Under what condition does the Del Taco buyer's indemnification of the sellers NOT cover liabilities?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall, to the fullest extent permissible under applicable law, indemnify and hold Del Taco and its affiliates, and each of Del Taco's respective officers, directors, shareholders, employees, and agents harmless against any and all claims, obligations, and damages arising directly or indirectly from, as a result of, or in connection with this Agreement, the Program Usage Agreement, Franchisee's use of the Platform, Franchisee and its employees', agents' and vendors' actions and inaction, or Franchisee's breach of this Agreement, including those alleged to be caused by Del Taco's negligence, as well as the costs, including attorneys' fees, costs, and expenses (and interest on such fees, costs, and expenses), of defending against them, unless (and then only to the extent that) the claims, obligations, and damages are determined to be caused solely by Del Taco's gross negligence or willful misconduct according to a final, unappealable ruling issued by a court or arbitrator with competent jurisdiction.
Source: Item 23 — RECEIPTS (FDD pages 59–325)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the franchisee's indemnification of Del Taco and its affiliates does not extend to claims, obligations, and damages determined to be caused solely by Del Taco's gross negligence or willful misconduct. This protection for Del Taco is a standard practice in franchising, where franchisees often indemnify the franchisor against liabilities arising from the franchisee's operations. However, this clause provides an exception, shielding the franchisee from liability when Del Taco itself is grossly negligent or engages in willful misconduct.
This exception is significant for a prospective Del Taco franchisee because it limits their financial exposure in cases where Del Taco's actions are the primary cause of the damages. The franchisee's responsibility to cover claims, obligations, and damages is reduced to the extent that Del Taco's gross negligence or willful misconduct is the determined cause. This determination must come from a final, unappealable ruling by a court or arbitrator with competent jurisdiction.
It is important to note that the franchisee remains responsible for indemnifying Del Taco against claims arising from other factors, such as the franchisee's own actions, inactions, or breach of the franchise agreement, even if Del Taco's negligence is also alleged. The exception applies only when Del Taco's gross negligence or willful misconduct is the sole cause, as determined by a final ruling. This clause highlights the importance of understanding the scope of indemnification obligations and the potential liabilities associated with operating a Del Taco franchise.