If a Del Taco franchisee breaches the Development Agreement, what immediate financial obligation arises regarding reduced fees?

According to Del Taco's 2025 Franchise Disclosure Document, if a developer breaches either the Development Agreement or the Franchise Agreement, they must immediately pay Del Taco the amount of any reduction in the Initial Franchise Fees or Royalty Fees. This obligation is in addition to any other rights and remedies available to Del Taco under the Development Agreement and Franchise Agreement.

This means that if a Del Taco developer was receiving reduced fees as part of a development incentive program and then failed to meet the terms of their agreements, they would immediately owe Del Taco the difference between the standard fees and the reduced fees they had been paying. This could represent a significant financial obligation, especially if multiple restaurants were operating under the reduced fee structure.

For a prospective Del Taco developer, this clause highlights the importance of adhering to the development schedule and all other terms of the agreements. Failure to do so could result in the loss of development incentives and the immediate repayment of previously reduced fees, potentially impacting the developer's financial stability and project viability. This is a fairly standard clause in franchise development agreements, designed to ensure compliance and protect the franchisor's revenue stream.

It is important for potential Del Taco developers to carefully review the terms of the Development Agreement and Franchise Agreement, particularly the development schedule and the conditions for maintaining development incentives. Understanding these obligations and having a solid plan for meeting them is crucial to avoiding a breach and the resulting financial penalties.