What was the reported value of Del Taco's goodwill as of September 29, 2024?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
------------------------------------------------------------------------| | $ 323,833 | | (162,624) | | $ 161,209 | | 135 | | 323,968 | | (162,624) | | $ 161,344 | | 188,006 | | (162,624) | | 25,382 | | (52) | | 187,954 | | (162,624) | | 25,330 |
During the third quarter of 2024, the Company had identified triggering events that indicated the goodwill allocated to the Del Taco reporting unit might be impaired. As a result, the Company performed a quantitative test over the Del Taco reporting unit, noting that th
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, during the third quarter of 2024, the company identified events that suggested the goodwill allocated to Del Taco might be impaired. As a result, a quantitative test was performed, which indicated that the fair value of the Del Taco reporting unit was less than its carrying value. This led to an impairment of goodwill of $162.6 million at that time. The company determined that there was no such triggering event for the Jack in the Box reporting unit.
In simpler terms, Del Taco's parent company reviews the value of its assets, including goodwill (which represents the intangible value of the brand and its reputation), at least annually. In 2024, factors led the company to believe that the value of the Del Taco brand might have decreased. After conducting a formal evaluation, they determined that the goodwill had indeed diminished, resulting in a write-down of $162.6 million.
For a potential Del Taco franchisee, this goodwill impairment indicates that the company has reassessed the brand's value and future prospects. While a large write-down may seem alarming, it is essential to understand the reasons behind it. It could be due to various factors, such as declining sales, increased competition, or changes in market conditions. It is important to note that this impairment does not necessarily mean that Del Taco is not a viable franchise opportunity, but it does warrant further investigation and due diligence.
A prospective franchisee should inquire about the specific factors that led to the goodwill impairment and what steps Del Taco is taking to address these challenges and restore the brand's value. Understanding the company's strategy for future growth and profitability is crucial in assessing the long-term potential of a Del Taco franchise.