The adiabatic flame temperature is one that occurs when the combustion chamber is well insulated with no heat losses (adiabatic conditions). The peak adiabatic flame temperature occurs at around Φ = 1 in an ideally insulated combustion chamber.

Why is the maximum adiabatic flame temperature located at slight fuel rich side?

Since the extent of dissociation is greater on the lean side as a result of the stoichiometry of dissociated products, the peaking occurs on the rich side.

Why the temperature of a flame is lower than the adiabatic flame temperature?

We shall see in detail about the flame temperature that even relates to the adiabatic volume and pressure. ... Thus, the correct answer is that the actual flame temperature is lower than that of adiabatic flame temperature because some energy released during the combustion goes into changing the volume of the system.