On what grounds can a Del Taco franchisee terminate the franchise agreement?
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) | |
| s. Modification of the | 23 | No changes can take place unless mutually agreed |
| agreement | to in writing. | |
| t. Integration/ merger clause | 23 | Only the written terms of the agreement and 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. Dispute resolution by arbitration or mediation | 17 | The parties must arbitrate any controversy or claim, except that either party may file for preliminary injunctive relief, a restraining order, or order of specific performance, including, without limitation, injunctive relief pertaining to the use of the Del Taco System and Marks. |
| v. Choice of forum | 17.2 and 17.3 | All litigation and arbitration must take place in Orange County, California, subject to applicable state law. See Exhibit F. |
| w. Choice of law | 17.1 and 17.3 | California law applies, subject to applicable state law. See Exhibit F. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 42–46)
What This Means (2025 FDD)
Based on the 2025 Del Taco Franchise Disclosure Document, Item 17 provides a table summarizing various provisions related to termination, including conditions under which Del Taco can repurchase the franchise. Specifically, Del Taco has the option to purchase the franchisee's business upon the termination or expiration of the Franchise Agreement, as detailed in Section 12.6 of the agreement. Additionally, if a franchisee dies or becomes disabled, Del Taco will not unreasonably withhold consent to a transfer to a third party within 6 months, provided the transferee meets Del Taco's general conditions of transfer, as outlined in Sections 12.7 and 12.8.
Furthermore, the agreement outlines non-competition covenants that affect termination. During the franchise term, a franchisee cannot use the Del Taco system or its associated elements in connection with another restaurant, nor can they operate a competitive business offering similar menu items in a quick-service format, as stated in Section 10.5. Post-termination or expiration, a franchisee is restricted from operating a competitive business within two miles of their original Del Taco location or any other existing Del Taco Restaurant for a period of two years, as per Section 10.6. These non-competition clauses are subject to state law, which may modify their enforceability.
Other key provisions affecting the franchise agreement include modifications and dispute resolution. Section 23 states that no changes to the agreement can occur unless mutually agreed to in writing. The agreement also includes an integration/merger clause, specifying that only the written terms of the agreement and its exhibits are binding, although this does not disclaim express representations made in the Franchise Disclosure Document. Any disputes must be resolved through arbitration or mediation, although either party may seek preliminary injunctive relief, a restraining order, or specific performance related to the use of the Del Taco system and marks, as detailed in Section 17. The choice of forum for litigation and arbitration is Orange County, California, and California law applies, subject to applicable state law, as noted in Sections 17.2, 17.3, and 17.1.