Does Del Taco require franchisee consent to transfer or assign the Franchise Agreement?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 22: CONTRACTS]
Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee, and that Del Taco has granted this franchise in reliance on Franchisee or its owners' business skill, financial capacity, and personal character.
Accordingly:
- 12.3.1 Franchisee shall not, without Del Taco's prior written consent, transfer, pledge or otherwise encumber: (a) this Agreement or any of Del Taco's rights and obligations under this Agreement;
(b) all or substantially all of the assets of the Restaurant; (c) the leases or any other interest in the Restaurant; or (d) any direct or indirect ownership interest in Franchisee.
12.1 Del Taco Transfers.
Del Taco has the right to transfer or assign this Agreement, the System, Confidential Information, and all or any part of Del Taco's rights or obligations under this Agreement or Del Taco's interest in the System and Confidential Information to any person or legal entity without Franchisee's consent.
- 12.5 Transfers to Entities for the Convenience of Ownership. If Franchisee desires to transfer all of Franchisee's interest in this Agreement, or if all of Franchisee's owners desire to transfer all of their ownership interests in Franchisee, to a corporation, limited liability company, or other entity, solely for the convenience of ownership and/or for tax or estate planning reasons, Del Taco shall not unreasonably withhold Del Taco's consent to such transfer, and Del Taco shall not require that Franchisee comply with the provisions and conditions of Section 12.4 or 12.6, if Franchisee complies with all of the following conditions:
- 12.5.1 Franchisee shall provide written notice to Del Taco not less than thirty (30) days prior to the date of the proposed transfer, and shall provide Del Taco with such documents and information as Del Taco may request in support of Franchisee's request, which may include, among other things, entity formation and good standing certifications, evidence of insurance in the name of the new franchisee entity, and bank information for the new franchisee entity.
- 12.5.2 Franchisee and Franchisee's owners shall own all of the outstanding equity interests in the new franchisee entity, and shall own the same percentage ownership interests in the new franchisee entity as they own in Franchisee, and if Franchisee is an individual, Franchisee shall own 100% of the outstanding voting equity interests in the new franchisee entity.
- 12.5.3 All owners of the new franchisee entity shall execute a Guarantee in the form attached as Exhibit E hereto.
- 12.5.4 Franchisee and Franchisee's owners shall comply with the provisions of Sections 12.4.1, 12.4.2, 12.4.6, 12.4.7, and 12.4.11 of this Agreement, and the new entity and its owners shall comply with Sections 5.27 and 5.28 of this Agreement.
- 12.5.5 Franchisee and Franchisee's owners shall execute such transfer documents, agreements and other materials as Del Taco may require.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, franchisees are generally not allowed to transfer their Franchise Agreement without prior written consent from Del Taco. Specifically, franchisees cannot transfer the agreement itself, the restaurant's assets, leases, or any ownership interest in the franchise without Del Taco's approval. Del Taco maintains these controls because the franchise is granted based on the franchisee's or their owners' business skills, financial capacity, and personal character.
Del Taco, however, has the right to transfer or assign the Franchise Agreement, the System, Confidential Information, and all or any part of Del Taco's rights or obligations under this Agreement or Del Taco's interest in the System and Confidential Information to any person or legal entity without the franchisee's consent. This includes the ability to sell assets, offer securities, merge with or acquire other entities, or undergo financial restructuring.
If a franchisee wishes to transfer their interest in the agreement to another entity for ownership convenience or for tax or estate planning reasons, Del Taco will not unreasonably withhold consent if certain conditions are met. These conditions include providing written notice, ensuring the original owners maintain the same ownership percentage in the new entity, and that all owners of the new entity execute a Guarantee. The franchisee must also comply with specific sections of the agreement related to transfer policies, releases, upgrades, and financial obligations.