Is Healthsource Chiropractic allowed to require a Healthsource Chiropractic Franchise Owner to consent to termination penalties in Minnesota?
Healthsource_Chiropractic Franchise · 2025 FDDAnswer from 2025 FDD Document
you or your Principal Owners.
Notwithstanding the foregoing, in the event you fail to timely and expressly assume, ratify or confirm this Agreement in any bankruptcy proceeding and you cease, or have ceased, performance hereunder in any respect, then all rights granted to you under this Agreement shall immediately and automatically terminate and revert to us without further notice to you or action on our part.
15.2 Legal Requirements. In addition, if, in the opinion of our legal counsel, any provision of this Agreement is contrary to law, then this Agreement shall remain in full force and effect and you and we agree to negotiate in good faith an amendment that would make this Agreement conform to the applicable legal requirements. If you and we are unable to reach such an agreement within 30 days after notice of the issue is given to the other party, or if fundamental changes to this Agreement are required to make it conform to the legal requirements, then we reserve the right to terminate this Agreement upon notice to you, in which case neither party shall have any liability to the other but all of your post-termination obligations set forth in Section 16 shall apply.
15.3 Our Remedies upon Termination. In the event that we terminate this Agreement under Section 15.1 or other applicable provisions of this Agreement, but excluding the circumstances described in Section 15.2, all rights granted to you under this Agreement shall immediately and automatically terminate and revert to us, and we shall be entitled, to recover from you any and all of the foregoing:
a. in those states in which such termination fees are enforceable, to receive from you a termination fee in the amount equal to one-half (1/2) of our then-current initial franchise fee for new HealthSource Chiropractic Start-up Clinic franchises; and
b. an amount equal to your average monthly Continuing Franchise Fee, Ad Fund contribution, and Technology Fee multiplied by the number of months remaining in the Term of this Agreement, discounted by a present value discount factor of five percent (5%) and any additional actual, economic, consequential and indirect damages incurred by us including, without limitation, the loss of future revenues (which we both agree include the expected amount of Continuing Franchise Fees, Ad Fund contributions, and Technology Fees payable by you for the remainder of the Term of this Agreement); and
c. all costs and expenses, including attorneys' fees, incurred in connection with the termination, collection of the termination fee and/or damages, and audit fees and expenses.
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).
Source: Item 23 — Receipts (FDD pages 77–282)
What This Means (2025 FDD)
According to Healthsource Chiropractic's 2025 Franchise Disclosure Document, the franchise agreement contains provisions regarding the payment of amounts owed upon termination. Specifically, Section 16.1 states that a franchisee must pay all outstanding amounts, including unpaid franchise fees, and any termination fees, damages, costs, or expenses owed per Section 15.3, along with audit costs. Section 15.3 outlines Healthsource Chiropractic's remedies upon termination, which include a termination fee (in states where such fees are enforceable), an amount equal to the average monthly Continuing Franchise Fee, Ad Fund contribution, and Technology Fee multiplied by the number of months remaining in the term of the agreement, discounted by a present value discount factor of five percent, and all costs and expenses, including attorneys' fees, incurred in connection with the termination.
However, Section 15.2 addresses legal requirements, stating that if any provision of the agreement is contrary to law, the parties will negotiate in good faith to amend the agreement to conform to applicable legal requirements. If an agreement cannot be reached within 30 days, Healthsource Chiropractic reserves the right to terminate the agreement, in which case neither party shall have any liability to the other, but all post-termination obligations set forth in Section 16 shall apply.
Therefore, while the franchise agreement does include termination penalties, its enforceability in Minnesota depends on whether such penalties are permissible under Minnesota law. The agreement also includes a clause that allows for amendment or termination if any provision is found to be contrary to law. A prospective franchisee should consult with a legal professional to determine the enforceability of these termination penalties in Minnesota.