Under what circumstances might a Del Taco franchisee not be required to pay the full Development Fee?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
re immediately upon the required opening date for the last Restaurant set forth on the Development Schedule or the actual opening date for the last Restaurant, whichever first occurs, unless sooner terminated in accordance with the terms and conditions of this Agreement.
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- Time of Essence. Time is of the essence of this Agreement.
5. Fees. The Developer shall pay to Del Taco the following fees:
- (a) In consideration of the Development Rights granted in this Agreement, the Developer shall pay to Del Taco a fully non-refundable Development Fee of $35,000 for the first Restaurant scheduled for opening and $10,000 for each additional Restaurant scheduled for opening, payable upon execution and delivery by the Developer of this Agreement. As between Developer and Del Taco, Del Taco shall earn the Development Fee upon the execution of this Agreement and shall not have any obligation to refund any portion of the Development Fee.
- (b) Upon the execution by the Developer of a Franchise Agreement, Del Taco shall credit from the Development Fee $35,000 for the first Restaurant scheduled for opening and $10,000 for each subsequent Restaurant scheduled for opening towards the initial franchise fee for each of those Restaurants. The Developer shall pay the balance of the initial franchise fee for the second and each subsequent Restaurant scheduled for opening. The Developer acknowledges that, once it has executed a Franchise Agreement for a Restaurant, the Developer will not have the right to a refund of any portion of the foregoing fees.
- (c) Notwithstanding any provision of the Agreement to the contrary, if Developer is not able to timely meet its Development Schedule, and provided that Developer and its affiliates are in full compliance with all agreements with Del Taco, Developer may request a twelve-month extension of one or more of the development deadlines in the Development Schedule, which extension Del Taco may grant or deny at its sole option. To request an extension of a development deadline, Developer must provide Del Taco at least six months' advance written notice.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, a developer who signs a Development Agreement to open multiple Del Taco restaurants may receive credits toward the initial franchise fees, effectively reducing the amount they pay at the time of signing the Franchise Agreement. Specifically, $35,000 is credited from the Development Fee for the first restaurant scheduled for opening, and $10,000 for each subsequent restaurant. These credits are applied towards the initial franchise fee for each respective restaurant.
However, the document also states that the Development Fee is fully non-refundable once the Development Agreement is executed, implying that the full fee is initially paid, but portions are later credited back. The developer acknowledges they won't receive a refund of any portion of these fees once a Franchise Agreement is executed for a restaurant. This means that while the initial outlay includes the full Development Fee, the franchisee benefits from a reduction in the initial franchise fees as they open more locations, as long as they adhere to the development schedule.
Additionally, if a developer is unable to meet the development schedule but remains in full compliance with all agreements with Del Taco, they may request a twelve-month extension of one or more development deadlines. Del Taco has the sole option to grant or deny this extension. If Del Taco approves the extension, the developer must pay an Extension Fee of $5,000 times the number of development deadlines they wish to extend. This Extension Fee is initially non-refundable but will be credited towards the Franchise Fee for the location upon execution of the applicable Franchise Agreement. In all other circumstances, Del Taco will retain any and all Extension Fees.