What payments are Del Taco franchisees obligated to make upon termination of the agreement?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
assumed name or equivalent registration which contains the Proprietary Mark "Del Taco" and all other Proprietary Marks, and/or any other service mark or trademark, and Franchisee shall furnish Del Taco with evidence satisfactory to Del Taco of compliance with this obligation within five (5) days after termination or expiration of this Agreement.
- 14.1.4 Pay Monies Owed; Liquidated Damages. Franchisee shall pay Del Taco all sums then due plus damages for the right to receive the Royalty Fees for the remaining term of this Agreement, together with any other damages suffered by Del Taco as a result of the default. The damages for royalties due during the remainder of the term of this Agreement shall equal the product of the average yearly amount of all fees paid or payments by Franchisee under Section 3 of this Agreement during the three years immediately preceding the termination (or such period as the Restaurant was open for business, if the Restaurant was not open for business during the entire three year period), multiplied by the number of years remaining in the term. The payments called for in this Section 14.1.4 are not a penalty. A precise calculation of the full extent of damages that Del Taco will incur if this Agreement terminates because Franchisee defaults cannot be reasonably determined. Nevertheless, the parties agree that the lump-sum payment provided under this Section 14.1.4 is reasonable in light of the damages for premature termination that may reasonably be expected to occur in such event.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, upon termination of the franchise agreement, a franchisee must pay Del Taco all sums then due, plus damages for the right to receive Royalty Fees for the remaining term of the agreement, along with any other damages suffered by Del Taco as a result of the default. The damages for royalties due during the remainder of the term are calculated by multiplying the average yearly amount of all fees paid by the franchisee under Section 3 of the agreement during the three years immediately preceding the termination (or such period as the Restaurant was open for business, if less than three years) by the number of years remaining in the term.
Del Taco emphasizes that these payments are not a penalty but are designed to compensate for the losses incurred due to the termination. The document states that a precise calculation of the full extent of damages that Del Taco will incur if the agreement terminates because the franchisee defaults cannot be reasonably determined.
In addition to the payments mentioned above, franchisees are generally responsible for paying all fees and other payments owed to Del Taco as outlined in the franchise agreement or the manuals. Del Taco retains the right to collect these fees via Electronic Funds Transfer (EFT) or other methods specified in the manuals. It is important to note that upon termination or expiration of the agreement, Del Taco will not refund any amounts paid under the agreement for any reason whatsoever.