What is the range of the Royalty Fee for a Del Taco franchise?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, the standard royalty fee is 5% of Net Sales. However, Del Taco offers a Development Incentive Program that can reduce the royalty fee for a limited time.
Under this program, for the first two restaurants opened under a Development Agreement, the royalty fee is reduced according to the following schedule: 1% of Net Sales for the first year, 2% for the second year, 3% for the third year, 4% for the fourth year, and 5% for all subsequent years. This incentive is available only if the franchisee and its affiliates fully comply with the terms of the Development Agreement, Franchise Agreement, and any other agreements with Del Taco.
It's important to note that if a Del Taco franchisee breaches the Development Agreement or Franchise Agreement, they will immediately have to pay Del Taco the amount of any reduction in the Initial Franchise Fees or Royalty Fees that they have received. This means that the franchisee would be responsible for paying the difference between the reduced royalty fee and the standard 5% royalty fee. The addendum and incentives are non-transferable.