Del Taco Franchise Costs, Fees & Owner Salary (2023)

INVESTMENT

$1,312,000

-

$3,085,000

LOCATIONS

592

Emily

Updated

May 2, 2024

Is

Del Taco

a franchise?

Yes,
Del Taco
currently
accepts
franchise
applications

Del Taco, a well-recognized name in the fast-food industry, particularly for its Mexican-inspired menu, was founded in 1964 by Ed Hackbarth and David Jameson in Yermo, California.The chain began franchising in 1967 providing opportunities to franchise owners worldwide. From its modest beginnings with a menu that featured 19¢ tacos and 24¢ cheeseburgers, Del Taco has grown significantly, marking a bold start with $169 in sales on its first day, equivalent to 900 tacos.

The franchise is headquartered in Lake Forest, California, and has maintained a strong presence in the Pacific Southwest region of the United States. Del Taco's expansive menu includes a variety of Mexican items such as tacos, burritos, quesadillas, along with American classics like hamburgers and crinkle-cut fries, prepared with fresh ingredients including cheddar cheese, beans slow-cooked from scratch, pico de gallo salsa, and marinated chicken grilled in the restaurant.

Del Taco differentiates itself from the competition by offering a unique blend of Mexican and American dishes, catering to a broad audience with its diverse menu. The inclusion of fresh ingredients and a wide range of options provides a competitive edge in the quick-service restaurant sector. Furthermore, Del Taco has adapted to consumer trends with initiatives like the introduction of plant-based Beyond Tacos in partnership with Beyond Meat, expanding its appeal to vegetarians and vegans.

How many

Del Taco

franchises

are there?

In 2022, there were
592
outlets in
the United
States, of which
421
are franchises, and
171
are corporate-owned.

What are the

Del Taco

franchise

fees?

Advertising fee

4.00%

Initial Franchise Fee ($35,000)

This fee is payable upon the execution of the Franchise Agreement.

Promotional Fee ($10,000)

This fee is paid upon the execution of the Franchise Agreement. It is used to promote the restaurant within a year of the restaurant's opening. The franchisee can draw upon this fee through reimbursements submitted to Del Taco or through direct payments by Del Taco to vendors.

If the franchisee fails to spend all of the promotional fee within 12 months after the opening of the restaurant, the unused portion of the fee is forfeited, and Del Taco applies it toward Del Taco’s general advertising or marketing programs.

Royalty (5% of Net Sales)

During the initial term of the agreement, the franchisee is required to pay Del Taco a continuing royalty fee equal to 5% of the restaurant's net sales. This fee is payable within three days after the close of each sales week based on the net sales of the restaurant for the immediately preceding sales week.

Advertising (4% of Net Sales)

The franchisee is required to participate in an advertising program administered by Del Taco. The current marketing fee is equal to 4% of the franchisee's net sales. This fee is used for various marketing programs, including the production and placement of media and print advertising, as well as in-restaurant promotional materials.

Transfer Fee ($5,000)

This fee is payable when the franchisee transfers the Franchise Agreement or a controlling interest in the franchisee entity. The fee is due upon the earlier of when the transferee signs its franchise agreement or begins training.

Audit Fees and Expenses (About $1,000 to $2,000)

If Del Taco conducts an audit and finds that the franchisee understated net sales by 1% or more, the franchisee must pay all costs of the audit.

New Product and Vendor Testing (About $2,000 to $3,000)

If the franchisee desires to purchase items from an unapproved vendor, they must submit a written request for approval. Del Taco has the right to inspect the vendor's facilities and take samples for testing.

Note: The fees presented here can be found in the Item 5 of the Franchise Disclosure Document. For a complete list of all the fees borne by the franchisee, please consult the Franchise Disclosure Document.

How much does

it cost

to start a

Del Taco

franchise?

It costs between
$1,312,000
and
$3,085,000
to start a
Del Taco
franchise.

Del Taco, a distinguished franchise in the fast-food industry, provides potential investors with two primary establishment options for their restaurant:

  1. Fresh Flex: This model represents a conversion of existing structures into a Del Taco restaurant. The initial investment for this type is projected to range from $1,080,700 to $2,467,500.
  2. End Cap with Drive Thru: This model emphasizes the establishment of a Del Taco restaurant with a drive-thru feature at the end of a retail strip. The investment for this option is estimated to range from $812,700 to $1,899,500.

A comprehensive breakdown of these costs is available in the table below.

Del Taco Franchise Initial Investment

Type of Expenditure Amount
Franchise Fee $35,000
Promotional Fee $10,000
Professional Fees $0 - $55,000
Lease Payment $0 - $25,000
Building $400,000 - $800,000
Site Work and Entitlement $50,000 - $450,000
Architectural, Engineer and Utility Fees and Costs $25,000 - $200,000
Furnishings, Fixtures and Equipment $400,000 - $575,000
Computer Systems $58,000 - $80,000
Technical Support $1,700 - $3,500
Insurance $8,000 - $20,000
Initial Training $15,000 - $25,000
Crew Training $48,000 - $68,000
Working Capital $20,000 - $45,000
Inventory $7,000
Licenses, Fees and Deposits $3,000 - $6,000
Trade Area Survey Analysis $0 - $10,500
Business Impact Payment $0 - $52,500
Total $1,080,700 - $2,467,500

Note: The table above provides a snapshot of the main costs associated with starting the most common franchise format (as disclosed in the Item 7 of the Franchise Disclosure Document). For a complete overview of all the expenses involved with the various formats offered by the franchisor, please consult the Franchise Disclosure Document.

Does

Del Taco

provide

training

to its

franchisees?

Yes,
Del Taco
provides
training

Before opening a Del Taco restaurant, franchisees undergo a detailed training program. This program encompasses various aspects of running the restaurant, from operational techniques to customer service and marketing strategies. The training is designed to ensure that franchisees are well-prepared to operate their franchises effectively.

In addition to the initial training, Del Taco believes in the importance of continuous learning. They provide ongoing support and training opportunities to ensure franchisees stay updated with the latest operational techniques and brand standards.

Does

Del Taco

provides

territory

protection?

Franchisees of Del Taco will not receive an exclusive territory. They are, however, provided with a designated location to operate their Del Taco restaurant. This means that while they have a specific location in which to conduct their business, there is no broader territory protection against the opening of other Del Taco restaurants or outlets.

The franchisees' rights are limited to the operation of their restaurant at the designated location. Any deviation from this location or any attempt to operate outside of it would require the franchisor's prior written consent. This setup emphasizes the importance of adhering to the designated location and understanding that there is no broader territorial exclusivity.

Can a

Del Taco

franchise

be run as

a passive

investment?

The franchise mandates the designation of an "Operating Principal" who is expected to actively participate in the direct operation of the restaurant.

If the franchisee is a legal entity, someone affiliated with the organization, who meets the required qualifications, must be actively involved in the restaurant's operations. This Operating Principal can be the franchisee if they meet the necessary criteria.

In addition to the Operating Principal, the franchise must also designate a "General Manager" who is responsible for the direct oversight and management of the day-to-day operations and personnel at the restaurant.

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