What was the common issue in both the Virginia and California cases against Healthsource Chiropractic?
Healthsource_Chiropractic Franchise · 2025 FDDAnswer from 2025 FDD Document
ation involves us:
Public Agency Orders
Commonwealth of Virginia v HealthSource Chiropractic, Inc. and Bernard Brozek; Case No. SEC-2019-00058. On January 29, 2020, we entered into and delivered a Settlement Order with the Virginia State Corporation Commission's Division of Securities and Retail Franchising (the "Division"). The Division alleged that our 2017 and 2018 disclosure documents failed to disclose a prior personal bankruptcy one of our officers, Bernard Brozek, and therefore, violated the Virginia Retail Franchising Act. We do not admit or deny the Division's allegation. In order to resolve this matter without the further cost and expense of formal proceedings, we agreed to make an offer to refund the initial franchise fees paid by the one purchaser during the subject time frame (up to a maximum of $80,000) and to pay the Division the sum of $9,000 in costs and civil penalties. We have completed making the refund to the designated purchaser and paying the required costs, Mr. Brozek reimbursed us for those payments, and Mr. Brozek is no longer employed by us.
The Commissioner of Financial Protection and Innovation of the State of California v. HealthSource Chiropractic, Inc. On July 20, 2021, we entered into a Consent Order with the California Commissioner of Financial Protection and Innovation (the "Commissioner"). The Commissioner determined that our 2017 and 2018 disclosure documents failed to contain a required disclosure concerning Mr. Brozek's personal bankruptcy and therefore violated Section 31200 of the California Franchise Investment Law. In order to resolve this matter we agreed to desist and refrain from the violation described ab
Source: Item 3 — Litigation (FDD pages 14–15)
What This Means (2025 FDD)
According to the 2025 Healthsource Chiropractic Franchise Disclosure Document, both the Commonwealth of Virginia and the State of California took action against Healthsource Chiropractic because the company's 2017 and 2018 disclosure documents failed to disclose a prior personal bankruptcy of one of its officers, Bernard Brozek. This failure was deemed a violation of the Virginia Retail Franchising Act in Virginia and Section 31200 of the California Franchise Investment Law in California.
In Virginia, Healthsource Chiropractic entered into a Settlement Order, agreeing to offer refunds of initial franchise fees (up to $80,000) to a purchaser and pay $9,000 in costs and civil penalties. Mr. Brozek reimbursed Healthsource Chiropractic for these payments and is no longer employed by the company. In California, Healthsource Chiropractic entered into a Consent Order, agreeing to cease and refrain from the violation.
For a prospective franchisee, this litigation history highlights the importance of complete and accurate disclosures in franchise documents. It also demonstrates the potential consequences of non-compliance, including financial penalties and legal orders. While the issue has been resolved with Mr. Brozek's departure, a prospective franchisee should carefully review Item 3 of the FDD, which covers litigation, and consider asking Healthsource Chiropractic about their current procedures for ensuring full compliance with disclosure laws.