Who pays for the independent appraisal if Del Taco exercises its right of first refusal?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
If the parties cannot agree within a reasonable time on the reasonable equivalent in cash of the consideration, terms, and/or conditions offered by the third party, they must attempt to appoint a mutuallyacceptable independent appraiser to make a binding determination.
If the parties are unable to agree upon one (1) independent appraiser, then an independent appraiser shall be promptly designated by Del Taco and another independent appraiser shall be promptly designated by Franchisee, which two (2) appraisers shall, in turn, promptly designate a third appraiser; all three (3) appraisers shall promptly confer and reach a single determination, which determination shall be binding upon Del Taco and Franchisee.
The cost of any such appraisal shall be shared equally by Del Taco and Franchisee.
If Del Taco elects to exercise its right under this Section 12.6, Del Taco shall have the right to set off all amounts due from Franchisee, and one-half (½) of the cost of the appraisal, if any, against any payment to the seller.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, in the event that Del Taco exercises its right of first refusal and an independent appraisal is required to determine the cash equivalent of a third-party offer, the cost of the appraisal is shared equally between Del Taco and the franchisee.
Specifically, if Del Taco decides to match an offer from a third party to purchase the franchisee's interest, but the terms are such that Del Taco cannot reasonably match them, an independent appraiser may be needed to determine a reasonable cash equivalent. If the parties cannot agree on a single appraiser, then each party designates an appraiser, and those two appraisers then designate a third. All three appraisers then confer to reach a single determination that is binding on both Del Taco and the franchisee.
This cost-sharing arrangement means that a franchisee considering selling their Del Taco business needs to factor in the potential expense of an appraisal when negotiating with third parties and when Del Taco considers exercising its right of first refusal. Del Taco also has the right to offset one-half of the appraisal cost against any payment to the seller if it exercises its right of first refusal.