Under what condition does the Del Taco buyer's indemnification of the seller NOT cover liabilities related to the restaurant business after the Closing Date?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
- B. Buyer hereby indemnifies and agrees to hold harmless Sellers and each of them from and against any and all indebtedness, liabilities, losses, costs, expenses, damages, deficiencies and claims including without limitation attorneys' fees, court costs and all costs of investigation, defense and payment of any claim, arising out of or resulting from the conduct of or contracts by Buyer in connection with the Locations or the operation of the restaurant business thereat after the Closing Date; provided, however, that Buyer's indemnification hereunder shall not cover any liabilities arising from Seller's sole negligence.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the buyer's indemnification of the seller does not extend to liabilities arising from the seller's sole negligence. Indemnification generally means that one party agrees to protect another party from financial loss or legal claims. In this case, the buyer typically agrees to cover any liabilities related to the Del Taco restaurant's operation after the closing date, essentially taking responsibility for any issues that arise from their operation of the business.
However, this protection for the seller has a specific limit. If the liabilities stem directly from the seller's own negligence, the buyer is not responsible for covering those costs. This clause is designed to ensure that the buyer isn't held accountable for problems caused by the seller's actions or failures prior to the change in ownership.
For a prospective Del Taco franchisee, this means it's crucial to carefully assess the business's condition and the seller's past practices before finalizing the purchase. While the buyer will be responsible for the restaurant's operation moving forward, they are not obligated to cover liabilities that are a result of the seller's negligence. Understanding the scope of this indemnification is an important part of evaluating the risks and responsibilities associated with acquiring a Del Taco franchise.