What must a Del Taco franchisee do if they propose to transfer obligations or any interest in the assets of the Del Taco Restaurant?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
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- 12.3.5 Franchisee shall not transfer or assign the lease for the Restaurant, or permit a default or surrender of the lease that will or may cause the Restaurant to be owned, leased, or operated by, any person or entity that will not operate a Del Taco Restaurant, without Del Taco's prior written consent.
- 12.4 Conditions for Approval. Del Taco shall not unreasonably withhold any consent required by Section 12.3.4 above; provided, that if Franchisee proposes to transfer its obligations hereunder or any interest in all or substantially all of the assets of the Restaurant, or if Franchisee or an owner proposes to transfer any direct or indirect interest in Franchisee, or if Franchisee or any owner proposes to undertake any transfer that is subject to Section 12.3, Del Taco shall have the right to require, among other things, any or all of the following as conditions of Del Taco's approval:
- 12.4.1 Franchisee shall comply with Del Taco's then-current transfer policies. Franchisee and the proposed transferee shall provide Del Taco with all information and documents requested by Del Taco for its evaluation of the proposed transfer, transaction, and transferee, including the business and financial terms of the proposed transaction including the leases and/or any assignments, renewal or extension of the leases and any necessary landlord consents, financial and operational information regarding the proposed transferee, and evidence of any financing that may be required to complete the transaction and/or fund the transferee's operation after the transfer.
- 12.4.2 The transferor shall have executed a general release (which shall include a release from the transferor, Franchisee, Franchisee's owners, and guarantors), in a form satisfactory to Del Taco, of any and all claims against Del Taco and its affiliates, successors, and assigns, and their respective directors, officers, shareholders, partners, agents, representatives, servants, and employees in their corporate and individual capacities including claims arising under this Agreement, any other agreement between Del Taco and Franchisee or their affiliates, and federal, state, and local laws and rules.
- 12.4.3 The transferee of an owner shall be designated as an owner and each transferee who is designated as an owner shall enter into a written agreement, in a form satisfactory to Del Taco, agreeing to be bound as an owner under the terms of this Agreement as long as such person or entity owns any interest in Franchisee; and, if Franchisee's obligations were guaranteed by the transferor, the owner shall guarantee the performance of all such obligations in writing in a form satisfactory to Del Taco.
- 12.4.4 Prior to and after the transfer, Franchisee's new owners shall meet Del Taco's educational, managerial, and business standards; each shall possess a good moral character, business reputation, and credit rating; have the aptitude and ability to operate the Restaurant, as may be evidenced by prior related business experience or otherwise; Franchisee's Operating Principal, and such other owners
and employees as specified by Del Taco, shall satisfactorily complete Del Taco's initial training program; and have adequate financial resources and capital to operate the Restaurant. The price, consideration, and other proposed terms of the proposed transfer must not, in Del Taco's reasonable business judgment, have the effect of negatively impacting the future viability of the Restaurant.
- 12.4.5 In connection with any proposed transfer, at Del Taco's option, Franchisee (or transferee) shall execute the form of franchise agreement then being offered to new franchisees, and such other ancillary agreements required by Del Taco for the business franchised hereunder, which agreements shall supersede this Agreement and its ancillary documents in all respects, and the terms of which may differ from the terms of this Agreement including higher Royalty Fees and Marketing Fees, and a different or modified Protected Area, provided however that the term of such franchise agreement shall be equal to the then unexpired term of this Agreement.
- 12.4.6 In connection with any proposed transfer, at Del Taco's option, Franchisee, at Franchisee's expense, shall upgrade the Restaurant to conform to the then-current standards and specifications of new Restaurant then being established in the System, and shall complete the upgrading and other requirements set forth in this Section 12.4.6 or as required under Section 5.9 above within the time specified by Del Taco.
- 12.4.7 All of Franchisee's monetary obligations hereunder shall be paid in full on a current basis, and Franchisee must not be otherwise in default of any of Franchisee's obligations hereunder including Franchisee's reporting obligations.
- 12.4.8 The transferor shall remain liable for all of the obligations to Del Taco in connection with the Restaurant that arose prior to the effective date of the transfer, and any covenants that survive the termination or expiration of this Agreement, and shall execute any and all instruments reasonably requested by Del Taco to evidence such liability.
- 12.4.9 At Franchisee's expense, one (1) owner designated by Del Taco to be a new Operating Principal and any of Franchisee's Restaurant Managers that Del Taco designates shall successfully complete (to Del Taco's satisfaction) all training programs required by Del Taco upon such terms and conditions as Del Taco may reasonably require (and while Del Taco will not charge a fee for attendance at such training programs, the transferee shall be responsible for the salary and all expenses of the person who attends training).
- 12.4.10 In connection with any proposed transfer, to compensate Del Taco for Del Taco's legal, accounting, training, and other expenses incurred in connection with the transfer, Franchisee shall pay Del Taco a non-refundable transfer fee in the amount of Five Thousand Dollars ($5,000). The transfer fee shall be paid at the earlier of (a) when the transferee signs the new franchise agreement, or (b) when the transferee begins training. The transfer fee is non-refundable. In addition, in the event a proposed transfer is not consummated or closed, for any reason except for disapproval by Del Taco, Franchisee or the proposed transferee shall reimburse Del Taco for all of Del Taco's costs and expenses incurred in connection with Del Taco's evaluation of the proposed transfer, including attorneys' and accountants' fees, background checks, site evaluation, and training, if applicable, to the extent the portion of the transfer fee paid does not cover those costs and expenses.
- 12.4.11 The transferor and/or the transferring franchisee must certify to Del Taco that the transferring franchisee has provided to the transferee true, complete and accurate copies of Franchisee's financial information and documents regarding the operation of the Restaurant, including the trailing two years of financial statements and monthly cash reports, the lease for the Restaurant premises, material contracts, and such other information as may be specified by Del Taco.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, a franchisee who proposes to transfer their obligations or any interest in the assets of their Del Taco restaurant must meet several conditions to gain approval from Del Taco. These conditions include complying with Del Taco's current transfer policies and providing all requested information and documents for evaluating the proposed transfer, including financial and operational details of the transferee, lease agreements, and financing evidence. The franchisee must ensure all monetary obligations to Del Taco are current and that they are not in default of any other obligations, including reporting requirements. The transferor must also execute a general release of all claims against Del Taco and its affiliates.
Additionally, the new owners must meet Del Taco's standards for education, management, and business acumen, possessing good moral character, business reputation, and credit rating. The terms of the transfer must not negatively impact the restaurant's future viability, in Del Taco's judgment. Del Taco may also require the franchisee to execute the then-current franchise agreement, which could include different terms such as higher royalty and marketing fees, although the term would match the remaining term of the original agreement. The franchisee may also be required to upgrade the restaurant to current standards at their own expense.
Furthermore, the franchisee will need to ensure that a designated new Operating Principal and any restaurant managers specified by Del Taco successfully complete the required training programs. The franchisee is responsible for the salary and expenses of those attending the training. A non-refundable transfer fee of $5,000 is required to compensate Del Taco for expenses related to the transfer. The transferor remains liable for obligations to Del Taco that arose before the transfer's effective date and must agree to remain bound by specific covenants. These stipulations ensure that Del Taco maintains control over who operates its franchises and that the brand's standards are upheld even after a transfer.