What is the effect of termination or expiration on the franchisee's right to operate a Del Taco restaurant?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
this Agreement in accordance with Sections 13.2 or 13.3 above, and/or to terminate any other rights, options or arrangements
under this Agreement at any time thereafter for the same default or as a result of any additional defaults of the terms of this Agreement.
14. Obligations Upon Termination or Expiration.
- 14.1 Upon termination or expiration of this Agreement, all rights granted hereunder to Franchisee shall forthwith terminate, and:
- 14.1.1 Cease Operations. Franchisee shall immediately cease to operate the Restaurant, and shall not thereafter, directly or indirectly, represent to the public or hold Franchisee out as a present or former franchisee of Del Taco.
- 14.1.2 Cease Use of Proprietary Marks. Franchisee shall immediately and permanently cease to use, in any manner whatsoever, any confidential methods, procedures and techniques associated with the System, the mark "Del Taco" and all other Proprietary Marks and distinctive forms, slogans, signs, symbols, and devices associated with the System. In particular, Franchisee shall cease to use all signs, advertising materials, displays, stationery, forms, and any other articles that display the Proprietary Marks, remove all such articles and/or permit Del Taco to enter the Restaurant and remove or permanently cover all signs or advertisements identifiable in any way with Del Taco's name or business, at Franchisee's expense.
- 14.1.3 Cancellation of Assumed Names. Franchisee shall take such action as may be necessary to cancel any assumed name or equivalent registration which contains the Proprietary Mark "Del Taco" and all other Proprietary Marks, and/or any other service mark or trademark, and Franchisee shall furnish Del Taco with evidence satisfactory to Del Taco of compliance with this obligation within five (5) days after termination or expiration of this Agreement.
- 14.1.4 Pay Monies Owed; Liquidated Damages. Franchisee shall pay Del Taco all sums then due plus damages for the right to receive the Royalty Fees for the remaining term of this Agreement, together with any other damages suffered by Del Taco as a result of the default. The damages for royalties due during the remainder of the term of this Agreement shall equal the product of the average yearly amount of all fees paid or payments by Franchisee under Section 3 of this Agreement during the three years immediately preceding the termination (or such period as the Restaurant was open for business, if the Restaurant was not open for business during the entire three year period), multiplied by the number of years remaining in the term. The payments called for in this Section 14.1.4 are not a penalty. A precise calculation of the full extent of damages that Del Taco will incur if this Agreement terminates because Franchisee defaults cannot be reasonably determined. Nevertheless, the parties agree that the lump-sum payment provided under this Section 14.1.4 is reasonable in light of the damages for premature termination that may reasonably be expected to occur in such event. Franchisee shall also pay to Del Taco, in addition to any amounts then due and owing, all expenses incurred by Del Taco as a result of any default, including reasonable attorneys' fees, expenses, and costs, and interest on such attorneys' fees, expenses, and costs.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, upon termination or expiration of the Franchise Agreement, the franchisee's rights to operate the Del Taco restaurant immediately cease. The franchisee must stop operating the restaurant and cannot represent themselves as a current or former Del Taco franchisee.
Furthermore, the franchisee must immediately and permanently stop using any confidential methods, procedures, and techniques associated with the Del Taco system, including the "Del Taco" mark and all other proprietary marks. This includes ceasing the use of all signs, advertising materials, displays, stationery, and forms that display Del Taco's proprietary marks. The franchisee is responsible for removing these items or allowing Del Taco to remove or cover them at the franchisee's expense.
Additionally, the franchisee is required to cancel any assumed name registrations that contain the "Del Taco" proprietary mark and provide Del Taco with evidence of compliance within five days of termination or expiration. The franchisee must also pay all outstanding sums due to Del Taco, including damages for the right to receive royalty fees for the remaining term of the agreement. These damages will be calculated based on the average yearly amount of fees paid by the franchisee during the three years preceding termination, multiplied by the number of years remaining in the term. The FDD states that these payments are not a penalty.
It is important to note that the termination of the agreement does not affect the franchisee's rights to operate other Del Taco restaurants under separate franchise agreements, provided those agreements remain in effect. Also, all provisions of the agreement that are designed to survive termination or expiration will continue to be in effect.