Does the Del Taco franchise agreement create a principal-agent relationship between Del Taco and the franchisee?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
- 16.1.1 Identification as Independent Contractor.
At all times during the term of this Agreement and any extensions hereof, Franchisee shall hold itself out to the public as an independent contractor operating the business pursuant to a franchise from Del Taco.
- 16.1.2 No Agency.
Franchisee shall not act or attempt to act or represent itself, directly or by implication, as an agent of Del Taco.
It is understood and agreed that nothing in this Agreement authorizes Franchisee to make any contract, agreement, warranty, or representation on Del Taco's behalf, or to incur any debt or other obligation in Del Taco's name; and that Del Taco shall in no event assume liability for, or be deemed liable hereunder as a result of, any such action; nor shall Del Taco be liable by reason of any act or omission by Franchisee in Franchisee's conduct of the Restaurant or for any claim or judgment arising therefrom against Franchisee or Del Taco.
Franchisee shall not have the authority, express or implied, to bind or obligate Del Taco in any way.
- 16.1.3 Indemnification.
Franchisee shall, to the fullest extent permissible under applicable law, indemnify and hold Del Taco and its affiliates, and each of Del Taco's respective officers, directors, employees, and agents harmless against any and all claims, obligations, and damages arising directly or indirectly from, as a result of, or in connection with this Agreement, the Restaurant, Franchisee's operation of the Restaurant, Franchisee and its employees' actions and inaction, or Franchisee's breach of this Agreement, including those alleged to be caused by Del Taco's negligence, as well as the costs, including attorneys' fees, costs, and expenses (and interest on such fees, costs, and expenses), of defending against them, unless (and then only to the extent that) the claims, obligations, and damages are determined to be caused solely by Del Taco's gross negligence or willful misconduct according to a final, unappealable ruling issued by a court or arbitrator with competent jurisdiction.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, the franchise agreement explicitly states that the franchisee is an independent contractor and not an agent of Del Taco. The agreement specifies that the franchisee cannot act or represent themselves as an agent of Del Taco, nor can they make any contracts, agreements, warranties, or representations on Del Taco's behalf. Furthermore, the franchisee is responsible for all debts and obligations incurred in the operation of the restaurant, and Del Taco assumes no liability for the franchisee's actions or omissions. This arrangement is typical in franchising, where franchisees operate independently while adhering to the franchisor's system and standards.
This independence means that the Del Taco franchisee has the authority and responsibility for the day-to-day management of their restaurant. However, this independence comes with the responsibility to indemnify and hold Del Taco harmless from any claims, obligations, and damages arising from the franchisee's operation of the restaurant. This indemnification extends to claims allegedly caused by Del Taco's negligence, unless those claims are determined to be caused solely by Del Taco's gross negligence or willful misconduct by a court or arbitrator.
In practical terms, this section of the Del Taco franchise agreement protects Del Taco from liabilities arising from the franchisee's business operations. Franchisees need to understand that they are responsible for their own actions and must maintain adequate insurance coverage to protect themselves and Del Taco from potential claims. This also means that franchisees have the autonomy to manage their business within the guidelines set by Del Taco, but they must do so responsibly and in compliance with all applicable laws and regulations.