What is Del Taco's reasonable judgement regarding compliance with terms and conditions based on for renewal?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
- 2.2.3 Franchisee shall not have received, prior to its election to renew, written notice of a default under this Agreement on more than 3 separate occasions and, from the time of Franchisee's election to renew through the expiration of the initial term, Franchisee or its affiliates shall not have been in default of any provision of this Agreement, any amendment to this Agreement, or any other agreement between Franchisee and Del Taco or its affiliates; and, in the reasonable judgment of Del Taco, Franchisee shall have substantially complied with all the terms and conditions of this Agreement, such other agreements, as well as the operating standards prescribed by Del Taco during the initial term;
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, to be eligible for renewal, a franchisee must, in Del Taco's reasonable judgment, have substantially complied with all the terms and conditions of the franchise agreement, any other agreements, as well as the operating standards prescribed by Del Taco during the initial term. This determination is made by Del Taco when a franchisee seeks to renew their franchise agreement.
This means that Del Taco evaluates the franchisee's adherence to the franchise agreement, other related agreements, and the brand's operational standards throughout the initial term. This evaluation is subjective, based on Del Taco's 'reasonable judgment,' introducing an element of discretion in the renewal process.
For a prospective franchisee, this highlights the importance of maintaining a strong record of compliance with all aspects of the franchise agreement and operational standards. It's not enough to simply avoid formal defaults; a franchisee must consistently meet Del Taco's expectations in areas like quality control, customer service, and adherence to brand guidelines to ensure they are seen as having 'substantially complied' with the agreement and are therefore eligible for renewal.