What was the dollar amount of nondeductible goodwill related to the sale of company-operated restaurants for Del Taco in 2023?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
NGS AND FRANCHISE ACQUISITIONS
Refranchisings — The following table summarizes the number of restaurants sold to franchisees and gains recognized in each fiscal year (dollars in thousands):
| 202 | 4 | 2023 | 2022 | |
|---|---|---|---|---|
| Restaurants sold to Jack in the Box franchisees | _ | 5 | 15 | |
| Restaurants sold to Del Taco franchisees | 47 | 111 | ||
| Proceeds from the sale of company-operated restaurants (1) | $ 19 | 9,400 | $ 85,221 | $ 6,391 |
| Broker commissions | _ | (1,614) | _ | |
| Net assets sold (primarily property and equipment) | (: | 5,310) | (17,101) | (1,565) |
| Goodwill related to the sale of company-operated restaurants | (6 | 5,835) | (35,544) | (948) |
| Franchise fees | ( | 1,266) | (3,086) | |
| Sublease liabilities, net |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, in 2023, the goodwill related to the sale of company-operated restaurants was ($35,544). This figure represents a decrease in goodwill as a result of selling restaurants to franchisees.
Goodwill, as described in the FDD, arises when the purchase price exceeds the fair value of identifiable net assets acquired. Conversely, when restaurants are sold to franchisees, goodwill is reduced. The amount written off is based on the fair value of the disposed business relative to the reporting unit's fair value before disposal. If the business wasn't fully integrated and the acquired goodwill benefits weren't realized, the current carrying amount of the acquired goodwill is written off.
It's important to note that the $35,544 figure is specifically related to the sale of company-operated restaurants to franchisees. This is different from the overall goodwill associated with the Del Taco brand, which, as the FDD mentions, is not deductible for tax purposes. The FDD also indicates that during the third quarter of 2024, an event triggered a quantitative test of the Del Taco reporting unit, resulting in a goodwill impairment of $162.6 million. This highlights that goodwill can be subject to impairment based on the performance and fair value of the reporting unit.