Can an obligee divert business from a Del Taco restaurant to a competitor during their employment or ownership?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
erational, sales, promotional, and marketing methods and techniques of Del Taco and the System.
- (b) Obligee covenants and agrees that during the term of Obligee's employment with, or ownership interest in, Franchisee, and except as otherwise approved in writing by Del Taco, Obligee shall not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, partnership, corporation, or entity:
- (i) Divert or attempt to divert any business or customer of the Restaurant or of any Restaurant using the System to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with Del Taco's Proprietary Marks and the System; or
- (ii) Own, maintain, operate, engage in, be employed by, or have any interest in any business that it offers one or more Mexican or similar style menu items, and is operated in a quick service, fast food, or fast casual format ("Competitive Business").
- (c) Obligee covenants and agrees that during the Post-Term Period (defined below), except as otherwise approved in writing by Del Taco, Obligee shall not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, partnership, corporation, or entity, own, maintain, operate, engage in, or have any interest in any Competitive Business which is, or is intended to be, located: (a) within the Protected Area of the Restaurant or (b) within two (2) miles of any other Del Taco restaurant owned and/or operated or then under construction by Del Taco or any other franchisee or licensee of Del Taco as of the time that the obligations under this Section commence.
- (d) As used in this Agreement, the term "Post-Term Period" shall mean a continuous uninterrupted period of two (2) years from the date of: (a) a transfer permitted under Section 12.3 of the Franchise Agreement with respect to Obligee; and/or (b) termination of Obligee's employment with, and/or ownership interest in, Franchisee.
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- Injunctive Relief. Obligee acknowledges that any failure to comply with the requirements of this Agreement will cause Del Taco irreparable injury, and Obligee agrees to pay all court costs and reasonable attorney's fees incurred by Del Taco in obtaining specific performance of, or an injunction against violation of, the requirements of this Agreement.
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- Severability. All agreements and covenants contained herein are severable.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, an obligee is restricted from diverting business away from a Del Taco restaurant to a competitor during their employment or ownership interest with the franchisee. Specifically, the obligee cannot directly or indirectly induce customers to patronize a competitor or perform any action that harms the goodwill associated with Del Taco's trademarks and system.
Furthermore, during the term of their employment or ownership, the obligee is prohibited from owning, maintaining, operating, or having any interest in a business that offers Mexican or similar menu items in a quick-service, fast-food, or fast-casual format, defined as a "Competitive Business," unless Del Taco provides written approval. This restriction ensures that those associated with a Del Taco franchise remain committed to the brand and do not use their knowledge or position to benefit a competing establishment.
After the termination of their employment or ownership (referred to as the "Post-Term Period"), the obligee is still restricted from engaging in a Competitive Business for a period of two years. This restriction applies within the protected area of the Del Taco restaurant they were associated with, or within two miles of any other Del Taco restaurant owned, operated, or under construction by Del Taco or its franchisees. Del Taco emphasizes that failure to comply with these requirements will cause irreparable injury, entitling Del Taco to seek injunctive relief, court costs, and attorney's fees to enforce these covenants.