What was the value of Del Taco's goodwill?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Represents the closing indebtedness of Del Taco's existing debt that was paid at the Closing Date by the Company.
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The excess of the total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities is recorded as goodwill. The goodwill of $319.7 million arising from the acquisition was primarily attributable to the market position and future growth potential of Del Taco for both company-operated and franchised restaurants related to future store openings, expansion into new markets, and expected synergies. None of the goodwill resulting from the acquisition is deductible for tax purposes.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, at the time of acquisition, the total goodwill associated with Del Taco was $319.7 million. This goodwill is primarily attributed to Del Taco's market position and its potential for future growth, including the expansion of both company-operated and franchised restaurants into new markets, as well as expected synergies. Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired. It is a common accounting practice to record goodwill when a company acquires another business, reflecting the intangible value of the acquired entity, such as brand reputation and customer relationships.
Del Taco's goodwill is not amortized and is assigned to reporting units for impairment testing. The company's two restaurant brands, Jack in the Box and Del Taco, are both operating segments and reporting units. Goodwill is evaluated for impairment by determining whether the fair value of our reporting units exceed their carrying values. The company tests goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if events and circumstances warrant. The company performs this testing during the third quarter of each year.
However, during the third quarter of 2024, the company identified triggering events that indicated the goodwill allocated to the Del Taco reporting unit might be impaired. As a result, the company performed a quantitative test over the Del Taco reporting unit, noting that the fair value of the reporting unit was less than the carrying value, which resulted in an impairment of goodwill of $162.6 million at that time. This means that the value of Del Taco's goodwill was reduced by this amount due to the impairment. None of the goodwill resulting from the acquisition is deductible for tax purposes.
For a potential Del Taco franchisee, understanding goodwill and its potential impairment is crucial because it reflects the overall financial health and market perception of the brand. While goodwill itself doesn't directly impact day-to-day operations, a significant impairment can signal underlying issues within the business, which could affect future growth and profitability. Therefore, it's important to monitor the brand's financial performance and market conditions to assess the stability and long-term prospects of the franchise.