How are revenues from leasing arrangements with Del Taco franchisees presented in the consolidated statements of earnings?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
As lessor, our leases and subleases primarily consist of restaurants that have been leased to franchisees subsequent to refranchising transactions. The lease descriptions, terms, variable lease payments and renewal options are generally the same as the lessee leases described above. Revenues from leasing arrangements with our franchisees are presented in "Franchise rental revenues" in the accompanying consolidated statements of earnings, and the related expenses are presented in "Franchise occupancy expenses."
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, revenues stemming from leasing arrangements with franchisees are categorized as "Franchise rental revenues" within the company's consolidated statements of earnings. The corresponding expenses related to these leasing arrangements are classified as "Franchise occupancy expenses."
This means that when Del Taco leases or subleases property (such as restaurant sites) to its franchisees, the income generated from these leases is specifically identified as franchise rental revenue in its financial reporting. This provides transparency into the revenue streams of the company, distinguishing rental income from other sources like royalties or franchise fees.
For a prospective Del Taco franchisee, this information is useful for understanding the financial relationship between the franchisee and franchisor. It clarifies how Del Taco accounts for revenues and expenses related to property leases, which can be a significant aspect of the franchise agreement, especially in refranchising situations where Del Taco leases property to the franchisee.