Does Del Taco require franchisees to purchase or lease goods or services from Del Taco or its designated suppliers?

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Generally, you must purchase all goods, products, menu items, foodstuffs, beverages, packaging materials, signage, furniture, fixtures, equipment, computer hardware and software, and small wares ("Supplies") used to operate or furnish your Del Taco Restaurant from vendors who demonstrate the ability to meet our standards and specifications and whom we have approved in writing. We do not provide franchises with our standards and specifications for foodstuffs, menu items, beverages, or other items that must be purchased solely from an approved or designated supplier. We will provide our current standards and specifications for such items to approved suppliers. We may modify such standards and specifications by providing written notification to the applicable suppliers. You must implement and maintain an approved Payment Card Industry (PCI) compliance program for the Restaurant that complies with the specifications set forth in the Manuals. You must engage the services of PCI compliance vendors to provide the services that we designate. We have the right, but are not obligated, to engage a vendor to provide some or all of the PCI compliance services for your benefit at your expense. We have engaged NuArx to provide PCI compliance services to Del Taco System Restaurants. You must submit PCI compliance reports to us or our designee in the manner and frequency we set in the Manuals. You must use such related computer hardware and/or software that we may designate or approve in the manner that we designate or approve. You must also use an Internet service provider of whom we have approved. Under the Franchise Agreement, you must also purchase customer relationship management services and software, for which we or our affiliates may be the only approved supplier. These requirements help to establish quality control standards for the items used in the operation of your Restaurant and to protect, maintain and promote the product consistency, reputation, goodwill, and public acceptance of our service marks, trademarks and products. We also require the purchase of certain brand name products. We may derive revenue from those vendors in the form of marketing allowances as explained below.

We currently have approved vendors for food, packaging equipment, and small wares materials; and one approved vendor for PCI compliance.

We negotiate price and certain other contract terms with the suppliers; conduct food safety and product quality testing, inspections and remediation activities; manage product tests, rollouts and related product obsolescence; review distribution charges and performance; and participate in distribution discussion groups and dispute resolutions. For those services, in 2025, we will begin to receive a Sourcing Fee from franchisees for purchases through certain third-party distributors. The Sourcing Fee is currently twenty-five cents ($0.25) per box (a box is a case of goods sold through the distribution network). The Sourcing Fee is collected by our third-party distributors in connection with sales to franchised and company owned restaurants and is forwarded to us on a weekly basis.

You do not receive any material benefits from us, other than prices that we may have negotiated, as a result of your use of our designated or approved sources.

We reserve the right to designate more vendors in the future. If you desire to purchase any Supplies from a vendor not already approved, you must obtain our prior written approval, which may take up to three to six months after our receipt of all requested information, although that time frame can vary depending on the circumstances. As a condition to granting approval, we may require you to submit samples of the proposed vendor's products and to arrange for us to visit the vendor's facilities. If we elect to test the samples or inspect the proposed vendor's facilities, you will have to pay an amount not to exceed the actual cost of the inspection and the actual cost of the testing. We do not charge a separate fee for the approval process. The criteria we use in approving suppliers are available to franchisees upon written request.

You also must obtain and maintain at your own expense insurance policies with insurers reasonably satisfactory to us covering the items specified in the Franchise Agreement, including: Commercial General Liability insurance, including Products Liability coverage, and Broad Form Contractual Liability coverage, written on a "per occurrence" policy form in an amount of not less than $5,000,000 combined single limit per occurrence and aggregate; Business Automobile Liability insurance with a limit of not less than $1,000,000 per accident; Workers' Compensation insurance as required by law; Employer's Liability insurance with a limit not less than $1,000,000 per occurrence; "All Risk" property insurance; Builders' All Risk insurance; Cyber Liability insurance with a limit not less than $1,000,000; and other insurance that may be required by any state, local, federal, or municipal law or by a third-party land owner.. If you do not provide proof of insurance to us as required under the Franchise Agreement, we may secure insurance for you and charge the cost to you.

If you decide to lease the land on which you operate your Restaurant, we have the right to require that certain provisions are included in the lease relating to use, default, notices, lien waivers, length of term, assignment, remodeling, personal property rights, the right for authorized Del Taco employees to enter your Restaurant, the right for Del Taco to protect its proprietary marks located on your premises and noncompetition by the landlord and its affiliates.

Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 28–30)