Under what conditions can Del Taco terminate a franchise agreement before its expiration?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Restaurant opens. |
| Provision | Section in the Agreement | Summary | |
|---|---|---|---|
| n. Our right of first refusal to acquire your business | 12.6 | We have an option for 30 days to purchase upon same terms and conditions offered to the third party. | |
| o. Our option to purchase your business | 12.6 | We have an option to purchase your business upon the termination or expiration of your Franchise Agreement. | |
| p. Your death or disability | 12.7 and 12.8 | We will not withhold consent unreasonably to a transfer to a third party within 6 months, provided the transferee meets our general conditions of transfer. | |
| q. Non-competition covenants during the term of the franchise | 10.5 | You cannot use the Del Taco System or any other names, marks, systems, logotypes, symbols or foodstuffs provided by us or an approved supplier in connection with another Restaurant; you cannot operate any “competitive business”, which means a Restaurant or food service business that offers one or more Mexican or similar style menu items, and is operated in a quick service, fast food, or fast casual format. (subject to state law) | |
| r. Non-competition | 10.6 | For a period of two years, you cannot operate a | |
| covenants after the | competitive business within two miles of your | ||
| franchise terminates or | original location or any other existing Del Taco | ||
| expires | Restaurant. (subject to state law) | ||
| s. Modification of the | 23 | No changes can take place unless mutually agreed | |
| agreement | to in writing. | ||
| t. Integration/ merger clause | 23 | Only the written terms of the agreement and exhibits bind the parties. Notwithstanding the foregoing, nothing in this or any related agreement is intended to disclaim the express representations made in the Franchise Disclosure Document, its exhibits and amendments. Any representations or promises outside of the Franchise Disclosure Document and other agreements may not be enforceable. (subject to state law) | |
| u. Dispute resolution by arbitration or mediation | 17 | The parties must arbitrate any controversy or claim, except that either party may file for preliminary injunctive relief, a restraining order, or order of specific performance, including, without limitation, injunctive relief pertaining to the use of the Del Taco System and Marks. | |
| v. Choice of forum | 17.2 and 17.3 | All litigation and arbitration must take place in Orange County, California, subject to applicable state law. See Exhibit F. | |
| w. Choice of law | 17.1 and 17.3 | California law applies, subject to applicable state law. See Exhibit F. |
| Provision | Section in the Agreement | Summary |
|---|---|---|
| n. Our right of first refusal to | Not applicable | Not applicable. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 42–46)
What This Means (2025 FDD)
Based on the 2025 Del Taco Franchise Disclosure Document, Item 17 includes a table that summarizes conditions relating to termination, renewal, transfer, and dispute resolution. However, the table does not list the specific conditions under which Del Taco can terminate the franchise agreement before its expiration. The table includes provisions for Del Taco's right of first refusal to acquire the franchisee's business, Del Taco's option to purchase the business, and conditions related to the franchisee's death or disability. It also covers non-competition covenants during and after the franchise term, modification of the agreement, integration/merger clauses, dispute resolution, choice of forum, and choice of law. These provisions generally outline the parameters within which the franchise operates and what happens upon termination or expiration, but not the specific causes for termination.
Several addenda address modifications to the standard agreement based on state-specific laws. For example, addenda for Indiana, Virginia, and Washington modify certain provisions of the Franchise Agreement and Development Agreement to comply with state regulations. These modifications often relate to non-compete clauses, dispute resolution, and waivers of claims. However, these addenda do not provide a comprehensive list of termination conditions.
To fully understand the conditions under which Del Taco can terminate a franchise agreement before its expiration, a prospective franchisee should carefully review the complete Franchise Agreement and consult with a legal professional. It is essential to identify all potential triggers for termination, including any performance-based metrics, breaches of contract, or other circumstances that could lead to early termination. Understanding these conditions is crucial for assessing the risks and obligations associated with the franchise.