After the Del Taco franchise terminates or expires, what is the geographic limit on the non-competition covenant?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in the Agreement | Summary |
|---|---|---|
| n. Our right of first refusal to | Not applicable | Not applicable. |
| acquire your business | ||
| o. Our option to purchase your | Not applicable | Not applicable |
| business | ||
| p. Your death or disability | Not applicable | Not applicable |
| q. Non-competition covenants during the term of the franchise | 17(e) | You cannot have any interest in a competitive business within the protected area of any Restaurant operated under a franchise agreement executed pursuant to the Development Agreement or any other existing Del Taco restaurant. (subject to state law) |
| r. Non-competition covenants after the franchise terminates or expires | 17(e) | You cannot have any interest in a competitive business for two years after expiration or termination, within the protected area of any Restaurant operated under a franchise agreement executed pursuant to the Development Agreement or any other existing Del Taco restaurant. (subject to state law) |
| s. Modification of the | 23 | All changes require mutual agreement in writing. |
| agreement | ||
| t. Integration/ merger clause | 23 | Only the written terms of agreement and the exhibits bind the parties. Notwithstanding the foregoing, nothing in this or any related agreement is intended to disclaim the express representations made in the Franchise Disclosure Document, its exhibits and amendments. Any representations or promises outside of the Franchise Disclosure Document and other agreements may not be enforceable. (Subject to state law) |
| u. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 42–46)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, if the franchise terminates or expires, the franchisee is subject to a non-competition covenant. This covenant restricts the franchisee from having any interest in a competitive business for two years after the termination or expiration of the franchise agreement. The geographic scope of this restriction is limited to the protected area of any Restaurant operated under a franchise agreement executed pursuant to the Development Agreement or any other existing Del Taco restaurant. This means the franchisee cannot operate or have an interest in a competing business within the defined protected area of existing Del Taco locations.
For a prospective Del Taco franchisee, this non-compete clause has significant implications. After leaving the Del Taco system, whether through choice or termination, the franchisee is restricted from engaging in any competitive food service business within the specified area. This could limit their future business opportunities and require them to seek opportunities outside the Del Taco restaurant's protected territory. The duration of two years is a considerable amount of time, and the franchisee must factor this into their long-term career plans.
It is important to note that these non-competition covenants are subject to state law, as indicated in the FDD. For example, the FDD includes an amendment specific to Indiana, stating that non-compete areas cannot be greater than the exclusive territory granted in the franchise agreement, or if no exclusive territory is granted, in an area of more than reasonable size. In Indiana, this is interpreted as a 50-mile radius of the Del Taco location. Therefore, prospective franchisees should carefully review the specific state laws applicable to their franchise location to understand the exact scope and enforceability of the non-competition agreement.