After the Del Taco franchise terminates or expires, for how long is the franchisee restricted from operating a competitive business?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in the Agreement | Summary |
|---|---|---|
| n. Our right of first refusal to acquire your business | 12.6 | We have an option for 30 days to purchase upon same terms and conditions offered to the third party. |
| o. Our option to purchase your business | 12.6 | We have an option to purchase your business upon the termination or expiration of your Franchise Agreement. |
| p. Your death or disability | 12.7 and 12.8 | We will not withhold consent unreasonably to a transfer to a third party within 6 months, provided the transferee meets our general conditions of transfer. |
| q. Non-competition covenants during the term of the franchise | 10.5 | You cannot use the Del Taco System or any other names, marks, systems, logotypes, symbols or foodstuffs provided by us or an approved supplier in connection with another Restaurant; you cannot operate any “competitive business”, which means a Restaurant or food service business that offers one or more Mexican or similar style menu items, and is operated in a quick service, fast food, or fast casual format. (subject to state law) |
| r. Non-competition | 10.6 | For a period of two years, you cannot operate a |
| covenants after the | competitive business within two miles of your | |
| franchise terminates or | original location or any other existing Del Taco | |
| expires | Restaurant. (subject to state law) |
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, a franchisee is subject to a non-competition covenant for a period of two years after the franchise terminates or expires. This means that for two years following the end of the franchise agreement, the franchisee cannot operate a competitive business within a specific geographic area.
The non-compete clause restricts the franchisee from operating a competitive business within two miles of their original Del Taco location or any other existing Del Taco Restaurant. A competitive business is defined as a restaurant or food service business that offers one or more Mexican or similar style menu items and operates in a quick service, fast food, or fast casual format.
It is important to note that these non-competition covenants are subject to state law, meaning the enforceability and specific terms may vary depending on the state in which the Del Taco franchise is located. Prospective franchisees should carefully review these restrictions and seek legal counsel to understand their implications in their specific state. The Indiana addendum also notes that it is unlawful for a franchise agreement to contain a provision that requires a franchisee not to compete with the franchisor in an area 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, upon Termination of a franchise agreement.