Does the security interest granted to Healthsource Chiropractic extend to proceeds from the collateral described in the Healthsource Chiropractic Agreement?
Healthsource_Chiropractic Franchise · 2025 FDDAnswer from 2025 FDD Document
To secure your performance under this Agreement and indebtedness for all sums due us or our affiliates, we shall have a lien upon, and you hereby grant us a security interest in, the following collateral and any and all additions, accessions, and substitutions to or for it and the proceeds from all of the same: (a) all inventory now owned or after-acquired by the Franchise, including but not limited to all inventory and supplies transferred to or acquired by you in connection with this Agreement; (b) all accounts of the Franchise now existing or subsequently arising, together with all interest in the Franchise, now existing or subsequently arising, together with all chattel paper, documents, and instruments relating to such accounts; (c) all contract rights of the Franchise, now existing or subsequently arising including, without limitation, accounts receivable and other contractual rights to payment from others; (d) all general intangibles of the Franchise, now owned or existing, or after-acquired or subsequently arising including, without limitation, all awards, damages, payments, escrowed monies, insurance proceeds, and interest, fees, charges or payments accruing on or received from or to be received on any of the foregoing in any way; and (e) all products, proceeds, substitutions, and replacements of any of the above described collateral.
You agree to execute such financing statements, instruments, and other documents, in a form satisfactory to us, that we deem necessary so that we may establish and maintain a valid security interest in and to these assets, and you authorize us to file, without your signature, such financing statements as we shall deem necessary or advisable to reflect the security interest granted herein.
Source: Item 23 — Receipts (FDD pages 77–282)
What This Means (2025 FDD)
According to the 2025 Healthsource Chiropractic Franchise Disclosure Document, Healthsource Chiropractic is granted a security interest in specific collateral to secure the franchisee's performance under the agreement and any debts owed to Healthsource Chiropractic or its affiliates. This security interest extends not only to the listed collateral but also to any proceeds derived from that collateral.
The collateral includes all inventory owned by the franchise, both current and future, along with all accounts, chattel paper, documents, and instruments related to those accounts. It also encompasses all contract rights, including accounts receivable and other contractual rights to payment. Furthermore, the collateral includes all general intangibles of the franchise, such as awards, damages, payments, escrowed monies, and insurance proceeds.
Specifically, the security interest extends to 'all products, proceeds, substitutions, and replacements of any of the above described collateral.' This means that if a franchisee sells inventory, the resulting cash (proceeds) is also subject to Healthsource Chiropractic's security interest. Similarly, if equipment is replaced, the new equipment is also covered. This provision ensures that Healthsource Chiropractic has a comprehensive claim on the assets and revenue streams of the franchise to secure the franchisee's obligations.
As a prospective franchisee, it is crucial to understand the full scope of this security interest. Healthsource Chiropractic requires franchisees to execute financing statements and other documents to establish and maintain this security interest. This gives Healthsource Chiropractic a legal claim on the specified assets, which could have significant implications if the franchisee defaults on their obligations under the Franchise Agreement.