Does the Healthsource Chiropractic agreement require Healthsource Chiropractic to not unreasonably withhold approval of all of the franchisee's actions or requests?
Healthsource_Chiropractic Franchise · 2025 FDDAnswer from 2025 FDD Document
- 17.19 Exercise of Discretion. Whenever this Agreement gives HealthSource Chiropractic discretion to take an action or make a decision, HealthSource Chiropractic will be allowed to take or make (or refrain from taking or making) that action or decision based on its business judgment. Even if HealthSource Chiropractic has numerous motives for a particular action or decision and/or there are other reasonable and/or arguably preferable alternatives to a particular action or decision, so long as at least one motive is a reasonable business justification, the action or decision will not be subject to challenge for abuse of discretion. IF THE EXERCISE OF HEALTHSOURCE CHIROPRACTIC'S DISCRETION AS TO ANY MATTER IS CHALLENGED, THE PARTIES EXPRESSLY DIRECT THE TRIER OF FACT THAT HEALTHSOURCE CHIROPRACTIC'S RELIANCE ON A BUSINESS REASON IN THE EXERCISE OF ITS DISCRETION IS TO BE VIEWED AS A REASONABLE AND PROPER EXERCISE OF HEALTHSOURCE CHIROPRACTIC'S DISCRETION, WITHOUT REGARD TO WHETHER OTHER REASONS FOR ITS DECISION MAY EXIST AND WITHOUT REGARD TO WHETHER THE TRIER OF FACT WOULD INDEPENDENTLY ACCORD THE SAME WEIGHT TO THE BUSINESS REASON.
Source: Item 23 — Receipts (FDD pages 77–282)
What This Means (2025 FDD)
According to the 2025 Healthsource Chiropractic Franchise Disclosure Document, Healthsource Chiropractic retains significant discretion in its decision-making. Specifically, Section 17.19 states that Healthsource Chiropractic is allowed to make decisions based on its business judgment. Even if there are multiple motives or other reasonable alternatives, as long as one motive is a reasonable business justification, the decision cannot be challenged for abuse of discretion. This indicates that Healthsource Chiropractic is not explicitly bound to a standard of 'reasonableness' in the same way that some franchise agreements might require. Instead, the agreement emphasizes the franchisor's business judgment as the primary factor.
This approach has several implications for franchisees. It means that Healthsource Chiropractic has considerable latitude in approving or denying franchisee requests, provided they can point to a business justification. While this does not grant Healthsource Chiropractic unlimited power, it does place a significant burden on the franchisee to demonstrate that a decision lacks any reasonable business basis if they wish to challenge it. The agreement further directs any 'trier of fact' (e.g., a judge or arbitrator) to view Healthsource Chiropractic's reliance on a business reason as a reasonable and proper exercise of discretion, regardless of other potential reasons or whether the trier of fact would independently agree with the decision.
For a prospective Healthsource Chiropractic franchisee, this clause highlights the importance of understanding the franchisor's business philosophy and ensuring alignment with their own. It also underscores the value of clear communication and building a strong relationship with Healthsource Chiropractic to understand the rationale behind their decisions. While the agreement does not explicitly prevent Healthsource Chiropractic from unreasonably withholding approval, it does provide a framework that prioritizes the franchisor's business judgment and makes it more challenging to contest their decisions.