During the term of the Del Taco franchise agreement, can the franchisee engage in a similar business?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
ration of the Restaurant.
- 10.5 In-Term Covenants. Franchisee specifically acknowledges that, pursuant to this Agreement, Franchisee will receive valuable specialized training and Confidential Information, including information regarding Del Taco's operational, sales, promotional, and marketing methods and techniques and the System. During the term of this Agreement, except as otherwise approved in writing by Del Taco, Franchisee shall not, either directly or indirectly, for Franchisee, or through, on behalf of, or in conjunction with any person, persons, partnership, corporation, or entity:
- 10.5.1 Divert or attempt to divert any business or customer of the Restaurant or of any Del Taco Restaurant using the System to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Proprietary Marks and the System.
- 10.5.2 Except as otherwise approved in writing by Del Taco directly or indirectly own, maintain, operate, engage in, have any interest in or provide any assistance to (whether as owner, stockholder, partner, officer, director, employee, consultant, franchisor, lessor, or otherwise) any "Competitive Business," which shall mean a restaurant or food service business that offers one or more Mexican or similar style menu items, and is operated in a quick service, fast food, or fast casual format.
- 10.6 Post-Term Covenants. Except as otherwise approved in writing by Del Taco, Franchisee shall not, for a continuous uninterrupted period of two (2) years from the date of: (a) a transfer permitted under Section 12.3 above; (b) expiration or termination of this Agreement (regardless of the cause for termination);
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, franchisees are restricted from engaging in any competitive business during the term of their franchise agreement, unless they receive written approval from Del Taco. A "Competitive Business" is defined as any restaurant or food service that offers Mexican or similar style menu items and operates in a quick service, fast food, or fast casual format. This restriction applies whether the franchisee is an owner, stockholder, partner, officer, director, employee, consultant, franchisor, or lessor.
Del Taco requires the Operating Principal or a Manager to devote full-time efforts to managing and operating the Del Taco restaurant, further limiting the franchisee's ability to engage in other business ventures. Franchisees also acknowledge that they will receive valuable training and confidential information about Del Taco's operational, sales, promotional, and marketing methods, which they are prohibited from using to benefit a competitor.
These in-term covenants are designed to protect Del Taco's brand, market share, and confidential information. The franchise agreement explicitly states that franchisees cannot divert business or customers to any competitor or perform any action that could harm the goodwill associated with Del Taco's proprietary marks and the System. This ensures that franchisees remain fully committed to the success of their Del Taco franchise and do not use their knowledge or resources to support competing businesses.