What is the minimum Royalty Fee for a Del Taco franchise?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Whereas, Del Taco and the Franchisee have entered into a Development Agreement for the development of at least 5 or more Del Taco Restaurants (the "Restaurant(s)"); and
Whereas, Del Taco and the Franchisee wish to modify certain provisions of the Franchise Agreement as set forth below;
Now, therefore, in consideration of the covenants and agreements set forth in the Franchise Agreement and this Addendum, the parties hereby agree as follows:
Development Incentive Program. For so long as Franchisee and its affiliates are fully compliant with the terms of the Development Agreement, Franchise Agreement and any other agreements entered into with Del Taco and its affiliates, the following provision shall apply to the first two Restaurants opened under the Development Agreement:
The Royalty Fee (which is currently 5% of Net Sales) will be reduced to: (i) 1% of Net Sales for the first year of a Restaurant's operations; (ii) 2% of Net Sales for the second year of a Restaurant's operations; (iii) 3% of Net Sales for the third year of a Restaurant's operations; (iv) 4% of Net Sales for the fourth year of a Restaurant's operations; and (v) 5% of Net Sales for all subsequent years.
In addition, for so long as Franchisee and its affiliates are fully compliant with the terms of the Development Agreement, Franchise Agreement and any other agreements entered into with Del Taco and its affiliates, the following provision shall apply to each Restaurant opened pursuant to the Development Agreement:
Adherence to Development Schedule. The Franchisee must develop each Restaurant according to the development schedule of the Development Agreement to qualify for the development incentives described in this Addendum. In the event the Franchisee breaches the Development Agreement or Franchise Agreement, in addition to the other rights and remedies available to Del Taco under the Development Agreement and Franchise Agreement, Franchisee shall immediately pay to Del Taco the amount of any reduction in the Initial Franchise Fees or Royalty Fees.
Transferability. The Franchisee shall not have any rights to transfer this Addendum or the rights granted to the Franchisee by it.
No Other Modifications. Except as specifically set forth in this Addendum, the terms of the Franchise Agreement shall remain unchanged and in full force and effect.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to the 2025 Del Taco FDD, the minimum royalty fee can be 1% of Net Sales for the first year of a restaurant's operations under a specific development incentive program. This incentive is available to developers who enter into a Development Agreement for developing at least 3 to 5 Del Taco Restaurants in markets deemed undeveloped or emerging by Del Taco.
The reduced royalty fees are structured as follows: 1% of Net Sales for the first year, 2% for the second, 3% for the third, and 4% for the fourth year. After the fourth year, the royalty fee reverts to the standard 5% of Net Sales. This reduction is contingent upon the developer and their affiliates remaining fully compliant with the terms of the Development Agreement, Franchise Agreement, and any other agreements with Del Taco.
To qualify for these development incentives, the developer must adhere to the development schedule outlined in the Development Agreement. Failure to meet the schedule or any breach of the agreements will result in the developer being required to immediately pay Del Taco the amount of any reduction in Initial Franchise Fees or Royalty Fees that were previously granted. This incentive is also non-transferable, meaning the franchisee cannot transfer this addendum or the rights granted within it to another party.