What standards must a Del Taco franchisee's new owners meet prior to and after a transfer?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
- 12.4.4 Prior to and after the transfer, Franchisee's new owners shall meet Del Taco's educational, managerial, and business standards; each shall possess a good moral character, business reputation, and credit rating; have the aptitude and ability to operate the Restaurant, as may be evidenced by prior related business experience or otherwise; Franchisee's Operating Principal, and such other owners
and employees as specified by Del Taco, shall satisfactorily complete Del Taco's initial training program; and have adequate financial resources and capital to operate the Restaurant. The price, consideration, and other proposed terms of the proposed transfer must not, in Del Taco's reasonable business judgment, have the effect of negatively impacting the future viability of the Restaurant.
12.4.5 In connection with any proposed transfer, at Del Taco's option, Franchisee (or transferee) shall execute the form of franchise agreement then being offered to new franchisees, and such other ancillary agreements required by Del Taco for the business franchised hereunder, which agreements shall supersede this Agreement and its ancillary documents in all respects, and the terms of which may differ from the terms of this Agreement including higher Royalty Fees and Marketing Fees, and a different or modified Protected Area, provided however that the term of such franchise agreement shall be equal to the then unexpired term of this Agreement.
12.4.6 In connection with any proposed transfer, at Del Taco's option, Franchisee, at Franchisee's expense, shall upgrade the Restaurant to conform to the then-current standards and specifications of new Restaurant then being established in the System, and shall complete the upgrading and other requirements set forth in this Section 12.4.6 or as required under Section 5.9 above within the time specified by Del Taco.
12.4.7 All of Franchisee's monetary obligations hereunder shall be paid in full on a current basis, and Franchisee must not be otherwise in default of any of Franchisee's obligations hereunder including Franchisee's reporting obligations.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, a franchisee's new owners must meet specific standards both before and after a transfer is completed. These standards encompass educational, managerial, and business qualifications, ensuring that the new owners are well-prepared to operate the Del Taco restaurant effectively. Each new owner must demonstrate good moral character, a solid business reputation, and a favorable credit rating, reflecting their reliability and integrity. They should also possess the aptitude and ability to manage the restaurant, which can be shown through prior relevant business experience.
Furthermore, the Operating Principal of the franchisee, along with other designated owners and employees, must successfully complete Del Taco's initial training program. This training is crucial for maintaining the brand's standards and operational consistency. The new owners must also have sufficient financial resources and capital to ensure the restaurant's smooth operation and future viability. Del Taco also assesses whether the financial terms of the proposed transfer could negatively impact the restaurant's future success.
Del Taco also has the option to require the franchisee or transferee to execute the current form of the franchise agreement offered to new franchisees. This new agreement would supersede the existing one and may include different terms, such as higher royalty and marketing fees, or a modified protected area. However, the term of the new franchise agreement will match the unexpired term of the original agreement. Additionally, Del Taco can require the franchisee to upgrade the restaurant to meet the current standards of new restaurants in the Del Taco system, ensuring uniformity and quality across all locations. All monetary obligations of the franchisee must be current, and the franchisee must not be in default of any obligations, including reporting requirements, to proceed with the transfer.