What was the reported purchase price for the Del Taco restaurants acquired from Del Taco franchisees?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
l proceeds of $1.5 million, $0.9 million, and $1.4 million, respectively, related to the extension of the underlying franchise and lease agreements from the sale of restaurants in prior years.
Franchise acquisitions — In 2024, Del Taco purchased 10 franchise-operated restaurants for $86 thousand as part of three separate transactions, and recognized related gains of $2.7 million. In 2022, Jack in the Box acquired 13 franchise restaurants for total consideration of $0.3 million, comprised of franchise receivables owed to the Company as of the acquisition date. There were no such acquisitions in 2023. We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations. The purchase price allocations were based on fair value estimates determined using significant unobservable inputs (Level 3).
(2) Amount in 2024 is primarily comprised of a $2.2 million loss on sale of assets related to a Del Taco refranchising transaction that closed in the second quarter of 2024. Amount in 2023 is primarily related to charges for a restaurant that was closed due to refranchising the related market.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, in 2024, Del Taco purchased 10 franchise-operated restaurants for $86 thousand as part of three separate transactions. The company also recognized related gains of $2.7 million from these transactions. These acquisitions are accounted for using the acquisition method of accounting for business combinations, and the purchase price allocations were based on fair value estimates determined using significant unobservable inputs.
Additionally, during the first quarter of 2024, Del Taco acquired 9 franchise restaurants for $0.1 million as part of two separate transactions, recognizing related gains of $2.4 million. This amount is recorded in "Other operating expenses, net" in the condensed consolidated statements of earnings. The company did not acquire any Jack in the Box or Del Taco franchise restaurants in the first quarter of 2025.
These franchise acquisitions contribute to Del Taco's overall growth strategy. The company aims to gain greater scale and accelerate growth through such acquisitions. The goodwill arising from these acquisitions is primarily attributable to the market position and future growth potential of Del Taco, including future store openings and expansion into new markets. However, it's important to note that none of the goodwill resulting from these acquisitions is deductible for tax purposes.
For a prospective franchisee, this information indicates that Del Taco is actively involved in acquiring existing franchise locations. This could present opportunities for franchisees looking to sell their restaurants back to the company. It also highlights the company's strategic focus on growth and market expansion, which could benefit franchisees through increased brand recognition and potential synergies.