Does the Del Taco franchise agreement require arbitration or litigation to be conducted outside of the franchisee's state?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in the Agreement | Summary |
|---|---|---|
| v. Choice of forum | 18 and 20 | All litigation and arbitration must take place in Orange County, California, subject to applicable state law. See Exhibit F. |
INDIANA
The Franchise Agreement requires binding arbitration. The arbitration will occur in a state other than Indiana, with costs being borne by the non-prevailing party. The provision concerning the place where arbitration will occur is deleted from the Franchise Agreement.
Item 17 of the Disclosure Document, Sections (u), (v), and (w), is amended to omit any reference to selection of an out-of-Indiana forum or choice of law.
Item 17(v) of the Disclosure Document, Section 17.2 of the Franchise Agreement, and Section 20 of the Development Agreement requiring franchisee/developer to consent to resolution of disputes to be outside North Dakota may not be enforceable under Section 51-19-09 of the North Dakota Franchise Investment Law and such requirement is hereby deleted to the extent required by law. Any litigation under the agreement shall be conducted in North Dakota or a mutually agreed upon location. The provisions of this paragraph are subject to the United States Arbitration Act (9 U.S.C. § 1 et seq.).
§ 19-28.1-14 of the Rhode Island Franchise Investment Act provides that "A provision in a franchise agreement and development agreement restricting jurisdiction or venue to a forum outside this state or requiring the application of the laws of another state is void with respect to a claim otherwise enforceable under the Act."
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 42–46)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the standard franchise agreement mandates that all litigation and arbitration take place in Orange County, California, irrespective of the franchisee's location. This requirement is specified under the 'Choice of forum' provision in the agreement. However, this is subject to applicable state laws, which may modify or supersede this clause.
For instance, the FDD includes specific amendments for franchisees in Indiana, North Dakota, and Rhode Island. For Indiana franchisees, the provision concerning the location where arbitration will occur is deleted from the Franchise Agreement, and Item 17 of the Disclosure Document is amended to omit any reference to selection of an out-of-Indiana forum or choice of law. Similarly, for North Dakota franchisees, the requirement to resolve disputes outside of North Dakota may not be enforceable under North Dakota law, and any litigation shall be conducted in North Dakota or a mutually agreed-upon location. Rhode Island's Franchise Investment Act stipulates that any provision restricting jurisdiction or venue to a forum outside of Rhode Island is void with respect to claims enforceable under the Act.
These state-specific amendments indicate that while Del Taco's standard agreement specifies California as the forum for dispute resolution, the enforceability of this provision depends on the franchisee's state and its franchise laws. Prospective franchisees should be aware of their state's franchise laws and how they may impact the dispute resolution process. It is advisable to consult with a legal professional to understand the implications of these clauses in their specific state.