How is the 'Development Area' defined in the Del Taco Development Agreement, and what rights does Del Taco retain regarding it?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Definitions.
As used in this Agreement, the following words and phrases shall have the meanings indicated:
- (c) "Development Area" shall mean, subject to Del Taco's retention of rights pursuant to the terms and conditions of Section 13 of this Agreement, that area, if any, described on Exhibit A to this Agreement.
Del Taco hereby grants to the Developer, subject to the terms and conditions of this Agreement and as long as the Developer complies with this Agreement and all other agreements with Del Taco, limited exclusive Development Rights for Restaurants identified on Exhibit B.
The Developer shall have limited exclusive rights to develop Restaurants—that is, Del Taco will not establish, or grant franchises for others to establish, Del Taco Restaurants—in the Development Area for the term of this Agreement.
(c) The right to develop, construct, operate, merchandise, sell, license and/or franchise others to sell Del Taco foods and other products to the public within the Development Area, including the immediate area surrounding any Del Taco restaurant location submitted by Developer to Del Taco for approval, or any Del Taco restaurant established by Developer, irrespective of any boundaries otherwise referenced in this Agreement through restaurant outlets (whether mobile or fixed, permanent or temporary) located on military bases, institutional outlets (including, without limitation, college campuses, hospitals and school lunch programs), fairs, athletic contests or other special events, casinos, airports and larger retail outlets, including (without limitation) Wal-Mart and Home Depot, toll roads, limited access highways, schools, universities, enclosed shopping malls, hotels, industrial or government facilities, amusement or theme park complexes, train stations, bus stations or transportation facilities, and other locations owned or operated by major institutions with sites throughout the country or a particular state (collectively, referred to as "Alternative Points of Distribution") and to use the Del Taco System in connection with those Alternative Points of Distribution.
Del Taco shall notify Developer in writing of Del Taco's or another franchisee's intent to develop one or more Del Taco restaurants at the specific Alternative Point of Distribution within the Development Area. If Developer can demonstrate to Del Taco's satisfaction, within 30 days of Developer's receipt of such notification, that Developer has the ability to enter into an agreement under the same terms and conditions offered to Del Taco or another franchisee, as well as the financial and operational resources available to it for the development of the Del Taco restaurant at the specific Alternative Point of Distribution, then Del Taco shall offer the opportunity to Developer under the same terms and conditions offered to Del Taco or another franchisee.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the Development Area is defined in Exhibit A of the Development Agreement, but this is subject to Del Taco retaining certain rights as detailed in Section 13 of the agreement. The Development Area is the specific territory where the developer has the right to develop Del Taco restaurants, as long as they comply with the Development Agreement. The developer has limited exclusive rights to develop restaurants in the Development Area, meaning Del Taco will not establish or grant franchises to others within that area for the term of the agreement. The number of restaurants and the schedule for their development are outlined in Exhibit B.
However, Del Taco retains significant rights within the Development Area. Del Taco can develop and operate, or franchise others to develop and operate, Del Taco restaurants at specific locations known as "Alternative Points of Distribution," regardless of whether these sites are within the Development Area. These locations include airports, university campuses, hospitals, transportation facilities, amusement parks, government facilities, malls, and sports facilities. Del Taco's development or franchising of these sites does not constitute a violation of the Development Agreement, and if the developer is allowed to develop such a site, it does not count towards their development obligations.
Del Taco also retains the right to construct and operate other Del Taco restaurants and to use the Del Taco System at any location outside the Development Area, and to license others to do the same. They can also develop, use, and franchise the rights to any trade names, trademarks, service marks, or copyrights for use with the Del Taco System for similar or different franchise systems outside the Development Area. This means that while a developer has certain exclusive rights within their Development Area, Del Taco maintains considerable control and flexibility to expand its brand through various channels and locations, even within the defined territory under specific circumstances.
If Del Taco intends to develop a Del Taco restaurant at a specific Alternative Point of Distribution within the Development Area, they will notify the developer in writing. The developer then has 30 days to demonstrate their ability to enter into an agreement under the same terms and conditions offered to Del Taco or another franchisee, including proving they have the financial and operational resources. If the developer can meet these conditions, Del Taco must offer them the opportunity to develop the site.