Under what condition is a Del Taco franchisee prohibited from renewing their franchise due to defaults?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
- 2.2.3 Franchisee shall not have received, prior to its election to renew, written notice of a default under this Agreement on more than 3 separate occasions and, from the time of Franchisee's election to renew through the expiration of the initial term, Franchisee or its affiliates shall not have been in default of any provision of this Agreement, any amendment to this Agreement, or any other agreement between Franchisee and Del Taco or its affiliates; and, in the reasonable judgment of Del Taco, Franchisee shall have substantially complied with all the terms and conditions of this Agreement, such other agreements, as well as the operating standards prescribed by Del Taco during the initial term;
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, a franchisee's right to renew their franchise agreement is contingent upon several conditions related to defaults. Specifically, prior to electing to renew, the franchisee must not have received written notice of default under the agreement on more than 3 separate occasions. Furthermore, from the time the franchisee elects to renew through the expiration of the initial term, neither the franchisee nor their affiliates can be in default of any provision within the franchise agreement, any amendments to it, or any other agreements between the franchisee and Del Taco or its affiliates.
Del Taco also requires, in its reasonable judgment, that the franchisee has substantially complied with all the terms and conditions of the agreement, other related agreements, and the operating standards prescribed by Del Taco during the initial term. This means that even if a franchisee technically meets the other conditions, Del Taco can still deny renewal if they believe the franchisee has not adequately adhered to the brand's standards and expectations.
These stipulations are fairly standard in franchising, as franchisors want to ensure that franchisees seeking renewal are in good standing and have consistently upheld the brand's reputation and operational standards. For a prospective Del Taco franchisee, this underscores the importance of maintaining compliance with all aspects of the franchise agreement and addressing any defaults promptly to preserve their renewal options. Failing to do so could jeopardize their ability to continue operating the Del Taco restaurant beyond the initial term.