Is HealthSource Chiropractic considered a third-party beneficiary of the covenants in Section 11.1 regarding indemnification?

According to HealthSource Chiropractic's 2025 Franchise Disclosure Document, HealthSource is indeed considered a third-party beneficiary of the covenants within Section 11.1, which pertains to indemnification. This means that HealthSource Chiropractic has specific rights and protections under the indemnification agreement, even though they are not a direct party to the agreement itself (which is primarily between the Management Company and the Licensed Provider).

In practical terms, this designation as a third-party beneficiary allows HealthSource Chiropractic to directly enforce the indemnification provisions against the Licensed Provider (the franchisee) if the franchisee's actions or omissions lead to claims, lawsuits, or damages for which HealthSource Chiropractic is held liable. The franchisee is obligated to defend, indemnify, and hold HealthSource Chiropractic harmless from any such claims arising from the franchisee's operations, breaches of agreement, or negligent actions.

This is a significant protection for HealthSource Chiropractic, as it shields them from potential liabilities stemming from the actions of individual franchisees. For a prospective franchisee, this highlights the importance of understanding and adhering to the terms of the franchise agreement, as any breach could result in direct financial responsibility to HealthSource Chiropractic through the indemnification clause. Franchisees should ensure they maintain adequate insurance coverage and operate their clinics responsibly to minimize the risk of triggering this indemnification obligation.

The FDD also states that HealthSource is a third party beneficiary of the covenants contained in Section 10. This section addresses the Licensed Provider's acknowledgement that a breach of any provision in Section 10 would cause immediate and irreparable harm to Management Company and HealthSource. Therefore, the Licensed Provider agrees that the restraints outlined in Section 10 are fair and reasonable and are required for the protection of Management Company's and HealthSource's legitimate business interests, and do not impose any undue hardship on the Licensed Provider.