Does the FDD specify any conditions under which the Del Taco Advertising Fee might be waived or reduced?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Whereas, Del Taco and the Franchisee have entered into a Development Agreement for the development of at least 5 or more Del Taco Restaurants (the "Restaurant(s)"); and
Whereas, Del Taco and the Franchisee wish to modify certain provisions of the Franchise Agreement as set forth below;
Now, therefore, in consideration of the covenants and agreements set forth in the Franchise Agreement and this Addendum, the parties hereby agree as follows:
Development Incentive Program. For so long as Franchisee and its affiliates are fully compliant with the terms of the Development Agreement, Franchise Agreement and any other agreements entered into with Del Taco and its affiliates, the following provision shall apply to the first two Restaurants opened under the Development Agreement:
The Royalty Fee (which is currently 5% of Net Sales) will be reduced to: (i) 1% of Net Sales for the first year of a Restaurant's operations; (ii) 2% of Net Sales for the second year of a Restaurant's operations; (iii) 3% of Net Sales for the third year of a Restaurant's operations; (iv) 4% of Net Sales for the fourth year of a Restaurant's operations; and (v) 5% of Net Sales for all subsequent years.
In addition, for so long as Franchisee and its affiliates are fully compliant with the terms of the Development Agreement, Franchise Agreement and any other agreements entered into with Del Taco and its affiliates, the following provision shall apply to each Restaurant opened pursuant to the Development Agreement:
Adherence to Development Schedule. The Franchisee must develop each Restaurant according to the development schedule of the Development Agreement to qualify for the development incentives described in this Addendum. In the event the Franchisee breaches the Development Agreement or Franchise Agreement, in addition to the other rights and remedies available to Del Taco under the Development Agreement and Franchise Agreement, Franchisee shall immediately pay to Del Taco the amount of any reduction in the Initial Franchise Fees or Royalty Fees.
Transferability. The Franchisee shall not have any rights to transfer this Addendum or the rights granted to the Franchisee by it.
No Other Modifications. Except as specifically set forth in this Addendum, the terms of the Franchise Agreement shall remain unchanged and in full force and effect.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, under a Development Incentive Program, a reduction in the Royalty Fee is available, but the document does not mention any waivers or reductions to the Advertising Fee. For franchisees who enter into a Development Agreement for at least 5 Del Taco Restaurants, and remain compliant with all agreements, a reduced Royalty Fee is applied to the first two restaurants opened.
For the first year of operations, the Royalty Fee is reduced to 1% of Net Sales, increasing to 2% for the second year, 3% for the third year, and 4% for the fourth year. By the fifth year, the Royalty Fee returns to the standard 5% of Net Sales.
To qualify for these development incentives, the franchisee must adhere to the development schedule outlined in the Development Agreement. If the franchisee breaches either the Development Agreement or the Franchise Agreement, they will be required to immediately pay Del Taco the amount of any reduction previously received in Initial Franchise Fees or Royalty Fees. This addendum and its associated rights are non-transferable.