If Del Taco elects to accept assignment of the franchise agreement in a bankruptcy situation, what consideration will Del Taco pay?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
If, for any reason, this Agreement is not terminated pursuant to this Section 13, and the Agreement is assumed, or assignment of the same to any person or entity who has made a bona fide offer to accept an assignment of the Agreement is contemplated, pursuant to the United States Bankruptcy Code, then notice of such proposed assignment or assumption, setting forth: (i) the name and address of the proposed assignee; and (ii) all of the terms and conditions of the proposed assignment and assumption, shall be given to Del Taco within twenty (20) days after receipt of such proposed assignee's offer to accept assignment of this Agreement, and, in any event, within ten (10) days prior to the date application is made to a court of competent jurisdiction for authority and approval to enter into such assignment and assumption, and Del Taco shall thereupon have the prior right and option, to be exercised by notice given at any time prior to the effective date of such proposed assignment and assumption, to accept an assignment of this Agreement to Del Taco upon the same terms and conditions and for the same consideration, if any, as in the bona fide offer made by the proposed assignee, less any brokerage commissions which may be payable by Franchisee out of the consideration to be paid by such assignee for the assignment of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, in the event of a franchisee's bankruptcy, if Del Taco chooses to accept the assignment of the franchise agreement, the consideration Del Taco will pay is the same consideration offered by a third party making a bona fide offer, less any brokerage commissions payable by the franchisee. This ensures that Del Taco has the first right to take over the franchise under the same financial terms as any other potential buyer in a bankruptcy situation.
This clause protects Del Taco's interests by allowing them to maintain control over the franchise location and operations if a franchisee faces bankruptcy. By matching the offer of a third party, Del Taco can ensure they are not overpaying for the assignment while also preventing the franchise from falling into the hands of an undesirable owner. The deduction of brokerage commissions further sweetens the deal for Del Taco, making it financially advantageous for them to exercise this option.
For a prospective franchisee, this means that in a bankruptcy scenario, Del Taco has the right to step in and take over the franchise agreement. This could be a concern if the franchisee believes they could find a buyer willing to pay a premium for the franchise. However, it also provides some assurance that Del Taco is invested in maintaining the brand's presence and standards, even in challenging financial situations. Franchisees should be aware of this clause and understand its implications for the potential sale of their franchise in the event of bankruptcy.