After the termination of employment or ownership with a Del Taco franchisee, what is the duration of the 'Post-Term Period' during which certain restrictions apply?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
(c) Obligee covenants and agrees that during the Post-Term Period (defined below), except as otherwise approved in writing by Del Taco, Obligee shall not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, partnership, corporation, or entity, own, maintain, operate, engage in, or have any interest in any Competitive Business which is, or is intended to be, located: (a) within the Protected Area of the Restaurant or (b) within two (2) miles of any other Del Taco restaurant owned and/or operated or then under construction by Del Taco or any other franchisee or licensee of Del Taco as of the time that the obligations under this Section commence.
(d) As used in this Agreement, the term "Post-Term Period" shall mean a continuous uninterrupted period of two (2) years from the date of: (a) a transfer permitted under Section 12.3 of the Franchise Agreement with respect to Obligee; and/or (b) termination of Obligee's employment with, and/or ownership interest in, Franchisee.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the "Post-Term Period" lasts for two years following the termination of employment or ownership interest in the franchise. During this period, certain restrictions apply to the franchisee or former franchisee. Specifically, unless Del Taco provides written approval, the franchisee cannot own, maintain, operate, engage in, or have any interest in a Competitive Business. A Competitive Business is defined as one that offers one or more Mexican or similar style menu items and operates in a quick service, fast food, or fast casual format.
This restriction applies within the Protected Area of the Restaurant or within two miles of any other Del Taco restaurant owned and/or operated or then under construction by Del Taco or any other franchisee or licensee of Del Taco at the time the obligations commence. This means that a former Del Taco franchisee is significantly limited in their ability to open a competing restaurant in the vicinity of existing Del Taco locations for a period of two years after their involvement with the franchise ends.
Del Taco also emphasizes the importance of adhering to these post-termination obligations, noting that failure to comply will cause the company irreparable injury. The franchisee agrees to cover all court costs and reasonable attorney's fees incurred by Del Taco in obtaining specific performance or an injunction against any violation of these requirements. This highlights the seriousness with which Del Taco enforces these non-compete provisions to protect its brand and market share.
Prospective franchisees should carefully consider these post-term restrictions and how they might impact their future business opportunities before investing in a Del Taco franchise. It is essential to understand the geographic limitations and the types of businesses that are considered competitive to avoid potential legal issues after leaving the Del Taco system.