What is the purpose of the Initial Franchise Fee for Del Taco?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Taco a fully non-refundable Development Fee of $35,000 for the first Restaurant scheduled for opening and $10,000 for each additional Restaurant scheduled for opening, payable upon execution and delivery by the Developer of this Agreement. As between Developer and Del Taco, Del Taco shall earn the Development Fee upon the execution of this Agreement and shall not have any obligation to refund any portion of the Development Fee.
- (b) Upon the execution by the Developer of a Franchise Agreement, Del Taco shall credit from the Development Fee $35,000 for the first Restaurant scheduled for opening and $10,000 for each subsequent Restaurant scheduled for opening towards the initial franchise fee for each of those Restaurants. The Developer shall pay the balance of the initial franchise fee for the second and each subsequent Restaurant scheduled for opening. The Developer acknowledges that, once it has executed a Franchise Agreement for a Restaurant, the Developer will not have the right to a refund of any portion of the foregoing fees.
- (c) Notwithstanding any provision of the Agreement to the contrary, if Developer is not able to timely meet its Development Schedule, and provided that Developer and its affiliates are in full compliance with all agreements with Del Taco, Developer may request a twelve-month extension of one or more of the development deadlines in the Development Schedule, which extension Del Taco may grant or deny at its sole option. To request an extension of a development deadline, Developer must provide Del Taco at least six months' advance written notice. For each twelve-month extension of such deadline(s) that Del Taco approves in writing, Developer must (A) pay Company a fee calculated as follows: $5,000 times the number of development deadlines that Developer wishes to extend for twelve months ("Extension Fee") and (B) sign an amendment to the Development Agreement to reflect these specific dates of the extension, and which will include a general release in the form in gene
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the initial franchise fee is related to the Development Rights granted to a developer. Specifically, when a developer signs a Franchise Agreement, Del Taco credits $35,000 from the Development Fee for the first restaurant scheduled to open and $10,000 for each subsequent restaurant towards the initial franchise fee.
This credit system incentivizes developers to proceed with opening restaurants according to the agreed-upon schedule. The developer is responsible for paying the remaining balance of the initial franchise fee for the second and subsequent restaurants. Once a Franchise Agreement is executed, the developer acknowledges that they are not entitled to a refund of any portion of these fees.
Furthermore, if a developer needs to extend their development deadlines and is compliant with all agreements, they may request a twelve-month extension. Del Taco may grant or deny this extension at its sole option. To obtain an extension, the developer must provide at least six months' advance written notice and pay an Extension Fee, calculated as $5,000 times the number of development deadlines they wish to extend. This Extension Fee is credited towards the Franchise Fee upon execution of the applicable Franchise Agreement, but is otherwise non-refundable.
In essence, the initial franchise fee, in conjunction with the development fee and potential extension fees, serves as a financial commitment from the developer to Del Taco, ensuring the developer's dedication to fulfilling the development schedule and adhering to the terms of the agreements. These fees also compensate Del Taco for granting development rights and providing support during the initial stages of establishing new Del Taco restaurants.