Healthsource_Chiropractic 2025 Franchise FAQ - FDD Ninja

Question 1

According to the Healthsource Chiropractic FDD, what reasons are listed for Clinic Franchisees ceasing to do business?

Accepted Answer

The name, city, state and telephone number for each Clinic Franchisee that was terminated, not renewed, canceled, voluntarily or involuntarily ceased to do business under the franchise agreement during the 2024 fiscal year, or who has not communicated to us within 10 weeks of the issuance date of this disclosure document, is set forth in Exhibit E.

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 71–77)

Question 2

Across all states, what was the highest number of Healthsource Chiropractic outlets opened in a single state during 2024?

Accepted Answer

| State | Year | Outlets at Start of Year | Outlets Opened | Terminations | Non- Renewals | Reacquired by Franchisor | Ceased Operations- Other Reasons | Outlets at End of the Year |
|---|---|---|---|---|---|---|---|---|
| TX | 2022 | 9 | 0 | 0 | 1 | 0 | 0 | 8 |
|  | 2023 | 8 | 1 | 0 | 0 | 0 | 0 | 9 |
|  | 2024 | 9 | 4 | 0 | 1 | 0 | 0 | 12 |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 71–77)

Question 3

Did any Healthsource Chiropractic outlets get reacquired by the franchisor in 2022, 2023, or 2024?

Accepted Answer

| State | Year | Outlets at Start of the Year | Outlets Opened | Outlets Reacquired from Franchisee | Outlets Closed | Outlets Sold to Franchisee | Outlets at End of the Year |
|---|---|---|---|---|---|---|---|
| All | 2022 | 0 | 0 | 0 | 0 | 0 | 0 |
| States |  |  |  |  |  |  |  |
|  | 2023 | 0 | 0 | 0 | 0 | 0 | 0 |
|  | 2024 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total | 2022 | 0 | 0 | 0 | 0 | 0 | 0 |
|  | 2023 | 0 | 0 | 0 | 0 | 0 | 0 |
|  | 2024 | 0 | 0 | 0 | 0 | 0 | 0 |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 71–77)

Question 4

What is the total number of classroom training hours required by Healthsource Chiropractic?

Accepted Answer

| Subject | Hours of Classroom Training You and any of your staff we require to attend | Hours of On-the-Job Training You and any of your staff we require to attend | Location | |---------------------------|----------------------------------------------------------------------------|-----------------------------------------------------------------------------|-------------------------------| | Starting Point | | | | | Practice | 49 | 0 | Virtual, Self- Directed | | Management | | | | | Clinical Systems | 50 | 0 | Virtual, Self- Directed | | Administrative Systems | 14 | 0 | Virtual, Self- Directed | | Software | 3 | 0 | Virtual, Self- Directed | | Marketing | 0 | 0 | Virtual, Self- Directed | | Compliance | 8 | 0 | Virtual, Self- Directed | | Observation | 0 | 40 | Your Clinic | | Subject | Hours of Classroom Training You and any of your staff we require to attend | Hours of On-the-Job Training You and any of your staff we require to attend | Location | |----------------------------|----------------------------------------------------------------------------|-----------------------------------------------------------------------------|------------| | HealthSource | | | | | University | | | | | Introductions | 1 | 0 | Avon, Ohio | | Practice Management | 17 | 8 | Avon, Ohio | | Clinical Systems | 6 | 2 | Avon, Ohio | | Administrative | 2 | 0 | Avon, Ohio | | Systems | | | | | Software | 0 | 0 | Avon, Ohio | | Marketing | 2 | 1 | Avon, Ohio | | Compliance | 0 | 0 | Avon, Ohio | | Immersion Master | | | | | Class | | | | | Practice | 24 | 0 | Avon, Ohio | | Management | | | | | Clinical Systems | 3 | 0 | Avon, Ohio | | Total Hours | 179 hours | 51 hours | | Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 34–44)

Question 5

What was the total number of Healthsource Chiropractic franchise transfers across all states in 2024?

Accepted Answer

| State     | Year | Number of Transfers |
|-----------|------|------------------------|
| Alabama   | 2022 | 3                      |
|           | 2023 | 4                      |
|           | 2024 | 0                      |
| Florida   | 2022 | 0                      |
|           | 2023 | 0                      |
|           | 2024 | 1                      |
| Minnesota | 2022 | 0                      |
|           | 2023 | 0                      |
|           | 2024 | 1                      |
| Texas     | 2022 | 0                      |
|           | 2023 | 0                      |
|           | 2024 | 1                      |
| Total     | 2022 | 3                      |
|           | 2023 | 4                      |
|           | 2024 | 3                      |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 71–77)

Question 6

What was the total number of Healthsource Chiropractic franchised outlets transferred to new owners in 2023 across all listed states?

Accepted Answer

| State     | Year | Number of Transfers |
|-----------|------|------------------------|
| Alabama   | 2022 | 3                      |
|           | 2023 | 4                      |
|           | 2024 | 0                      |
| Florida   | 2022 | 0                      |
|           | 2023 | 0                      |
|           | 2024 | 1                      |
| Minnesota | 2022 | 0                      |
|           | 2023 | 0                      |
|           | 2024 | 1                      |
| Texas     | 2022 | 0                      |
|           | 2023 | 0                      |
|           | 2024 | 1                      |
| Total     | 2022 | 3                      |
|           | 2023 | 4                      |
|           | 2024 | 3                      |

Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 71–77)

Question 7

What is the total number of on-the-job training hours required by Healthsource Chiropractic?

Accepted Answer

| Subject | Hours of Classroom Training You and any of your staff we require to attend | Hours of On-the-Job Training You and any of your staff we require to attend | Location | |---------------------------|----------------------------------------------------------------------------|-----------------------------------------------------------------------------|-------------------------------| | Starting Point | | | | | Practice | 49 | 0 | Virtual, Self- Directed | | Management | | | | | Clinical Systems | 50 | 0 | Virtual, Self- Directed | | Administrative Systems | 14 | 0 | Virtual, Self- Directed | | Software | 3 | 0 | Virtual, Self- Directed | | Marketing | 0 | 0 | Virtual, Self- Directed | | Compliance | 8 | 0 | Virtual, Self- Directed | | Observation | 0 | 40 | Your Clinic | | Subject | Hours of Classroom Training You and any of your staff we require to attend | Hours of On-the-Job Training You and any of your staff we require to attend | Location | |----------------------------|----------------------------------------------------------------------------|-----------------------------------------------------------------------------|------------| | HealthSource | | | | | University | | | | | Introductions | 1 | 0 | Avon, Ohio | | Practice Management | 17 | 8 | Avon, Ohio | | Clinical Systems | 6 | 2 | Avon, Ohio | | Administrative | 2 | 0 | Avon, Ohio | | Systems | | | | | Software | 0 | 0 | Avon, Ohio | | Marketing | 2 | 1 | Avon, Ohio | | Compliance | 0 | 0 | Avon, Ohio | | Immersion Master | | | | | Class | | | | | Practice | 24 | 0 | Avon, Ohio | | Management | | | | | Clinical Systems | 3 | 0 | Avon, Ohio | | Total Hours | 179 hours | 51 hours | | Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 34–44)

Question 8

What is the total required classroom training hours for Healthsource Chiropractic?

Accepted Answer

| Subject | Hours of Classroom Training You and any of your staff we require to attend | Hours of On-the-Job Training You and any of your staff we require to attend | Location | |---------------------------|----------------------------------------------------------------------------|-----------------------------------------------------------------------------|-------------------------------| | Starting Point | | | | | Practice | 49 | 0 | Virtual, Self- Directed | | Management | | | | | Clinical Systems | 50 | 0 | Virtual, Self- Directed | | Administrative Systems | 14 | 0 | Virtual, Self- Directed | | Software | 3 | 0 | Virtual, Self- Directed | | Marketing | 0 | 0 | Virtual, Self- Directed | | Compliance | 8 | 0 | Virtual, Self- Directed | | Observation | 0 | 40 | Your Clinic | | Subject | Hours of Classroom Training You and any of your staff we require to attend | Hours of On-the-Job Training You and any of your staff we require to attend | Location | |----------------------------|----------------------------------------------------------------------------|-----------------------------------------------------------------------------|------------| | HealthSource | | | | | University | | | | | Introductions | 1 | 0 | Avon, Ohio | | Practice Management | 17 | 8 | Avon, Ohio | | Clinical Systems | 6 | 2 | Avon, Ohio | | Administrative | 2 | 0 | Avon, Ohio | | Systems | | | | | Software | 0 | 0 | Avon, Ohio | | Marketing | 2 | 1 | Avon, Ohio | | Compliance | 0 | 0 | Avon, Ohio | | Immersion Master | | | | | Class | | | | | Practice | 24 | 0 | Avon, Ohio | | Management | | | | | Clinical Systems | 3 | 0 | Avon, Ohio | | Total Hours | 179 hours | 51 hours | | Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 34–44)

Question 9

What is the total required on-the-job training hours for Healthsource Chiropractic?

Accepted Answer

| Subject | Hours of Classroom Training You and any of your staff we require to attend | Hours of On-the-Job Training You and any of your staff we require to attend | Location | |---------------------------|----------------------------------------------------------------------------|-----------------------------------------------------------------------------|-------------------------------| | Starting Point | | | | | Practice | 49 | 0 | Virtual, Self- Directed | | Management | | | | | Clinical Systems | 50 | 0 | Virtual, Self- Directed | | Administrative Systems | 14 | 0 | Virtual, Self- Directed | | Software | 3 | 0 | Virtual, Self- Directed | | Marketing | 0 | 0 | Virtual, Self- Directed | | Compliance | 8 | 0 | Virtual, Self- Directed | | Observation | 0 | 40 | Your Clinic | | Subject | Hours of Classroom Training You and any of your staff we require to attend | Hours of On-the-Job Training You and any of your staff we require to attend | Location | |----------------------------|----------------------------------------------------------------------------|-----------------------------------------------------------------------------|------------| | HealthSource | | | | | University | | | | | Introductions | 1 | 0 | Avon, Ohio | | Practice Management | 17 | 8 | Avon, Ohio | | Clinical Systems | 6 | 2 | Avon, Ohio | | Administrative | 2 | 0 | Avon, Ohio | | Systems | | | | | Software | 0 | 0 | Avon, Ohio | | Marketing | 2 | 1 | Avon, Ohio | | Compliance | 0 | 0 | Avon, Ohio | | Immersion Master | | | | | Class | | | | | Practice | 24 | 0 | Avon, Ohio | | Management | | | | | Clinical Systems | 3 | 0 | Avon, Ohio | | Total Hours | 179 hours | 51 hours | | Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 34–44)

Question 10

Does the Healthsource Chiropractic amendment modify any obligations outlined in the original Development Agreement?

Accepted Answer

- c.

If a state regulator requires an amendment to this Agreement, the amendment is attached to this Agreement.

We will not, however, be precluded from contesting the validity, enforceability, or applicability of such regulator's required amendment in any action relating to this Agreement or to its rescission or termination.

- 17.2 **Unilateral Waiver of Obligations**.

Either you or we may, by written notice, unilaterally waive or reduce any obligation or restriction of the other under this Agreement.

The waiver or reduction may be revoked at any time for any reason on 10 days' written notice.

- 17.3 **Written Consents from HealthSource Chiropractic**.

Whenever this Agreement requires our advance approval or consent, you agree to make a timely written request for it.

Our approval or consent will not be valid unless it is in writing.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 11

Besides Colorado, in which other states does Barron Johnson, through HealthSource West LLC, operate Regional Developer franchises for Healthsource Chiropractic?

Accepted Answer

Mr. Johnson is the owner of HealthSource West LLC, which has Regional Developer franchises operating in Arizona, Colorado, and Washington, since June 2017.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 12

What are the different types of fees a Healthsource Chiropractic franchisee might encounter, considering both the initial fees in Item 5 and the other fees listed in Item 6?

Accepted Answer

**6. FEES**.

6.1 **Initial Franchise Fee; Reference to Exhibit 1**. You agree to pay us the initial franchise fee (the "Initial Franchise Fee") set forth below when you sign this Agreement. In recognition of the expenses we incur in furnishing assistance and services to you, you agree that

we will have fully earned the Initial Franchise Fee, and that is due and non-refundable when you sign this Agreement.

Question 13

What are all the fees a Healthsource Chiropractic franchisee might pay, considering both the initial fees in Item 5 and the other fees listed in Item 6?

Accepted Answer

and materials). The Continuing Franchise Fee does not represent payment for the referral of customers or patients to you, and you

acknowledge and agree that the services we offer to you and our other HealthSource Chiropractic franchisees do not include the referral of customers or patients.

# 6.3 **Advertising Fees; Other Fees**.

- a. Recognizing the value of advertising to the goodwill and public image of Clinic franchises, we may, in our sole discretion, establish, maintain and administer an advertising fund (the "Ad Fund") for such advertising as we may deem necessary or appropriate in our sole discretion. You agree to contribute to the Ad Fund in the amount of two percent (2%) of the gross revenues of the Franchise. We will provide you with 30 days' advance notice of the establishment or termination of an Ad Fund and any change in the required contribution. These advertising fees (the "Advertising Fees") will be payable monthly with and at the same time as your Continuing Franchise Fees payable under Paragraph 6.2 above. A further description of the Ad Fund and your obligations with respect to advertising and promoting the Franchise is found in Section 11 of this Agreement.
- b. In the future, we may also establish a program to provide additional marketing services to Clinic franchises involving the placement of individuals on a local basis to perform marketing activities. This program is optional for Clinic franchises. If you choose to use this marketing program, you must agree to pay the fee determined by us. You will only be permitted to use this program if you pay this fee. We reserve the right to change the amount of this fee at any time. If we choose to establish this program in the future, and you choose to purchase this optional program, you agree to comply with all specifications and requirements contained in the Operations Manual concerning this program. This fee does not represent payment for the referral of customers or patients to you, and you acknowledge and agree that the services we offer to you and our other HealthSource Chiropractic franchisees do not include the referral of customers or patients.
- c. Additionally, you are required to pay the monthly Technology Fee, defined and discussed in Section 11.4, for certain Website and technology-related services and expenses and any fees relating to the requ

Question 14

For Healthsource Chiropractic, are there any states listed in the FDD where the effective date of franchise registration is not currently pending?

Accepted Answer

gton, and Wisconsin.

This document is effective and may be used in the following states, where the document is filed, registered or exempt from registration, as of the Effective Date stated below:

| State        | Effective Date |
|--------------|----------------|
| California   | Pending        |
| Illinois     | Pending        |
| Indiana      | Pending        |
| Maryland     | Pending        |
| Michigan     | Pending        |
| Minnesota    | Pending        |
| New York     | Pending        |
| North Dakota | Pending        |
| Rhode Island | Pending        |
| South Dakota | Pending        |
| Virginia     | Pending        |
| Washington   | Pending        |
| Wisconsin    | Pending        |

Other states may require registration, filing, or exemption of a franchise under other laws, such as those that regulate the offer and sale of business opportunities or sellerassisted marketing plans.

# **RECEIPT**

This disclosure document summarizes certain provisions of the franchise agreement and other information in plain language. Read this disclosure document and all agreements carefully.

If HealthSource Chiropractic, LLC offers you a franchise, it must provide you this disclosure document to you 14 calendar-days before you sign a binding agreement with, or make a payment to, the franchisor or an affiliate in connection with the proposed franchise sale. Rhode Island requires that we give you this disclosure document at the earlier of the first personal meeting or 10 business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 15

What types of businesses will a Healthsource Chiropractic Clinic compete with?

Accepted Answer

Your Clinic will compete with other businesses offering wellness, pain relief, functional restoration, physical therapy, and chiropractic services. These competitors may include chiropractic clinics, physical therapy specialists, hospitals, and other medical facilities and franchises. The healthcare sector is competitive in most markets. Despite this competition, we believe that HealthSource Chiropractic Clinics will appeal to customers because of the specific services offered, the pricing model, unique brand awareness, expert and family-friendly environment, and other distinctive characteristics. While you will provide your products and services to the general public, your target market will be persons suffering from back or neck pain, headaches, arm or leg pain, carpal tunnel, or fibromyalgia, regardless of age. HealthSource Chiropractic Clinics are typically located in high-traffic strip malls.

Source: Item 1 — The Franchisor and any Parents, Predecessors, and Affiliates (FDD pages 10–13)

Question 16

According to the Healthsource Chiropractic FDD, can the PC be the same entity as the franchisee, or have the same owners, and under what conditions?

Accepted Answer

If permitted by state and local law, the PC may be the same entity as your franchisee entity or have the same owners. Under the Management Agreement, you will provide the PC with management and administrative services and support consistent with the System to support the PC's chiropractic practice and its delivery of chiropractic services and related services and products to patients at a Clinic, consistent with all applicable laws and regulations. Our Franchise Disclosure Document contains a general form of Management Agreement as an exhibit that can serve as a starting point for satisfying this requirement, but the actual Management Agreement to be used must be approved by us, in our discretion, and must satisfy all requirements and limitations of applicable laws, rules and regulations of the state in which the Clinic will be located.

- You must obtain our written approval of the final Management Agreement prior to signing it with the PC. We may provide you with assistance in preparing the Management Agreement, but you are responsible for determining whether such agreement is in compliance with all applicable laws, rules and regulations of the state in which the Clinic is located. You must have a Management Agreement in effect with a PC at all times during the operation of the Franchised Business and the Initial Term of this Agreement.
- We must approve the PC and its owners, but you are responsible for ensuring that the PC is in compliance with all applicable laws, rules and regulations of the state in which the Clinic is located.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 17

According to the Healthsource Chiropractic General Release Agreement, what is the impact of the release on the Franchisee's ability to operate the franchise?

Accepted Answer

with all the terms and conditions of this Agreement up to the date of expiration, and not just on those conditions set forth in our 6 month deficiency notice. If we send a notice of non-renewal, it will state the reasons for our refusal to renew.

c. **Renewal Agreement; Releases**. To renew the Franchise, HealthSource Chiropractic, you and your Principal Owners must execute the form of Franchise Agreement and any ancillary agreements we are then customarily using in the grant or renewal of franchises for the operation of Clinic Franchises (with appropriate modifications to reflect the fact that the agreement relates to the grant of a renewal franchise), except that no initial franchise fee will be payable upon renewal of the Franchise. The terms of the Franchise Agreement that you must execute upon renewal, and any other agreements we may require, may differ materially from those contained in this Agreement, including the possibility of increased Continuing Franchise Fees and Ad Fund contributions. Your right to renew will be contingent upon your acceptance of the new terms. You must pay to us a renewal fee equal to \$10,000.00 concurrently with signing the renewal

Source: Item 23 — Receipts (FDD pages 77–282)

Question 18

According to the Healthsource Chiropractic General Release Agreement, what is the impact of the 'Release' on the Franchisee's ability to renew the agreement?

Accepted Answer

with all the terms and conditions of this Agreement up to the date of expiration, and not just on those conditions set forth in our 6 month deficiency notice. If we send a notice of non-renewal, it will state the reasons for our refusal to renew.

c. **Renewal Agreement; Releases**. To renew the Franchise, HealthSource Chiropractic, you and your Principal Owners must execute the form of Franchise Agreement and any ancillary agreements we are then customarily using in the grant or renewal of franchises for the operation of Clinic Franchises (with appropriate modifications to reflect the fact that the agreement relates to the grant of a renewal franchise), except that no initial franchise fee will be payable upon renewal of the Franchise. The terms of the Franchise Agreement that you must execute upon renewal, and any other agreements we may require, may differ materially from those contained in this Agreement, including the possibility of increased Continuing Franchise Fees and Ad Fund contributions. Your right to renew will be contingent upon your acceptance of the new terms. You must pay to us a renewal fee equal to \$10,000.00 concurrently with signing the renewal

Source: Item 23 — Receipts (FDD pages 77–282)

Question 19

According to the Healthsource Chiropractic General Release Agreement, what is the relationship between the release and the renewal of the franchise?

Accepted Answer

with all the terms and conditions of this Agreement up to the date of expiration, and not just on those conditions set forth in our 6 month deficiency notice. If we send a notice of non-renewal, it will state the reasons for our refusal to renew.

c. **Renewal Agreement; Releases**. To renew the Franchise, HealthSource Chiropractic, you and your Principal Owners must execute the form of Franchise Agreement and any ancillary agreements we are then customarily using in the grant or renewal of franchises for the operation of Clinic Franchises (with appropriate modifications to reflect the fact that the agreement relates to the grant of a renewal franchise), except that no initial franchise fee will be payable upon renewal of the Franchise. The terms of the Franchise Agreement that you must execute upon renewal, and any other agreements we may require, may differ materially from those contained in this Agreement, including the possibility of increased Continuing Franchise Fees and Ad Fund contributions. Your right to renew will be contingent upon your acceptance of the new terms. You must pay to us a renewal fee equal to \$10,000.00 concurrently with signing the renewal

Source: Item 23 — Receipts (FDD pages 77–282)

Question 20

Can the actual investment for a HealthSource Chiropractic Clinic be different from the estimated initial expenses?

Accepted Answer

These estimated initial expenses are our best estimate of the costs you may incur in establishing and operating a single HealthSource Chiropractic Clinic.

Our estimates are based on our experience with our Clinic franchises and our current requirements for Clinics.

The factors underlying our estimates may vary depending on a number of variables, and the actual investment you make in developing and opening your HealthSource Chiropractic Clinic franchise may be greater or less than the estimates given depending upon the location of your franchise, and current relevant market conditions.

Source: Item 7 — Estimated Initial Investment (FDD pages 24–28)

Question 21

What aspects of the Healthsource Chiropractic franchise agreement in Washington might RCW 19.100.180 supersede?

Accepted Answer

any provisions contained in the franchise agreement or elsewhere that conflict with these limitations are void and unenforceable in Washington.

RCW 49.62.060 prohibits a franchisor from restricting, restraining, or prohibiting a franchisee from (i) soliciting or hiring any employee of a franchisee of the same franchisor or (ii) soliciting or hiring any employee of the franchisor. As a result, any such provisions contained in the franchise agreement or elsewhere are void and unenforceable in Washington.

No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 22

Who is the auditor for Healthsource Chiropractic's financial statements?

Accepted Answer

est, Inc.**

Mr. Johnson is the owner of HealthSource Northwest, Inc., which has Regional Developer franchises operating in Idaho, Oregon, Washington, Montana and Wyoming, since December 2012. Mr. Johnson is also the owner of HealthSource West LLC, which has Regional Developer franchises operating in Arizona, Colorado, and Washington, since June 2017.

# EXHIBIT G FINANCIAL STATEMENTS

![](_page_194_Picture_0.jpeg)

# TABLE OF CONTENTS

| Independent Auditor's Report                    | 1-2  |
|-------------------------------------------------|------|
| Balance Sheets                                  | 3    |
| Statements of Income and Comprehensive Income   | 4    |
| Statements of Members' and Stockholders' Equity | 5    |
| Statements of Cash Flows                        | 6    |
| Notes to Financial Statements                   | 7-18 |

2173 NORTH RIDGE ROAD E - STE C LORAIN, OH 44055 PH (440) 277-9020 FAX (440) 277-1686 Email: info@pandicpas.com www.pandicpas.com

#### INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Members of HealthSource Chiropractic, LLC

#### Opinion

We have audited the accompanying financial statements of HealthSource Chiropractic, LLC, which comprise the balance sheets as of December 31, 2024, 2023, and 2022, and the related statements of income and comprehensive income, members' and stockholders' equity, and cash flows for the years then ended, and the related notes to the financial statements.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of HealthSource Chiropractic, LLC as of December 31, 2024, 2023, and 2022, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

## **Basis for Opinion**

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of HealthSource Chiropractic, LLC and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

# Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about HealthSource Chiropractic, LLC's ability to continue as a going concern within one year after the date that the financial statements are available to be issued.

# Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with generally accepted auditing standards, we:

- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the financial statements, whether
  due to fraud or error, and design and perform audit procedures responsive to those risks.
   Such procedures include examining, on a test basis, evidence regarding the amounts and
  disclosures in the financial statements.
- Obtain an understanding of internal control relevant to the audit in order to design audit
  procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of HealthSource Chiropractic, LLC's internal
  control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

Source: Item 21 — Financial Statements (FDD page 77)

Question 23

Besides RCW 19.100.180, what else might supersede the Healthsource Chiropractic franchise agreement in Washington?

Accepted Answer

RCW 19.100.180 may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise. There may also be court decisions which may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 24

When must the Healthsource Chiropractic Business Associate update erroneous or incomplete PHI?

Accepted Answer

- 12. Amendment of and Access to PHI Notification: Business Associate shall make available PHI in a designated record set to Covered Entity for amendment and shall incorporate any amendments to PHI accordingly. Business Associate shall make reasonable efforts to notify persons, organizations, or other entities, including other business associates, known by Business Associate to have received the erroneous or incomplete information and who may have relied, or could foreseeably rely, on such information to the detriment of the individual patient. Business Associate must update this information when notified by the Covered Entity. If Business Associate receives a request for amendment to PHI directly from an individual patient, Business Associate shall forward such request to Covered Entity within ten (10) business days. Covered Entity shall have the sole responsibility for determining whether to approve an amendment to PHI and to make such amendment.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 25

Can Healthsource Chiropractic charge me for hard or digital copies of marketing materials?

Accepted Answer

- 10. We may establish, maintain, and administer an Ad Fund. As available, we will provide you with digital copies of our marketing materials via our intranet. (Franchise Agreement – Section 11.1). The Ad Fund will be used to support and pay for marketing programs we deem necessary, desirable, or appropriate to promote the services and products offered by your and other Clinics. Also, we may, at our discretion, charge you for hard or digital copies of marketing materials.

Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 34–44)

Question 26

Must Healthsource Chiropractic Clinic franchisees be licensed to practice chiropractic care?

Accepted Answer

*Clinic Franchises.* We franchise the right to operate a single Clinic that must be physically located in a designated geographic area (the "Protected Territory") under the "HealthSource Chiropractic" name and other authorized names and marks (the "Marks"), using a system of distinctive operating procedures, methods, and standards that we have developed (the "System"). Clinic franchises will only be offered and sold to individuals licensed to practice or provide chiropractic care unless otherwise permitted by law, or unless you operate a Clinic as a Clinic Management Business (as defined below). You may purchase your franchise as a new, start-up Clinic (a "Start-Up Clinic"), or you may convert an existing chiropractic clinic to a HealthSource Chiropractic Clinic (a "Conversion Clinic"). You will sign our standard franchise agreement attached as Exhibit B (the "Franchise Agreement") when you purchase your Clinic franchise. In the past, we have negotiated the terms of the Franchise Agreement with certain franchises. HealthSource Chiropractic, LLC will be the contracting party under the Franchise Agreement and under no circumstances will our Regional Developer franchises sign the Franchise Agreement on our behalf.

In certain cases, where permitted by law, we may offer franchises to persons or legal entities that meet our qualifications but are not licensed to practice or provide chiropractic care, and are willing to undertake the investment and effort to own and operate a business that will

manage a Start-Up or Conversion Clinic under the System; we refer to these businesses as "Clinic Management Businesses." For example, certain states do not permit non-licensed persons to own and/or operate chiropractic practices, but some states do. In states that do not permit non-licensed persons to own or operate chiropractic practices, a Clinic Management Business may be offered. In states that do permit non-licensed persons to own and operate chiropractic practices, a Clinic Management Business Franchise is not necessary, but may be offered by us under certain circumstances. To operate a Clinic Management Business, you must enter into a Franchise Agreement with us and a Management Agreement with a "Licensed Provider" that will own and operate the Clinic. A general form of a Management Agreement, to serve as a starting point for satisfying this requirement is attached as Exhibit M, but the actual Management Agreement to be used must be approved by us, in our discretion, and must satisfy all requirements and limitations of applicable laws, rules, and regulations of the state in which the Clinic Management Business will be located. A "Licensed Provider" will be one or more licensed individuals, or a professional corporation or similar entity, such as a professional limited liability company, that is duly authorized to provide chiropractic services under local and state laws.

Source: Item 1 — The Franchisor and any Parents, Predecessors, and Affiliates (FDD pages 10–13)

Question 27

When is a Healthsource Chiropractic 'Clinic Management Business' franchise not necessary?

Accepted Answer

Franchised Business"). You may purchase and operate your Franchise as a new, start-up Clinic (a "Start-up Clinic"), or may convert an existing chiropractic practice to a HealthSource Chiropractic Clinic (a "Conversion Clinic").
- c. In certain cases, where permitted by law, we may offer franchises to persons or legal entities that meet our qualifications but are not licensed to practice or provide chiropractic care, and are willing to undertake the investment and effort to own and operate a business that will manage a Start-Up or Conversion Clinic under the System; we refer to these businesses as "Clinic Management Businesses." For example, certain states do not permit non-licensed persons to own and/or operate chiropractic practices, but some states do.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 28

What condition must be met for a customer to terminate the Healthsource Chiropractic service agreement?

Accepted Answer

- 3. **TERMINATION BY CUSTOMER.** Customer will have the right, after the first one hundred eighty (180) days this Agreement is in effect, to terminate this Agreement upon thirty (30) days' prior written notice to HealthCore if Customer's HealthSource Chiropractic franchise has terminated or expired. Service shall terminate on the last day of the month following Customer's notice of termination.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 29

What is the condition for renewing the Healthsource Chiropractic Franchise Agreement according to Section 2.4(c)?

Accepted Answer

with all the terms and conditions of this Agreement up to the date of expiration, and not just on those conditions set forth in our 6 month deficiency notice. If we send a notice of non-renewal, it will state the reasons for our refusal to renew.

c. **Renewal Agreement; Releases**. To renew the Franchise, HealthSource Chiropractic, you and your Principal Owners must execute the form of Franchise Agreement and any ancillary agreements we are then customarily using in the grant or renewal of franchises for the operation of Clinic Franchises (with appropriate modifications to reflect the fact that the agreement relates to the grant of a renewal franchise), except that no initial franchise fee will be payable upon renewal of the Franchise. The terms of the Franchise Agreement that you must execute upon renewal, and any other agreements we may require, may differ materially from those contained in this Agreement, including the possibility of increased Continuing Franchise Fees and Ad Fund contributions. Your right to renew will be contingent upon your acceptance of the new terms. You must pay to us a renewal fee equal to \$10,000.00 concurrently with signing the renewal

Source: Item 23 — Receipts (FDD pages 77–282)

Question 30

What conditions, beyond those in the 6-month deficiency notice, must a Healthsource Chiropractic franchisee meet to be eligible for franchise renewal?

Accepted Answer

otice will state what actions, if any, you must take to correct the deficiencies in your operation of the Franchise or of the Premises, and will specify the

time period in which those deficiencies must be corrected or other requirements satisfied. Renewal of the Franchise will be conditioned on your continued compliance with all the terms and conditions of this Agreement up to the date of expiration, and not just on those conditions set forth in our 6 month deficiency notice. If we send a notice of non-renewal, it will state the reasons for our refusal to renew.

c. **Renewal Agreement; Releases**. To renew the Franchise, HealthSource Chiropractic, you and your Principal Owners must execute the form of Franchise Agreement and any ancillary agreements we are then customarily using in the grant or renewal of franchises for the operation of Clinic Franchises (with appropriate modifications to reflect the fact that the agreement relates to the grant of a renewal franchise), except that no initial franchise fee will be payable upon renewal of the Franchise. The terms of the Franchise Agreement that you must execute upon renewal, and any other agreements we may require, may differ materially from those contained in this Agreement, including the possibility of increased Continuing Franchise Fees and Ad Fund contributions. Your right to renew will be contingent upon your acceptance of the new terms. You must pay to us a renewal fee equal to \$10,000.00 concurrently with signing the renewal

Source: Item 23 — Receipts (FDD pages 77–282)

Question 31

What are the conditions under which financial performance information differing from Item 19 can be given by Healthsource Chiropractic?

Accepted Answer

Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances. Source: Item 19 — (FDD pages 64–71)

Question 32

What are the conditions under which a Healthsource Chiropractic franchisor can provide financial performance information that differs from Item 19?

Accepted Answer

The FTC's Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances. Written substantiation of the data used in preparing the following financial performance representation will be made available to you upon reasonable request. Source: Item 19 — (FDD pages 64–71)

Question 33

What is the consequence of not paying the entire remaining portion of the Initial Franchise Fee for a Healthsource Chiropractic franchise on or before the Deadline Date?

Accepted Answer

- c.

If HealthSource and I do not sign a Franchise Agreement or I do not pay the entire remaining portion of the Initial Franchise Fee on or before the Deadline Date, I will not have the right to operate a HealthSource Chiropractic franchise in the Protected Territory or use any HealthSource marks, logos, information or materials, and HealthSource may grant all or any portion the Protected Territory to another person or entity.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 34

In the context of Healthsource Chiropractic, does the allowance for similar businesses to operate in a protected territory extend to renewals of franchises?

Accepted Answer

Except as otherwise provided in this Paragraph 2.3, we retain all rights with respect to Clinic franchises, the Marks and the System, including (by way of example only and not as a limitation): (a) the right to operate or grant others the right to operate Clinic franchises physically located outside the Protected Territory on terms and conditions we deem appropriate; (b) the right to operate or offer other healthcare-related companies or franchises or enter into other lines of business offering similar or dissimilar products or services under trademarks or service marks other than the Marks, both within or outside of the Protected Territory and to use other channels of distribution (for example, the internet, email, social media, telemarketing, or other direct marketing) in connection with such system(s) and/or location(s); (c) the right to sell or distribute, at retail or wholesale, directly or indirectly, or via the internet or any other means, or license others to sell or distribute, via any means (including the internet and other channels of distribution) any products that bear any proprietary marks, including the Marks, whether within or outside your Protected Territory; (d) the right to own, acquire, establish, and/or operate, and license others to establish and operate, businesses different from a Franchised Business but operated under the Marks within or outside your Protected Territory, and to use other channels of distribution (for example, the internet, email, social media, telemarketing, or other direct marketing) in connection with such system(s) and/or location(s); and (e) the right to be acquired (whether though acquisition of assets, or equity interests or otherwise, regardless of

the form of transaction) by a business or entity providing products and services similar to those provided by Franchised Businesses even if that business or entity operates, franchises, or licenses competitive businesses in your Protected Territory.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 35

For a Healthsource Chiropractic conversion franchise, what happens to the HSWorx software fee after the sixth month if the franchise is still not 'live' on the system?

Accepted Answer

ratives. There are currently no advertising cooperatives. (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

| Type of Fee (1)                                             | Amount                                                                                                                                                                                                                              | Due Date                                                                                                                                 | Remarks                                                                                                                                                                                                                             |
|-------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Fee if Franchise Not Live on Software System | If franchise is not "live" on the HSWorx software system within two months post training, a \$500 per month fee will be assessed. After month six the fee will increase to \$1,000 starting month seven. | Due immediately upon demand                                                                                                        | This fee only applies to conversion franchises. We will charge you this fee if you do not go live on the software system within 2 months of your in

Source: Item 6 — Other Fees (FDD pages 17–23)

Question 36

For Healthsource Chiropractic, what is the deadline for a Conversion Clinic to open to avoid a $2,000 monthly fee, assuming approval to open has been obtained?

Accepted Answer

obtain our approval to open the Franchise for business; and
- (15) open the Franchise for business.

**For purposes of the following paragraph, you must achieve each of the foregoing requirements in this paragraph before your Clinic is deemed to be "open."**

b. If you do not open your Clinic within 90 days if you are a Conversion Clinic, or within 365 days if you are a Start-Up Clinic, from the date of this Agreement, and you have obtained our approval to open the Franchise for business, we will have the right to charge you a \$500.00 monthly fee. If you do not open your Clinic within 120 days if you are a Conversion Clinic, or within 455 days if you are a Start-Up Clinic, from the date of this Agreement, and you have obtained our approval to open the Franchise for business, we will have the right to charge you a \$1,000.00 monthly fee. If you do not open your Clinic within 240 days if you are a Conversion Clinic, or within 545 days if you are a Start-Up Clinic, from the date of this Agreement, and you have ob

Source: Item 23 — Receipts (FDD pages 77–282)

Question 37

For Healthsource Chiropractic, what is the deadline for a Start-Up Clinic to open to avoid a $2,000 monthly fee, assuming approval to open has been obtained?

Accepted Answer

14) obtain our approval to open the Franchise for business; and
- (15) open the Franchise for business.

**For purposes of the following paragraph, you must achieve each of the foregoing requirements in this paragraph before your Clinic is deemed to be "open."**

b. If you do not open your Clinic within 90 days if you are a Conversion Clinic, or within 365 days if you are a Start-Up Clinic, from the date of this Agreement, and you have obtained our approval to open the Franchise for business, we will have the right to charge you a \$500.00 monthly fee. If you do not open your Clinic within 120 days if you are a Conversion Clinic, or within 455 days if you are a Start-Up Clinic, from the date of this Agreement, and you have obtained our approval to open the Franchise for business, we will have the right to charge you a \$1,000.00 monthly fee. If you do not open your Clinic within 240 days if you are a Conversion Clinic, or within 545 days if you are a Start-Up Clinic, from the date of this Agreement, and you have ob

Source: Item 23 — Receipts (FDD pages 77–282)

Question 38

When is the Healthsource Chiropractic De-Identification fee payable?

Accepted Answer

s improvements made to the Clinic without our prior approval.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

| Type of Fee (1)                                           | Amount                                                                                                                                                                                                                                                                                                                              | Due Date       | Remarks                                                                                                                                                                                                                                                               |
|-----------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Computer Software/ Hardware Installation Fee  | All amounts we incur (i) by installing, providing, supporting, modifying, and enhancing any proprietary software or hardware that we

Source: Item 6 — Other Fees (FDD pages 17–23)

Question 39

Can Healthsource Chiropractic deny a transfer if the price and terms of payment are too burdensome?

Accepted Answer

- g. we must approve the material terms and conditions of the proposed Transfer, including without limitation that the price and terms of payment are not so burdensome as to adversely affect the operation of the Franchise;

Source: Item 23 — Receipts (FDD pages 77–282)

Question 40

What is the dependency for the approval of the application to operate a Healthsource Chiropractic franchise?

Accepted Answer

lletin: Practices of Business Consultants. We |
| HSC is not engaged in rendering legal, accounting, | or other professional services or advice. |
| your patients, taxes, employees, | If you require legal advice or other expert assistance, the services of a competent professional person should |
| or disputes. | be sought. HSC is not a law firm. We do not practice law and cannot provide you with legal advice about |
| Agreed and accepted by: |  |
|  |  |
| Signature of Franchisee | Date |
|  |  |
| Printed Name |  |
| Acknowledged and agreed by:    |
|--------------------------------|
| HealthSource Chiropractic, LLC |
|                                |
| By:                            |
| Its:                           |

# **EXHIBIT K**

**Franchise Deposit Acknowledgment and Amendment**

# **HEALTHSOURCE CHIROPRACTIC, LLC FRANCHISE DEPOSIT ACKNOWLEDGEMENT**

#### TO HEALTHSOURCE CHIROPRACTIC, LLC:

| 1. Introduction. I understand that my application for the grant of a franchise to operate a HealthSource |
|-------------------------------------------------------------------------------------------------------------|
| C

Source: Item 23 — Receipts (FDD pages 77–282)

Question 41

Are the estimated initial expenses for a HealthSource Chiropractic Clinic franchise guaranteed to be accurate?

Accepted Answer

e business for a single HealthSource Chiropractic Clinic franchise. These estimated initial expenses are our best estimate of the costs you may incur in establishing and operating a single HealthSource Chiropractic Clinic. Our estimates are based on our experience with our Clinic franchises and our current requirements for Clinics. The factors underlying our estimates may vary depending on a number of variables, and the actual investment you make in developing and opening your HealthSource Chiropractic Clinic franchise may be greater or less than the estimates given depending upon the location of your franchise, and current relevant market conditions.

Source: Item 7 — Estimated Initial Investment (FDD pages 24–28)

Question 42

To what extent are transfer fees collectable by Healthsource Chiropractic?

Accepted Answer

sation owed to, and the travel and living expenses (if the Initial Training program is not held virtually in the future, and including all transportation costs, room, board and meals) incurred by, the attendees who attend the Initial Training program;

- d. if your lease for the Premises requires it, the lessor must have consented to the assignment

Source: Item 23 — Receipts (FDD pages 77–282)

Question 43

Are the financial statements of Healthsource Chiropractic prepared according to generally accepted accounting principles?

Accepted Answer

ming, since December 2012. Mr. Johnson is also the owner of HealthSource West LLC, which has Regional Developer franchises operating in Arizona, Colorado, and Washington, since June 2017.

# EXHIBIT G FINANCIAL STATEMENTS

![](_page_194_Picture_0.jpeg)

# TABLE OF CONTENTS

| Independent Auditor's Report                    | 1-2  |
|-------------------------------------------------|------|
| Balance Sheets                                  | 3    |
| Statements of Income and Comprehensive Income   | 4    |
| Statements of Members' and Stockholders' Equity | 5    |
| Statements of Cash Flows                        | 6    |
| Notes to Financial Statements                   | 7-18 |

2173 NORTH RIDGE ROAD E - STE C LORAIN, OH 44055 PH (440) 277-9020 FAX (440) 277-1686 Email: info@pandicpas.com www.pandicpas.com

#### INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Members of HealthSource Chiropractic, LLC

#### Opinion

We have audited the accompanying financial statements of HealthSource Chiropractic, LLC, which comprise the balance sheets as of December 31, 2024, 2023, and 2022, and the related statements of income and comprehensive income, members' and stockholders' equity, and cash flows for the years then ended, and the related notes to the financial statements.

Source: Item 21 — Financial Statements (FDD page 77)

Question 44

In the Healthsource Chiropractic Franchise Agreement addendum, what is the dependency for the agreement to allow the franchisee to pay the Initial Franchise Fee as set forth?

Accepted Answer

# **6. FEES**.

6.1 **Initial Franchise Fee; Reference to Exhibit 1**. You agree to pay us the initial franchise fee (the "Initial Franchise Fee") set forth below when you sign this Agreement. In recognition of the expenses we incur in furnishing assistance and services to you, you agree that

we will have fully earned the Initial Franchise Fee, and that is due and non-refundable when you sign this Agreement.

- a. If the Franchise you are purchasing is a Start-up Clinic, then your Initial Franchise Fee is \$60,000.00. Notwithstanding the previous sentence, if Exhibit 1 states that you are signing this Agreement pursuant to your purchase of a development agreement, then your Development Fee paid pursuant thereto shall be in full satisfaction of this Agreement.
- b. If the Franchise you are purchasing is a Conversion Clinic, then your Initial Franchise Fee is \$60,000.00. Notwithstanding the previous sentence, if Exhibit 1 states tha

Source: Item 23 — Receipts (FDD pages 77–282)

Question 45

Does the Healthsource Chiropractic Franchise Agreement affect the Franchise Owner's rights to any procedure provided for by the laws of the jurisdiction?

Accepted Answer

Nothing in this Agreement shall obligate you or your General Manager (if any) to perform any act that is contrary to your or your General Manager's (if any) professional judgment; provided, however, that you must notify us immediately upon your determination that any specification, program, standard or operating procedure is contrary to your or your General Manager's (if any) professional judgment. Without limiting the generality of the foregoing, you acknowledge and agree that nothing contained in this Agreement or in any other agreement entered into by you in connection with this Agreement, shall be deemed to: (a) grant ownership or exclusive control of your patient records to us or any third party; (b) grant us direct or indirect control over the hiring or firing of any of your personnel who provide clinical services to your patients, or otherwise enable us to influence or control your employment decisions and practices; (c) impose, directly or indirectly, any requirements that affect your exercise of professional judgment in creating treatment plans and delivering clinical services and products to patients; or

HealthSource Chiropractic – 2025 Franchise Agreement

(d) directly or indirectly transfer legal liability from you to us with respect to the content of advertising or the implementation of any marketing program undertaken to promote your practice.

You further acknowledge and agree that all services and products that constitute the practice of chiropractic in your State will be provided to patients only by health care professionals that are duly licensed to provide the applicable services and products, in accordance with all applicable laws, rules and regulations, and that no entity (including us or any entity that you may form to operate your Franchised Business) will have any authority, control or influence over the scope of such services or products or the manner in which they are supplied. In the event that you enter into any Management Agreement or similar arrangement with respect to the provision of any professional services, we reserve the right, but do not assume the obligation, to review and approve such agreement.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 46

Does the Healthsource Chiropractic Franchise Agreement affect the Franchise Owner's rights to any remedies provided for by the laws of the jurisdiction?

Accepted Answer

The rights and remedies specifically granted to either you or us by this Agreement will not be deemed to prohibit either you or us from exercising any other right or remedy provided under this Agreement or permitted by law or equity.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 47

For a Healthsource Chiropractic franchise, can the Continuing Franchise Fee be different from what is described, and if so, how is this reflected?

Accepted Answer

ns of this Agreement up to the date of expiration, and not just on those conditions set forth in our 6 month deficiency notice. If we send a notice of non-renewal, it will state the reasons for our refusal to renew.

c. **Renewal Agreement; Releases**. To renew the Franchise, HealthSource Chiropractic, you and your Principal Owners must execute the form of Franchise Agreement and any ancillary agreements we are then customarily using in the grant or renewal of franchises for the operation of Clinic Franchises (with appropriate modifications to reflect the fact that the agreement relates to the grant of a renewal franchise), except that no initial franchise fee will be payable upon renewal of the Franchise. The terms of the Franchise Agreement that you must execute upon renewal, and any other agreements we may require, may differ materially from those contained in this Agreement, including the possibility of increased Continuing Franchise Fees and Ad Fund contributions. Your right to renew will be contingent upon your acceptance of the new terms. You must pay to us a renewal fee equal to \$10,000.00 concurrently with signing the renewal

Source: Item 23 — Receipts (FDD pages 77–282)

Question 48

Does the Healthsource Chiropractic Franchise Disclosure Document affect the Franchise Owner's rights to any forum provided for by the laws of the jurisdiction?

Accepted Answer

its right to file a lawsuit in Maryland claiming a violation of the Maryland Franchise Law. In light of the Federal Arbitration Act, there is some dispute as to whether this forum selection requirement is legally enforceable.

9. Each provision of this Amendment shall be effective only to the extent, with respect to such provision, that the jurisdictional requirements of the Maryland Franchise Registration and Disclosure Law are met independently without reference to this Amendment.

No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 49

Does the Healthsource Chiropractic Franchise Disclosure Document affect the Franchise Owner's rights to any procedure provided for by the laws of the jurisdiction?

Accepted Answer

Nothing in this Agreement shall obligate you or your General Manager (if any) to perform any act that is contrary to your or your General Manager's (if any) professional judgment; provided, however, that you must notify us immediately upon your determination that any specification, program, standard or operating procedure is contrary to your or your General Manager's (if any) professional judgment. Without limiting the generality of the foregoing, you acknowledge and agree that nothing contained in this Agreement or in any other agreement entered into by you in connection with this Agreement, shall be deemed to: (a) grant ownership or exclusive control of your patient records to us or any third party; (b) grant us direct or indirect control over the hiring or firing of any of your personnel who provide clinical services to your patients, or otherwise enable us to influence or control your employment decisions and practices; (c) impose, directly or indirectly, any requirements that affect your exercise of professional judgment in creating treatment plans and delivering clinical services and products to patients; or

HealthSource Chiropractic – 2025 Franchise Agreement

(d) directly or indirectly transfer legal liability from you to us with respect to the content of advertising or the implementation of any marketing program undertaken to promote your practice.

You further acknowledge and agree that all services and products that constitute the practice of chiropractic in your State will be provided to patients only by health care professionals that are duly licensed to provide the applicable services and products, in accordance with all applicable laws, rules and regulations, and that no entity (including us or any entity that you may form to operate your Franchised Business) will have any authority, control or influence over the scope of such services or products or the manner in which they are supplied. In the event that you enter into any Management Agreement or similar arrangement with respect to the provision of any professional services, we reserve the right, but do not assume the obligation, to review and approve such agreement.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 50

Does the Healthsource Chiropractic Franchise Disclosure Document affect the Franchise Owner's rights to any remedies provided for by the laws of the jurisdiction?

Accepted Answer

- 15.4 **Withholding of Performance.** HealthSource Chiropractic will perform its obligations under this Agreement if you are in full compliance with all or your duties and obligations to HealthSource Chiropractic under this Agreement and the Operations Manual (including any documents incorporated therein). If you are not in such compliance, we may, in our sole judgment, do any or all of the following until you fully correct the breach or default or HealthSource Chiropractic terminates this Agreement:
  - a. deny you access to the HealthSource Chiropractic website or Intranet;
- b. remove your Franchised Business from the Franchised Business locator page and/or remove your interior pages, on the HealthSource Chiropractic Website;
- c. remove your Franchised Business from the list of Franchised Businesses to which inquiries are referred;
- d. remove your Franchised Business from the list of Franchised Businesses that are entitled to HealthSource Chiropractic-related discounts from approved vendors; and/or
- e. remove your Franchised Business from the list of Franchised Businesses that are approved to participate in national or other alliance programs.

HealthSource Chiropractic may take any or all of these actions in addition to or instead of giving you notice of default and/or termination under this Agreement. You acknowledge and agree that HealthSource Chiropractic's withholding of performance services in accordance with this Section 15.4 will not constitute a breach of this Agreement and/or a defense to the enforcement by us of any provision of this Agreement, including the right to receive payment of Continuing Franchise Fees as provided in Section 6.2. You also acknowledge and agree that, should we choose to withhold performance rather than terminate this Agreement, HealthSource Chiropractic's failure to exercise its right to terminate this Agreement will in no way constitute a waiver of its subsequent right to terminate this Agreement for the specified default or for any other default or to exercise any other remedies available to us under this Agreement, at law, or in equity.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 51

For a Healthsource Chiropractic franchise, what is the impact of court decisions on the franchise agreement in Washington?

Accepted Answer

eable in Washington.

Item 17(d) of the Franchise Disclosure Document, regarding termination by a franchisee of a franchise agreement – is revised to state that such provision is subject to Washington law.

Items 17(q) and (r) of the Franchise Disclosure Document, regarding non-competition covenants during and after the term of the franchise, is revised to state that such provisions are subject to Washington law.

The franchisor may use the services of franchise brokers to assist it in selling franchises. A franchise broker represents the franchisor and is paid a fee for referring prospects to the franchisor and/or selling the franchise. Do not rely only on the information provided by a franchise broker about a franchise. Do your own investigation by contacting the franchisor's current and former franchisees to ask them about their experience with the franchisor.

In *In re: Franchise No Poaching Provisions, HealthSource Chiropractic, Inc.*, State of Washington, King County Superior Court No. 19-2-27562-6 SEA, on October 18, 2019, the Attorney General of the State of Washington alleged certain provisions contained in

HealthSource's prior versions of the franchise agreement contained "no-poach" provisions, and also alleged these provisions could constitute a violation of the State of Washington's Consumer Protection Act, RCW 19.86.030. Specifically, HealthSource's franchise agreement previously contained language that prohibited a franchisee from soliciting or hiring employees who worked for HealthSource during the term of the franchise agreement, or who worked for that particular franchise location if the current franchise owner sold the clinic and left the HealthSource system.

HealthSource and the State of Washington entered into an Assurance of Discontinuance whereby HealthSource agreed to not enforce any "no-poach" provisions contained in any existing franchise agreements, to amend franchise agreements with entities within the State of Washington to remove any "no-poach" provisions, and to not include any "no-poach" provisions in franchise agreements in the future. The Assurance of Discontinuance resolved all issues raised by the State of Washington against HealthSource, and HealthSource has fully performed its duties under the Assurance of Discontinuance.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 52

Can a Healthsource Chiropractic Franchise Owner waive rights under the Washington Franchise Investment Protection Act?

Accepted Answer

A release or waiver of rights executed by a franchisee may not include rights under the Washington Franchise Investment Protection Act or any rule or order thereunder except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, or rights or remedies under the Act such as a right to a jury trial, may not be enforceable.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 53

For a Healthsource Chiropractic franchise purchased in Washington, what law prevails in case of conflict of laws?

Accepted Answer

In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW will prevail.

RCW 19.100.180 may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise. There may also be court decisions which may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise.

In any arbitration or mediation involving a franchise purchased in Washington, the arbitration or mediation site will be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration or mediation, or as determined by the arbitrator or mediator at the time of arbitration or mediation. In addition, if litigation is not precluded by the franchise agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchises, or a violation of the Washington Franchise Investment Protection Act, in Washington.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 54

For a Healthsource Chiropractic franchise in Washington, what is the franchisee's recourse if litigation is not precluded by the franchise agreement?

Accepted Answer

gton requires that the following risks be highlighted concerning this Franchise:*

1. During the last 3 years, a large number of franchised outlets (138) were terminated, not renewed, re-acquired, or ceased operations for other reasons. This franchise could be a higher risk investment than a franchise in a system with a lower turnover rate.

# *Additional Disclosures Required in Washington*

In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW will prevail.

RCW 19.100.180 may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise. There may also

be court decisions which may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise.

In any arbitration or mediation involving a franchise purchased in Washington, the arbitration or mediation site will be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration or mediation, or as determined by the arbitrator or mediator at the time of arbitration or mediation. In addition, if litigation is not precluded by the franchise agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchises, or a violation of the Washington Franchise Investment Protection Act, in Washington.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 55

For a Healthsource Chiropractic franchise in Washington, what happens if the franchise agreement and the Washington Franchise Investment Protection Act conflict?

Accepted Answer

In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW will prevail.

RCW 19.100.180 may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise. There may also be court decisions which may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise.

In any arbitration or mediation involving a franchise purchased in Washington, the arbitration or mediation site will be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration or mediation, or as determined by the arbitrator or mediator at the time of arbitration or mediation. In addition, if litigation is not precluded by the franchise agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchises, or a violation of the Washington Franchise Investment Protection Act, in Washington.

A release or waiver of rights executed by a franchisee may not include rights under the Washington Franchise Investment Protection Act or any rule or order thereunder except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, or rights or remedies under the Act such as a right to a jury trial, may not be enforceable.

Transfer fees are collectable to the extent that they reflect the franchisor's reasonable estimated or actual costs in effecting a transfer.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 56

For a Healthsource Chiropractic franchise in Washington, what happens if there is a conflict between the franchise agreement and Chapter 19.100 RCW?

Accepted Answer

In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW will prevail.

RCW 19.100.180 may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise. There may also be court decisions which may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise.

A release or waiver of rights executed by a franchisee may not include rights under the Washington Franchise Investment Protection Act or any rule or order thereunder except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 57

For a Healthsource Chiropractic franchise in Washington, what happens if there is a conflict between the franchise agreement and the Washington Franchise Investment Protection Act?

Accepted Answer

In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW will prevail.

RCW 19.100.180 may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise. There may also be court decisions which may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise.

In any arbitration or mediation involving a franchise purchased in Washington, the arbitration or mediation site will be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration or mediation, or as determined by the arbitrator or mediator at the time of arbitration or mediation. In addition, if litigation is not precluded by the franchise agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchises, or a violation of the Washington Franchise Investment Protection Act, in Washington.

A release or waiver of rights executed by a franchisee may not include rights under the Washington Franchise Investment Protection Act or any rule or order thereunder except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, or rights or remedies under the Act such as a right to a jury trial, may not be enforceable.

Transfer fees are collectable to the extent that they reflect the franchisor's reasonable estimated or actual costs in effecting a transfer.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 58

For a Healthsource Chiropractic franchise in Washington, can the location of arbitration or mediation be determined at the time of the proceeding?

Accepted Answer

In any arbitration or mediation involving a franchise purchased in Washington, the arbitration or mediation site will be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration or mediation, or as determined by the arbitrator or mediator at the time of arbitration or mediation.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 59

For a Healthsource Chiropractic franchise in Washington, what is the potential impact of court decisions on the franchise agreement?

Accepted Answer

eable in Washington.

Item 17(d) of the Franchise Disclosure Document, regarding termination by a franchisee of a franchise agreement – is revised to state that such provision is subject to Washington law.

Items 17(q) and (r) of the Franchise Disclosure Document, regarding non-competition covenants during and after the term of the franchise, is revised to state that such provisions are subject to Washington law.

The franchisor may use the services of franchise brokers to assist it in selling franchises. A franchise broker represents the franchisor and is paid a fee for referring prospects to the franchisor and/or selling the franchise. Do not rely only on the information provided by a franchise broker about a franchise. Do your own investigation by contacting the franchisor's current and former franchisees to ask them about their experience with the franchisor.

In *In re: Franchise No Poaching Provisions, HealthSource Chiropractic, Inc.*, State of Washington, King County Superior Court No. 19-2-27562-6 SEA, on October 18, 2019, the Attorney General of the State of Washington alleged certain provisions contained in

HealthSource's prior versions of the franchise agreement contained "no-poach" provisions, and also alleged these provisions could constitute a violation of the State of Washington's Consumer Protection Act, RCW 19.86.030. Specifically, HealthSource's franchise agreement previously contained language that prohibited a franchisee from soliciting or hiring employees who worked for HealthSource during the term of the franchise agreement, or who worked for that particular franchise location if the current franchise owner sold the clinic and left the HealthSource system.

HealthSource and the State of Washington entered into an Assurance of Discontinuance whereby HealthSource agreed to not enforce any "no-poach" provisions contained in any existing franchise agreements, to amend franchise agreements with entities within the State of Washington to remove any "no-poach" provisions, and to not include any "no-poach" provisions in franchise agreements in the future. The Assurance of Discontinuance resolved all issues raised by the State of Washington against HealthSource, and HealthSource has fully performed its duties under the Assurance of Discontinuance.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 60

For a Healthsource Chiropractic franchise in Washington, what is the significance of the Washington Franchise Investment Protection Act?

Accepted Answer

In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW will prevail.

RCW 19.100.180 may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise. There may also be court decisions which may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise.

In any arbitration or mediation involving a franchise purchased in Washington, the arbitration or mediation site will be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration or mediation, or as determined by the arbitrator or mediator at the time of arbitration or mediation. In addition, if litigation is not precluded by the franchise agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchises, or a violation of the Washington Franchise Investment Protection Act, in Washington.

A release or waiver of rights executed by a franchisee may not include rights under the Washington Franchise Investment Protection Act or any rule or order thereunder except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, or rights or remedies under the Act such as a right to a jury trial, may not be enforceable.

Transfer fees are collectable to the extent that they reflect the franchisor's reasonable estimated or actual costs in effecting a transfer.

Source: Item 23 — Receipts (FDD pages 77–282)

Question 61

Is a Healthsource Chiropractic franchisee allowed to recruit or hire employees from other HealthSource Chiropractic locations?

Accepted Answer

- i. You agree not to recruit or hire, either directly or indirectly, any employee (or a former employee, for six (6) months after his or her employment has ended) of any HealthSource Chiropractic Clinic or Regional Developer franchise operated by us, our affiliates, or another HealthSource Chiropractic franchise owner without first obtaining the written consent of us, our affiliate, or the franchise owner that currently employs (or previously employed) such employee. (If you violate this provision, in addition to any other right or remedy we may have, you agree to pay the employee's current or former employer twice the employee's annual salary, plus all costs and attorneys' fees incurred as a result of the violation. This amount is set at twice the employee's annual salary because it is a reasonable estimation of the damages that would occur from such a breach, and it will almost certainly be impossible to calculate precisely the actual damages from such a breach).

Source: Item 23 — Receipts (FDD pages 77–282)

Question 62

Is a Healthsource Chiropractic franchisee eligible to renew their franchise if they comply with the requirements to purchase or lease real estate, goods, and services according to specifications and/or from approved suppliers?

Accepted Answer

You must comply with our requirements to purchase or lease real estate, goods, and services according to our specifications and/or from approved suppliers to be eligible to renew your franchise. Failure to comply with these requirements will render you ineligible for renewal, and may be a default allowing us to terminate your franchise and/or withhold performance (including but not limited to removing your access to our website or any intranet, removing any information about your Franchise on our website, removing you from any lists for which inquiries for services are made, any lists of approved Franchises for which any of our approved supplies provide discounts or any lists that you are approved to participate in national or other alliance programs). We do not provide any other benefits to you because of your use of designated or approved services and products, or suppliers.

Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 28–32)

Question 63

Is a Healthsource Chiropractic franchisee obligated to use specific vendors for products and services?

Accepted Answer

ccording to a commercial lease, the lease must contain terms that we specify.

You must obtain the customer management, accounting, and billing software for the Computer System, (see Items 7 and 11), that you must use in operating your HealthSource Chiropractic franchise from HSWorx, or such other supplier as we may designate in the future.

We currently require our franchisees to enroll in and maintain certain human resources and payroll services provided by Paychex, Inc. The required services consist of payroll processing, payroll tax filing, human resource solutions, benefits administration services, hiring and employee onboarding. Paychex, Inc. may also provide additional services at the option and cost of the franchisee.

If you would like to purchase or lease any items from any unapproved supplier, then you must submit to us a written request for approval of the proposed supplier or the proposed supplier may submit its own request. We may inspect the proposed supplier's facilities, and require that product samples from the proposed supplier be delivered for testing either directly to us or any independent certified laboratory that we designate. We also may require you (or the proposed supplier requesting the evaluation) to pay us an evaluation fee (not to exceed the reasonable cost of the inspection and the actual cost of the test (see Item 6) to make the evaluation. We will approve or disapprove your proposed supplier within 60 days of receiving all of the information that we require for the evaluation. We reserve the right to periodically re-inspect the facilities and products or services of any approved supplier, and revoke our approval if the supplier does not continue to meet any of our criteria.

# **HealthSource Chiropractic and Our Affiliates as Approved Suppliers**

We may designate us and/or our affiliates as an approved supplier, or the only approved supplier, from which you may or must lease or purchase certain products or services in developing and operating your HealthSource Chiropractic franchise. We and our affiliates may derive revenue from these sales and may sell these items at prices exceeding our or their costs in order to make a profit on the sale.

We reserve the right to designate us and/or our affiliates as approved suppliers, or the exclusive supplier(s), from whom you may purchase or lease certain other categories of products, services, and equipment.

We are currently not an approved supplier for any other product, service, or equipment.

# **Our Involvement with Suppliers**

We and our affiliates and designees reserve the right to receive revenue or other material consideration from suppliers in consideration for other goods or services that we require or advise you to obtain from approved suppliers. We anticipate that any revenue or other consideration received would probably include promotional allowances, rebates, volume discounts, and other payments, and which range from zero to 50 percent of the amount of the goods or services you purchase from the supplier. In fiscal year 2024, our revenue totaled \$6,893,645. Of this total, \$335,649 or 4.9% of our total revenue, was derived from franchise purchases or leases, including but not limited to purchases of services provided by HealthSource Chiropractic, as well as products and services purchased from third party suppliers that pay us a rebate and other payments for franchise purchases. These figures do not include the revenues received by our affiliate, Octalean (which receives net revenues from the voluntary HS Masterminds program used by some HealthSource Chiropractic franchises). Our affiliate, Octalean, obtained revenues from the sale of services to HealthSource Chiropractic franchisees in the amount of \$245,418 in the 2024 fiscal year. We expect that at least some of these arrangements will generally allow us to obtain discounts off standard pricing and pass at least a portion of the savings on to you.

The approved supplier for certain chiropractic equipment, Pivotal Health Solutions, also pays us a rebate of 5% on all purchases made by our franchises. The approved supplier for certain chiropractic, massage, acupuncture, physical therapy, rehabilitation, and other equipment, fitness supplies, vitamins, and retail display units, WBC Group, LLC, pays us a rebate of 5% of all purchases made by our franchises from WBC Group, LLC, except that we do not receive any rebate on retail display units purchased by our franchises. A supplier for certain merchant/credit card services for Clinic franchises, OpenEdge Payments LLC, pays us a rebate of 50% of the difference of OpenEdge Payments LLC's fee revenues generated from transactions conducted by Clinic franchises and its expenses relating to same. The approved supplier for certain merchant/credit card services, Fortis Payment Systems, LLC, pays us a rebate of 10% of profit received from approved merchants on the transactions conducted by our franchises. The approved supplier for certain chiropractic equipment, Saatva, also pays us a rebate of 6.5% on all purchases made by our franchises. The approved supplier for certain chiropractic equipment, NCMIC, also pays us a rebate of 1% on all purchases made by our franchises. The approved supplier for certain products, Liberty Distribution, LLC, also pays us a rebate of \$5/bottle on all purchases made by our franchises. The approved supplier for certain brand materials and marketing communications, Xpress Docs LTD., pays us a rebate of 5% on all purchases made by our franchises.

Source: Item 16 — Restrictions on What the Franchisee May Sell (FDD page 52)

Question 64

Is a Healthsource Chiropractic franchisee required to establish training programs for employees and/or independent contractors?

Accepted Answer

tions required by law before assuming his or her responsibilities at the Franchise.
- c. You must ensure that your employees and independent contractors of the Franchise have any licenses as may be required by law, and hold or are pursuing any licenses, certifications, and/or degrees required by law or by us in the Operations Manual, as updated from time to time.
- d. **You will be exclusively responsible for the terms of your employees' and independent contractors' employment and compensation, and for the proper training of your employees and independent contractors in the operation of the Franchise, all hiring, retention and firing decisions, and for all other employment practices utilized in the operation of the Franchise. You must notify and communicate clearly with your employees in all dealings (including, without limitation, your written and electronic correspondence, paychecks, and other materials) that Franchisee (and only Franchisee) is their employer and that HealthSource Chiropractic is not their employer.**

- e. You must establish any training programs for your employees and/or independent contractors that we may prescribe in writing from time to time. You are required to enroll in and maintain the human resources and payroll services provided by the vendor we designate for such services, including the payment of any fees and execution of any agreement required by such vendor. The required services consist of payroll processing, payroll tax filing, human resource solutions, benefits administration services, hiring and employee onboarding.
- f. You must require all employees and independent contractors to maintain a neat and clean appearance and conform to the standards of dress that we specify in the Operations Manual, as updated from time to time.
- g. Each of your employees and independent contractors must sign a written agreement, in a form approved by us, to maintain confidential our Confidential Information, proprietary information, and trade secrets as described in Paragraph 9.1. You must forward to us a copy of each such signed agreement.
- h. All of your employees and independent contractors must render prompt, efficient and courteous service to all customers of the Franchise.
- i. You agree not to recruit or hire, either directly or indirectly, any employee (or a former employee, for six (6) months after his or her employment has ended) of any HealthSource Chiropractic Clinic or Regional Developer franchise operated by us, our affiliates, or another HealthSource Chiropractic franchise owner without first obtaining the written consent of us, our affiliate, or the franchise owner that currently employs (or previously employed) such employee. (If you violate this provision, in addition to any other right or remedy we may have, you agree to pay the employee's current or former employer twice the employee's annual salary, plus all costs and attorneys' fees incurred as a result of the violation. This amount is set at twice the employee's annual salary because it is a reasonable estimation of the damages that would occur from such a breach, and it will almost certainly be impossible to calculate precisely the actual damages from such a breach).

# 10.8 **Insurance**

a. Before you open the Franchise and during any Term of this Agreement, you must maintain in force, under policies of insurance issued by carriers in good standing in the state where your clinic is located: (1) comprehensive commercial general liability and motor vehicle liability insurance against claims for bodily and personal injury, death and property damage

caused by or occurring in conjunction with the operation of the Franchise or otherwise in conjunction with your conduct of the Franchise business pursuant to this Agreement, under one or more policies of insurance containing minimum liability coverage of not less than \$1,000,000 per occurrence and \$3,000,000 in the aggregate; (2) worker's compensation and employer's liability insurance as required by law, with limits equal to or in excess of those required by statute; (3) professional liability (malpractice) insurance, for each doctor practicing in your Franchise business, having limits of not less than \$1,000,000 per occurrence and \$3,000,000 in the aggregate; and (4) any other insurance required by applicable law, rule, regulation, ordinance or licensing requirements.

Source: Item 23 — Receipts (FDD pages 77–282)

Healthsource_Chiropractic 2025 FDD FAQ