Under what circumstances can Del Taco require the transfer of a franchisee's interest due to permanent disability?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
- 12.8 Transfer Upon Permanent Disability.
Upon Franchisee's permanent disability or the permanent disability of any owner with a controlling interest in Franchisee, Del Taco may require Franchisee's or the owner's interest to be transferred to a third party approved by Del Taco within six (6) months after notice to Franchisee. "Permanent Disability" shall mean any physical, emotional, or mental injury, illness, or incapacity that would prevent a person from performing the obligations set forth in this Agreement for at least six (6) consecutive months and from which condition recovery within six (6) consecutive months from the date of determination of disability is unlikely.
If Del Taco and Franchisee or Franchisee's representative disagree as to whether a person has a permanent disability, the existence of the permanent disability shall be determined by a licensed practicing physician selected by Del Taco upon examination of such person or, if such person refuses to be examined, then such person shall automatically be deemed permanently disabled for the purposes of this Section 12.8 as of the date of refusal.
Del Taco shall pay the cost of the required examination.
- 12.9 Notification Upon Death or Permanent Disability.
Within ten (10) days after the death or permanent disability of Franchisee (if a natural person) or an owner, Franchisee or Franchisee's representative shall notify Del Taco of the death or permanent disability in writing.
Any transfer upon death or permanent disability will be subject to the same terms and conditions set out in this Section 12 for any inter vivos transfer.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, Del Taco can require a franchisee to transfer their interest if the franchisee, or any owner with a controlling interest, experiences a permanent disability. This means any physical, emotional, or mental injury, illness, or incapacity that prevents them from performing their obligations under the Franchise Agreement for at least six consecutive months, with recovery within another six months being unlikely.
Del Taco has the right to request this transfer to a third party approved by them, and the franchisee has six months after receiving notice to complete the transfer. If there is a disagreement between Del Taco and the franchisee (or their representative) regarding whether a permanent disability exists, Del Taco will select a licensed physician to examine the person in question. Refusal to undergo this examination automatically results in the person being deemed permanently disabled. Del Taco is responsible for covering the cost of this examination.
The franchisee is obligated to notify Del Taco in writing within ten days of the permanent disability of the franchisee or an owner. Any transfer due to permanent disability is subject to the same terms and conditions as any other transfer of interest. This ensures that Del Taco maintains control over who operates its franchises and that the new operator meets their standards.
This clause protects Del Taco by ensuring that the restaurant continues to be operated effectively even if the original franchisee becomes unable to manage it. For a prospective franchisee, this highlights the importance of having a succession plan or disability insurance to manage such a situation. It also emphasizes the need to understand the definition of "Permanent Disability" as defined in the agreement and the process for determining its existence.