If the Healthsource Chiropractic developer is a business entity, what obligation do the principals/owners have?
Healthsource_Chiropractic Franchise · 2025 FDDAnswer from 2025 FDD Document
In this Agreement, we refer to as "we," "us," or the "HealthSource Chiropractic." We refer to you as "you," "Franchise Owner" or "Franchisee" and such terms include any person or entity that operates or has an interest in the Franchised Business (defined below). If you are a corporation, partnership or limited liability company, you will notice certain provisions that are applicable to those principal shareholders, partners or members on whose business skill, financial capability and personal character we are relying in entering into this Agreement. Those individuals will be referred to in this Agreement as "Principal Owners".
Your Principal Owners and General Manager must immediately comply with the restrictive covenants set forth in this Agreement and any Restrictive Covenants Agreement signed by your General Manager, as applicable.
You and each Principal Owner represent, warrant, and agree that all "Interests" in Franchise Owner are owned in the amount and manner described in Exhibit 2. No Interests in Franchise Owner will, during the Term of this Agreement, be "public" securities (i.e., securities that require, for their issuance, registration with any state or federal authority). (An "Interest" is defined to mean any shares, units, membership interests, or partnership interests of Franchise Owner and any other equitable or legal right in any of Franchise Owner's stock, revenues, profits, rights, or assets. When referring to Franchise Owner's rights or assets, an "Interest" means this Agreement, Franchise Owner's rights under and interest in this Agreement, any HealthSource Chiropractic franchise, and the revenues, profits or assets of any HealthSource Chiropractic franchise.) You and each Principal Owner also represent, warrant, and agree that no Principal Owner's Interest has been given as security for any obligation (i.e., no one has a lien on or security interest in a Principal Owner's Interest), and that no change will be made in the ownership of an Interest other than as expressly permitted by this Agreement or as we may otherwise approve in writing. You and each Principal Owner agree to furnish us with such evidence as we may request from time to time to assure ourselves that the Interests of Franchise Owner and each of your Principal Owners remain as permitted by this Agreement, including a list of all persons or entities owning any Interest, as defined above.
Source: Item 23 — Receipts (FDD pages 77–282)
What This Means (2025 FDD)
According to the 2025 Healthsource Chiropractic Franchise Disclosure Document, if the franchisee is a corporation, partnership, or limited liability company, there are specific provisions applicable to the principal shareholders, partners, or members. These individuals, referred to as "Principal Owners," are those on whose business skill, financial capability, and personal character Healthsource Chiropractic relies when entering into the Franchise Agreement. This indicates that Healthsource Chiropractic places significant importance on the qualifications and character of the individuals who own and control the franchise entity.
The Principal Owners must comply with certain obligations. Specifically, they must adhere to restrictive covenants outlined in the agreement and any Restrictive Covenants Agreement signed by the General Manager, if applicable. Additionally, all "Interests" in the Franchise Owner must be owned in the amount and manner described in Exhibit 2 of the Franchise Agreement. These "Interests" cannot be "public" securities, meaning they cannot require registration with any state or federal authority for their issuance. An "Interest" is defined as any shares, units, membership interests, or partnership interests of the Franchise Owner, as well as any other equitable or legal right in the Franchise Owner's stock, revenues, profits, rights, or assets, including the Franchise Agreement itself.
Furthermore, Principal Owners must ensure that their Interests are not given as security for any obligation, meaning no one should have a lien on or security interest in a Principal Owner's Interest. Any changes in the ownership of an Interest must be expressly permitted by the Franchise Agreement or approved in writing by Healthsource Chiropractic. The Principal Owners must also furnish Healthsource Chiropractic with evidence, upon request, to assure them that the Interests of the Franchise Owner and each Principal Owner remain as permitted by the agreement. This includes providing a list of all persons or entities owning any Interest, as defined in the agreement.
These provisions ensure that Healthsource Chiropractic maintains control over who is involved in the ownership and management of its franchises, safeguarding the brand's reputation and the integrity of its operations. Prospective franchisees operating as business entities should carefully review Exhibit 2 and Article 9 of the Franchise Agreement to fully understand the obligations and restrictions placed on their Principal Owners. They should also be prepared to provide documentation and seek approval for any changes in ownership or security interests.