Does Del Taco have the right to reduce the scope of the non-compete covenants without the franchisee's consent?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
- 10.10 Scope of Covenants.
Del Taco shall have the right to reduce the scope of any covenant set forth in Sections 10.5 and 10.6 in this Agreement, or any portion thereof, without Franchisee's consent, effective immediately upon receipt by Franchisee of written notice thereof; and Franchisee agrees that it shall comply forthwith with any covenant as so modified, which shall be fully enforceable notwithstanding the provisions of Section 24 and 24.2 below.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, Del Taco has the right to reduce the scope of the non-compete covenants outlined in Sections 10.5 and 10.6 of the franchise agreement without obtaining the franchisee's consent. This modification becomes effective immediately upon the franchisee receiving written notice from Del Taco. The franchisee is obligated to comply with the modified covenant, and this compliance is fully enforceable, regardless of any provisions in Sections 24 and 24.2 of the agreement.
This provision grants Del Taco significant flexibility in adjusting the non-compete terms, potentially allowing them to narrow the geographic area or the scope of activities restricted by the covenant. This could be beneficial to a franchisee if Del Taco reduces the non-compete obligations, making it easier for the franchisee to pursue other business ventures after the franchise agreement ends. However, it also introduces uncertainty, as Del Taco could modify the non-compete terms at any time during the franchise agreement.
In practical terms, a prospective Del Taco franchisee should carefully consider this clause and understand that the non-compete obligations they initially agree to may change during the term of the agreement. It is advisable to seek legal counsel to fully understand the implications of this provision and to assess how it might affect their future business opportunities. Franchisees should also maintain open communication with Del Taco to stay informed of any potential changes to the non-compete covenants and to understand the rationale behind such changes.
This level of franchisor control over non-compete terms is not uncommon, but franchisees should be aware of the potential for unilateral changes and factor this into their decision-making process. Understanding the conditions under which Del Taco might exercise this right is crucial for any potential franchisee.