What is the relationship between the Development Agreement and the Franchise Agreement for Del Taco?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
ire Developer and its landlord to execute a lease addendum, incorporating the above provisions, in such form as Del Taco may designate. Del Taco, in its sole and absolute discretion, may waive any one or more of the foregoing requirements, and the Developer shall not have any rights or claims against Del Taco if Del Taco waives or fails to insist on the compliance with any of the foregoing requirements.
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- Franchise Agreement. Subject to Del Taco's written approval of a proposed site and the construction plans for the Restaurant proposed for development at the site, Del Taco shall send the Developer a Franchise Agreement for the proposed site using the then-current form of Franchise Agreement being offered to new Del Taco franchisees. Prior to the commencement of construction of the Restaurant, and within 10 days (or any longer time required by law) after the receipt of the Franchise Agreement from Del Taco for an approved site, the Developer shall execute the Franchise Agreement and return it to Del Taco, together with all payments then due Del Taco. Promptly upon Del Taco's receipt of the properlyexecuted Franchise Agreement and all payments then due Del Taco, Del Taco shall execute the same and return a copy to the Developer. If Del Taco does not receive the properly-executed Franchise Agreement and all payments than due Del Taco within that 10-day period, Del Taco shall have the right to revoke its approval of the proposed site and, if Del Taco revokes its approval, the Developer shall have not have any right to open a Restaurant on that site.
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- Acquisition, Development and Construction of Restaurant Site. The Developer shall have sole responsibility for the acquisition (through purchase, lease, sublease or otherwise), development and construction of a Restaurant on the approved site.
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- Pre-Construction Obligations of Developer. The Developer shall not begin construction of any Restaurant unless the following events have taken place:
- (a) Del Taco has approved the site, without conditions, in accordance with Section 7 of this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the Development Agreement precedes the Franchise Agreement and establishes the developer's rights and obligations to open multiple Del Taco restaurants within a specific area and timeframe. The Development Agreement itself does not grant the developer the right to use the Del Taco system or operate a restaurant. These rights are only granted upon the execution of a separate Franchise Agreement for each specific restaurant location.
Specifically, after Del Taco approves a proposed site and construction plans, they will send the developer a Franchise Agreement. The developer must then execute and return this agreement, along with any due payments, within 10 days. Upon receiving the properly executed Franchise Agreement and payments, Del Taco will execute the agreement and return a copy to the developer. Failure to comply within the 10-day period allows Del Taco to revoke site approval, preventing the developer from opening a restaurant at that location.
The Development Agreement also outlines financial incentives for developers who adhere to the development schedule and remain compliant with all agreements. These incentives may include reduced royalty fees for the initial years of operation for restaurants opened under the Development Agreement. Furthermore, a portion of the development fee ($35,000 for the first restaurant and $10,000 for each subsequent restaurant) is credited towards the initial franchise fee upon the execution of each Franchise Agreement.
In summary, the Development Agreement with Del Taco sets the stage for future Franchise Agreements by granting development rights and outlining the steps and conditions required to obtain individual Franchise Agreements for each restaurant. It also provides potential financial incentives for multi-unit developers who meet their development obligations.