Under what circumstances is a transfer of ownership NOT considered an assignment requiring Del Taco's consent?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
If the Developer or its successor is a legal entity, the following provisions shall apply:
(a) The articles of incorporation and bylaws, partnership agreement, limited liability company operating agreement, or similar organizational documents (the "Charter Documents") shall limit the purpose of the entity to the development and operation of Del Taco Restaurants and shall prohibit the issuance and transfer of the ownership interests in the Developer in violation of this Agreement. The Developer shall furnish Del Taco, at the time of execution of this Agreement or upon the issuance or transfer of any ownership interests in the Developer, certified copies of its Charter Documents evidencing compliance with the foregoing and an agreement executed by all owners of the Developer, stating that no owner shall sell, assign or transfer, voluntarily or by operation of law, any ownership interests in the Developer to any person or entity other than existing owners, to the extent permitted by this Agreement, without the prior written consent of Del Taco. All ownership interests issued by the Developer shall bear the following legend, which shall appear legibly and conspicuously on each document or certificate evidencing an ownership interest:
"The transfer of these securities is subject to the terms and conditions of an agreement with Del Taco LLC."
- (b) The Developer shall recall any presently issued and outstanding ownership interests and place the foregoing legend on them.
The Developer shall place a stop transfer order against the transfer of any ownership interests, except transfers permitted by this Section 16.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
Based on the 2025 Del Taco Franchise Disclosure Document, if the Developer is a legal entity, the organizational documents must prohibit the issuance and transfer of ownership interests in the Developer in violation of the Development Agreement. To ensure compliance, the Developer must furnish Del Taco with certified copies of its Charter Documents and an agreement executed by all owners, stating that no owner shall sell, assign, or transfer any ownership interests to any person or entity other than existing owners (to the extent permitted by the Agreement) without Del Taco's prior written consent.
All ownership interests issued by the Developer must bear a legend stating that the transfer of these securities is subject to the terms and conditions of an agreement with Del Taco LLC. The Developer is required to recall any presently issued and outstanding ownership interests and place the specified legend on them. Additionally, the Developer must place a stop transfer order against the transfer of any ownership interests, except for transfers explicitly permitted within Section 16 of the Development Agreement.
In practical terms, this means that a Del Taco developer cannot freely transfer ownership in their development company without Del Taco's approval, ensuring that Del Taco maintains control over who is developing their franchise locations. This protects Del Taco's interests by preventing unwanted or unqualified individuals from gaining control of development rights. However, transfers among existing owners, if permitted by the agreement, do not require Del Taco's consent, providing some flexibility for the developer's internal ownership structure.