What happens to the restrictive covenants in Article 9 upon transfer of a Healthsource Chiropractic franchise?
Healthsource_Chiropractic Franchise · 2025 FDDAnswer from 2025 FDD Document
- f. you and your Principal Owners must execute a Transfer Agreement, which will include (i) a general release (in a form satisfactory to us) of any and all claims you and/or they may have against us, our affiliates, and our and our affiliates' respective officers, directors, employees, and agents, and (ii) acknowledgment that the restrictive covenants set forth in Article 9 of this Agreement will survive the Transfer to the extent set forth therein;
Source: Item 23 — Receipts (FDD pages 77–282)
What This Means (2025 FDD)
According to the 2025 Healthsource Chiropractic Franchise Disclosure Document, when a franchise is transferred, the original franchisee and their Principal Owners must acknowledge that the restrictive covenants outlined in Article 9 of the franchise agreement will remain in effect to the extent specified within Article 9. This means that even after selling the franchise, the original franchisee may still be bound by certain obligations, such as non-competition and confidentiality agreements.
Specifically, the franchisee and Principal Owners must sign a Transfer Agreement that includes an acknowledgement that the restrictive covenants in Article 9 will survive the transfer to the extent outlined in that article.
This condition ensures that Healthsource Chiropractic can continue to protect its confidential information and maintain a competitive advantage, even after a franchise changes ownership. Prospective franchisees should carefully review Article 9 to understand the specific restrictions that will apply to them even after they sell their franchise.
It is typical in franchising for restrictive covenants to extend beyond the term of the franchise agreement, especially concerning confidentiality and non-competition. This protects the franchisor's business model and proprietary information. Franchisees should seek legal counsel to fully understand the implications of these covenants before entering into a franchise agreement.