What interest rate will Del Taco charge on understated payments?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
If an inspection should reveal that any payments have been understated or overstated in any report to Del Taco, then Franchisee shall immediately pay Del Taco, in the event of an understatement, the amount understated upon demand, in addition to interest from the date such amount was due until paid, at the rate of one and one half percent (1.5%) per month, or the maximum rate permitted by law, whichever is less.
If an inspection is necessitated because Franchisee fails to timely provide Sales Reports or if an inspection discloses an understatement in any report by Franchisee of two percent (2%) or more, Franchisee shall, in addition, reimburse Del Taco for any and all costs and expenses connected with the inspection (including, without limitation, travel, lodging and wages expenses, and reasonable accounting and legal costs).
The foregoing remedies shall be in addition to any other remedies Del Taco may have.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, if an inspection reveals that any payments have been understated in any report to Del Taco, the franchisee must immediately pay the understated amount upon demand. In addition to the understated amount, Del Taco will charge interest from the date the amount was originally due until it is paid. The interest rate applied will be one and one-half percent (1.5%) per month, or the maximum rate permitted by law, whichever is less.
This means that if a Del Taco franchisee makes an error in their financial reporting that results in underpayment of fees, they will not only have to pay the difference but also accrue interest on that amount until it is settled. The 1.5% monthly interest rate can add up quickly, so it is crucial for franchisees to ensure their reports are accurate and payments are made correctly and on time.
Furthermore, if the understatement in any report by the franchisee is two percent (2%) or more, or if the inspection is required because the franchisee failed to provide sales reports on time, the franchisee will also be responsible for reimbursing Del Taco for all costs and expenses connected with the inspection. These costs may include travel, lodging, wage expenses, and reasonable accounting and legal costs. This policy incentivizes accurate and timely reporting by franchisees, as errors or delays can lead to significant financial penalties beyond the initial underpayment and interest charges.
Del Taco's right to charge interest and recover inspection costs is in addition to any other remedies they may have under the franchise agreement. This underscores the importance of maintaining accurate financial records and adhering to the reporting requirements outlined in the agreement and manuals.