Under what conditions will Del Taco not unreasonably withhold consent for a transfer to an entity for convenience of ownership?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
- 12.5 Transfers to Entities for the Convenience of Ownership. If Franchisee desires to transfer all of Franchisee's interest in this Agreement, or if all of Franchisee's owners desire to transfer all of their ownership interests in Franchisee, to a corporation, limited liability company, or other entity, solely for the convenience of ownership and/or for tax or estate planning reasons, Del Taco shall not unreasonably withhold Del Taco's consent to such transfer, and Del Taco shall not require that Franchisee comply with the provisions and conditions of Section 12.4 or 12.6, if Franchisee complies with all of the following conditions:
- 12.5.1 Franchisee shall provide written notice to Del Taco not less than thirty (30) days prior to the date of the proposed transfer, and shall provide Del Taco with such documents and information as Del Taco may request in support of Franchisee's request, which may include, among other things, entity formation and good standing certifications, evidence of insurance in the name of the new franchisee entity, and bank information for the new franchisee entity.
- 12.5.2 Franchisee and Franchisee's owners shall own all of the outstanding equity interests in the new franchisee entity, and shall own the same percentage ownership interests in the new franchisee entity as they own in Franchisee, and if Franchisee is an individual, Franchisee shall own 100% of the outstanding voting equity interests in the new franchisee entity.
- 12.5.3 All owners of the new franchisee entity shall execute a Guarantee in the form attached as Exhibit E hereto.
- 12.5.4 Franchisee and Franchisee's owners shall comply with the provisions of Sections 12.4.1, 12.4.2, 12.4.6, 12.4.7, and 12.4.11 of this Agreement, and the new entity and its owners shall comply with Sections 5.27 and 5.28 of this Agreement.
- 12.5.5 Franchisee and Franchisee's owners shall execute such transfer documents, agreements and other materials as Del Taco may require.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, Del Taco will not unreasonably withhold consent for a transfer of the franchise agreement to a corporation, limited liability company, or other entity if it is solely for the convenience of ownership or for tax or estate planning reasons. This is a notable exception to the standard transfer requirements.
For Del Taco to grant this exception, the franchisee must meet several conditions. First, the franchisee must provide written notice to Del Taco at least thirty days before the proposed transfer, including all requested documentation such as entity formation and good standing certifications, evidence of insurance under the new entity's name, and bank information. Second, the franchisee and its owners must retain the same ownership percentage in the new entity as they did in the original franchise. If the franchisee is an individual, they must own 100% of the voting equity interests in the new entity.
Additionally, all owners of the new entity must execute a guarantee, and the franchisee and its owners must comply with specific sections of the franchise agreement related to transfer conditions and operational requirements. The franchisee and its owners must also execute any transfer documents, agreements, and other materials that Del Taco requires. Meeting these conditions allows a Del Taco franchisee to restructure their business for tax or estate planning purposes without facing undue obstacles from Del Taco.