What variable lease costs are excluded from the measurement of the lease liability for Del Taco?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
Many of our restaurants also have rent escalation clauses and require the payment of property taxes, insurance, and maintenance costs. Variable lease costs include contingent rent, cost-of-living index adjustments, and payments for additional rent such as real estate taxes, insurance, and common area maintenance, which are excluded from the measurement of the lease liability.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, variable lease costs are excluded from the measurement of the lease liability. These costs include contingent rent, which is often based on a percentage of defined revenues. Additionally, variable lease costs encompass cost-of-living index adjustments, which can cause rent to fluctuate with inflation.
Furthermore, the excluded variable lease costs also cover payments for additional rent items. These include real estate taxes, insurance, and common area maintenance (CAM) fees. These expenses can vary depending on the location and the terms of the lease agreement.
For a Del Taco franchisee, understanding which lease costs are fixed versus variable is crucial for financial planning. Variable costs can impact profitability and should be carefully considered when evaluating potential restaurant locations. Franchisees should also be aware of how these variable costs are calculated and what factors can cause them to change over time.