For a Del Taco Development Agreement in South Dakota, when does the development fee become due?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Whereas, the Franchisor and the Developer wish to enter into a Franchise Agreement and/or a Development Agreement for the development and/or operation of one or more Del Taco franchised Restaurants subject to the laws of the state of South Dakota; and
Whereas, the South Dakota Department of Labor and Regulation has required the Franchisor to modify certain provisions of the Franchise Agreement and Development Agreement as a condition to the registration of the Franchisor's franchise.
Under a Development Agreement:
Now, therefore, for and in consideration of the covenants and agreements set forth in this Addendum and in the Development Agreement, the parties hereby agree as follows:
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- Development Fee. Notwithstanding the provisions of Section 5 of the Development Agreement to the contrary, the development fee shall become due, on a pro rata basis based on the number of Del Taco Restaurants scheduled for development within the Territory, only upon the opening of each licensed Del Taco Restaurant built within the Territory.
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- Other Provisions. Except as expressly modified by this Addendum, all of the other provisions of the Development Agreement shall remain in full force and effect.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 42–46)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the standard terms of the Development Agreement are modified for franchisees in South Dakota. Specifically, the development fee becomes due on a pro rata basis, based on the number of Del Taco Restaurants scheduled for development within the territory. This fee is only due upon the opening of each licensed Del Taco Restaurant built within the designated territory.
This modification is a result of requirements from the South Dakota Department of Labor and Regulation, which mandates that Del Taco alter certain provisions of its agreements as a condition for franchise registration in the state. This change directly impacts the cash flow requirements for new Del Taco developers in South Dakota, as they are not required to pay the entire development fee upfront. Instead, the fee is paid incrementally as each restaurant opens.
For a prospective Del Taco franchisee in South Dakota, this pro rata payment structure reduces the initial financial burden and risk. Instead of paying a large lump sum upfront, the franchisee can spread the development fee payments over time, aligning them with the revenue generated by each new restaurant. This can make the Del Taco franchise opportunity more accessible and financially manageable for developers in South Dakota.