What subjective assumptions does Del Taco use in its valuation model for stock options?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
| Shares | Veighted- Average Grant Date Fair Value | |
|---|---|---|
| Performance share awards outstanding at October 1, 2023 | 107,174 | $ 72.51 |
| Granted | 62,103 | $ 70.19 |
| Issued | (29,922) | $ 88.88 |
| Forfeited | (4,162) | $ 69.26 |
| Performance adjustments | 9,974 | $ 88.88 |
| Performance share awards outstanding at September 29, 2024 | 145,167 | $ 70.53 |
As of September 29, 2024, there was approximately $3.0 million of total unrecognized compensation cost related to performance share awards, which is expected to be recognized over a weighted-average period of 1.9 years. The weighted-average grant date fair value of awards granted was $70.19, $65.74,
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
I am unable to provide information on the subjective assumptions Del Taco uses in its valuation model for stock options, as this information is not present in the provided excerpts from the 2025 Franchise Disclosure Document. The excerpts do discuss stock awards and compensation, but do not elaborate on the assumptions used to determine their value.
However, the FDD excerpts do provide some context regarding stock and equity. For example, the document mentions unrecognized compensation costs related to performance share awards, which totaled approximately $3.0 million as of September 29, 2024, and are expected to be recognized over a weighted-average period of 1.9 years. The weighted-average grant date fair value of awards granted was $70.19, $65.74, and $78.95 in fiscal years 2024, 2023, and 2022, respectively. The total fair value of awards that became fully vested during fiscal years 2024, 2023, and 2022 was $2.7 million, $1.8 million, and $0.1 million, respectively.
To gain a comprehensive understanding of the assumptions behind Del Taco's stock option valuation, it is recommended that a prospective franchisee ask the franchisor directly about the specific models and inputs used. This would include factors such as expected volatility, risk-free interest rates, dividend yields, and the expected term of the options. Understanding these assumptions is crucial for assessing the potential value and impact of stock-based compensation on the company's financial statements.