After expiration or termination of a Del Taco Development Agreement, for how long is a franchisee prohibited from having interest in a competitive business?

According to Del Taco's 2025 Franchise Disclosure Document, a franchisee is restricted from engaging in any competitive business for a period of two years after the expiration or termination of the franchise. This restriction applies within the protected area of any Del Taco Restaurant operated under a franchise agreement executed under the Development Agreement or any other existing Del Taco restaurant. However, this is subject to state law.

This non-compete clause means that after a Del Taco franchise agreement ends, the former franchisee cannot immediately open or invest in a similar Mexican-style quick-service restaurant within the defined protected area. The protected area is determined by the specific franchise agreement and could encompass a significant radius around existing Del Taco locations. This restriction is designed to protect Del Taco's market share and prevent former franchisees from using their knowledge of the Del Taco system to directly compete against it.

It is important to note that the enforceability and specific terms of non-compete agreements can vary significantly by state. Some states have stricter regulations regarding non-compete clauses, potentially limiting their duration, geographic scope, or overall enforceability. Prospective Del Taco franchisees should consult with legal counsel to understand the specific non-compete restrictions applicable in their state and how they might impact their future business opportunities after leaving the Del Taco system.

Furthermore, the FDD stipulates that the non-compete is subject to state law, meaning the specific regulations in the franchisee's state will govern the enforceability of the clause. This highlights the importance of franchisees seeking legal counsel to understand their rights and obligations regarding non-competition after the franchise agreement terminates or expires.