Under what circumstances might a Del Taco licensee pay reduced fees?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
matic bank draft. Licensees in nontraditional locations may pay reduced fees. Otherwise, we uniformly impose the fees described above.
- The royalty fees will be reduced if you qualify for our Development Incentive Program. If you qualify for our Development Incentive Program and execute a Development Agreement and Development Incentive Program Addendum, the royalty fees will be reduced to 1% of net sales during the first year of operations, 2% of net sales during the second year of operations, 3% of net sales during the third year of operations, 4% of net sales during the fourth year of operations, and the standard royalty of 5% of net sales thereafter. Our Development Incentive Program is currently only available for multi-unit franchisees who agree to develop multiple restaurants pursuant to a Development Agreement in certain markets we have identified for further development and that we deem, in our sole determination, to be undeveloped, underdeveloped, or emerging in terms of the Del Taco brand's market penetration; it is not available in markets we deem to be mature in terms of the Del Taco brand's market penetration, such as, for example, Orange County, California, Los Angeles County, California, and Phoenix, Arizona.
Source: Item 6 — OTHER FEES (FDD pages 18–21)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, there are a couple of scenarios where a licensee might pay reduced fees. Licensees operating in nontraditional locations may be eligible for reduced fees, although the specific types of fees and amounts are not detailed in this document.
Del Taco also offers a Development Incentive Program that can reduce royalty fees for multi-unit franchisees. To qualify, franchisees must agree to develop multiple restaurants in markets that Del Taco identifies as undeveloped, underdeveloped, or emerging. This program is not available in mature markets like Orange County, Los Angeles County (California), and Phoenix (Arizona).
If a franchisee qualifies for the Development Incentive Program and executes the required agreements, the royalty fees are reduced according to the following schedule: 1% of net sales during the first year, 2% during the second year, 3% during the third year, 4% during the fourth year, and the standard 5% thereafter. This incentive is designed to encourage growth in specific target markets, benefiting both the franchisee and Del Taco by expanding the brand's presence.