What happens if a Del Taco franchisee defaults under the lease for the Restaurant?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
- 13.2.5 If Franchisee defaults under any lease or sublease for the Restaurant (the "Lease") and fails to cure the default within the time period specified in the Lease, or if the Lease is terminated, for any reason, or expires;
14.1.7 Assign Leases; Modification of Premises. Del Taco shall have the right and option, but not the obligation, to acquire the Leases for the Restaurant, or otherwise acquire the right to occupy the premises. Del Taco may assign or delegate this right or option to any of Del Taco's affiliates or a third party designee, without notice to, or request for approval from, the landlord or lessor of the premises. If Del Taco or its assignee or delegatee does not elect or is unable to exercise any option Del Taco may have to acquire the leases or subleases for the premises of the Restaurant, or otherwise acquire the right to occupy the premises, Franchisee shall make such modifications or alterations to the premises operated hereunder (including the changing of the telephone number) immediately upon termination or expiration of this Agreement as may be necessary to distinguish the appearance of said premises from that of other Del Taco Restaurants, and shall make such specific additional changes thereto as Del Taco may reasonably request for that purpose. In addition, Franchisee shall cease use of, and if Del Taco requests shall transfer to Del Taco, all telephone numbers, customer "loyalty" lists, and any domain names, websites, email addresses, and any other identifiers, whether or not authorized by Del Taco, used by Del Taco while operating the Restaurant, and shall promptly execute such documents or take such steps necessary to remove reference to the Restaurant from all trade or business telephone directories, including "yellow" and "white" pages, or at Del Taco's request transfer same to Del Taco. If Franchisee fails or refuses to comply with the requirements of this Section 14.1.7, Del Taco (or its designee) shall have the right to enter upon the premises of the Restaurant, without being guilty of trespass or any other tort, for the purpose of making or causing to be made such changes as may be required, at Franchisee's expense, which expense Franchisee agrees to pay upon demand.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, if a franchisee defaults under any lease or sublease for the Restaurant and fails to cure the default within the time period specified in the lease, or if the lease is terminated for any reason, or expires, it constitutes a breach of the franchise agreement. This gives Del Taco certain rights and options.
Del Taco has the option to acquire the leases for the Restaurant or otherwise acquire the right to occupy the premises. Del Taco can assign this right to any of its affiliates or a third party without needing approval from the landlord or lessor. If Del Taco does not exercise its option to acquire the leases, the franchisee must make modifications to the premises to differentiate it from other Del Taco Restaurants. This includes changing the telephone number and making any additional changes requested by Del Taco.
Furthermore, the franchisee must cease using and transfer to Del Taco all telephone numbers, customer loyalty lists, domain names, websites, email addresses, and any other identifiers used while operating the Restaurant. The franchisee must also take steps to remove references to the Restaurant from telephone directories or transfer them to Del Taco. If the franchisee fails to comply with these requirements, Del Taco has the right to enter the premises and make the necessary changes at the franchisee's expense.
In summary, a lease default can lead to Del Taco taking control of the restaurant location and brand identifiers, with the franchisee bearing the costs of rebranding if Del Taco does not assume the lease. This highlights the importance of maintaining a good relationship with the landlord and adhering to lease terms to avoid potentially costly and disruptive consequences.