Is the Royalty Fee for Del Taco uniform across all agreements?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Development Incentive Program. For so long as Developer and its affiliates are fully compliant with the terms of the Development Agreement, Franchise Agreement, and any other agreements entered into with Del Taco and its affiliates, the following provision shall apply to each Franchise Agreement executed pursuant to the Development Agreement:
The Royalty Fee (which is currently 5% of Net Sales) will be reduced to: (i) 1% of Net Sales for the first year of a Restaurant's operations; (ii) 2% of Net Sales for the second year of a Restaurant's operations; (iii) 3% of Net Sales for the third year of a Restaurant's operations; (iv) 4% of Net Sales for the fourth year of a Restaurant's operations; and (v) 5% of Net Sales for all subsequent years.
Adherence to Development Schedule. The Developer must develop each Restaurant according to the development schedule of the Development Agreement to qualify for the development incentives described in this Addendum. In the event the Developer breaches the Development Agreement or Franchise Agreement, in addition to the other rights and remedies available to Del Taco under the Development Agreement and Franchise Agreement, Developer shall immediately pay to Del Taco the amount of any reduction in the Initial Franchise Fees or Royalty Fees.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, the royalty fee is not uniform across all agreements. Del Taco offers a Development Incentive Program that modifies the standard royalty fee for developers who commit to opening multiple Del Taco restaurants in undeveloped or emerging markets.
Under this program, the standard royalty fee, which is currently 5% of Net Sales, is reduced on a graduated scale for a set period. For the first year of a restaurant's operations, the royalty fee is 1% of Net Sales. It then increases to 2% for the second year, 3% for the third year, and 4% for the fourth year. By the fifth year and all subsequent years, the royalty fee returns to the standard 5% of Net Sales. This incentive is designed to encourage development in specific markets identified by Del Taco.
However, to qualify for these reduced royalty fees, the developer must adhere to the development schedule outlined in their Development Agreement and remain fully compliant with all agreements with Del Taco. Failure to meet the development schedule or any breach of the agreements will result in the developer immediately owing Del Taco the amount of any reduction in the Initial Franchise Fees or Royalty Fees. This condition ensures that the incentive is tied to the developer's commitment to expanding the Del Taco brand as agreed upon.