What restrictions are placed on the transfer of partnership interests for a Del Taco franchisee that is a partnership?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
12.3.3 If Franchisee is a partnership or limited partnership, the partners of the partnership shall not, without Del Taco's prior written consent, admit additional general partners, remove a general partner, or otherwise materially alter the powers of any general partner.
5.27.2 If Franchisee is a partnership or limited liability partnership it shall: (i) be newly organized, and confine its activities, and its governing documents shall at all times provide that its activities are confined, exclusively to operating the Restaurant; (ii) furnish Del Taco with its partnership agreement as well as such other documents as Del Taco may reasonably request, and any amendments thereto; (iii) prepare and furnish to Del Taco, upon request, a current list of all general and limited partners in Franchisee, which list shall be amended to reflect changes in ownership, as permitted under this Agreement; and (iv) maintain stop transfer instructions on its records and in its partnership agreement against the transfer of partnership interests and equity securities, and shall only issue securities or partnership interests with documentation which bears a notice or legend, in a form satisfactory to Del Taco, which references the transfer restrictions imposed by this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, if a franchisee is a partnership or limited partnership, the partners cannot admit additional general partners, remove a general partner, or materially alter the powers of any general partner without Del Taco's prior written consent.
Del Taco needs to give written consent if a franchisee wants to transfer their obligations, any interest in the restaurant assets, or any direct or indirect interest in the franchise. Del Taco can require compliance with their current transfer policies. Both the franchisee and the proposed transferee must provide all requested information and documents for Del Taco's evaluation, including financial and operational details, transaction terms, and lease information. The transferor must execute a general release of claims against Del Taco.
Moreover, the 2025 FDD states that the partnership must maintain stop transfer instructions on its records and in its partnership agreement against the transfer of partnership interests and equity securities. They can only issue securities or partnership interests with documentation that includes a notice referencing the transfer restrictions imposed by the Franchise Agreement. The franchisee must also provide Del Taco with a current list of all general and limited partners, updating it to reflect any ownership changes permitted under the agreement.
These restrictions ensure that Del Taco maintains control over who becomes a partner in a franchise, safeguarding their brand and business practices. Franchisees need to be aware of these conditions, as failing to comply can lead to a breach of the Franchise Agreement and potential termination of the franchise.