Under what section of the Healthsource Chiropractic agreement is application of payments discussed?
Healthsource_Chiropractic Franchise · 2025 FDDAnswer from 2025 FDD Document
- 6.7 Application of Payments; No Set-Off. When we receive a payment from you, we have the right in our sole discretion to apply it as we see fit to any past due indebtedness of yours due to us or our affiliates, whether for Continuing Franchise Fees, Advertising Fees, purchases, interest, or for any other reason, regardless of how you may designate a particular payment should be applied. You may not, on grounds of alleged non-performance by HealthSource Chiropractic of its obligations under this Agreement, withhold payment of Continuing Franchise Fees and/or any other amounts due to HealthSource Chiropractic and/or its related parties or affiliates.
- 6.8 Modification of Payments. If, by operation of law or otherwise, any fees contemplated by this Agreement cannot be based upon gross revenues, then you and we agree to negotiate in good faith an alternative fee arrangement. If you and we are unable to reach an agreement on an alternative fee arrangement, then HealthSource Chiropractic reserves the right to terminate this Agreement upon notice to you, in which case all of the post-termination obligations set forth in Section 16 shall apply.
Source: Item 23 — Receipts (FDD pages 77–282)
What This Means (2025 FDD)
According to the 2025 Healthsource Chiropractic Franchise Disclosure Document, the application of payments is discussed in section 6.7, titled "Application of Payments; No Set-Off". This section grants Healthsource Chiropractic the right to apply payments received from the franchisee to any past due debts owed to them or their affiliates. This includes debts related to Continuing Franchise Fees, Advertising Fees, purchases, or interest, regardless of how the franchisee designates the payment.
This means that Healthsource Chiropractic has considerable discretion in how they allocate payments made by the franchisee. For example, if a franchisee owes money for both Continuing Franchise Fees and Advertising Fees, Healthsource Chiropractic can choose to apply a payment entirely to one type of fee, even if the franchisee intended it to cover both. This could potentially lead to a franchisee being considered delinquent on one type of fee even if they have made sufficient overall payments.
The agreement also stipulates that the franchisee cannot withhold payment of Continuing Franchise Fees or any other amounts due to Healthsource Chiropractic or its affiliates based on alleged non-performance by Healthsource Chiropractic. This clause reinforces Healthsource Chiropractic's right to receive payments regardless of any disputes over their own obligations under the agreement. This is a fairly standard clause in franchise agreements, as it ensures a steady revenue stream for the franchisor.
Furthermore, section 6.8 addresses modifications of payments, stating that if any fees cannot be based on gross revenues due to legal or other reasons, Healthsource Chiropractic and the franchisee will negotiate an alternative fee arrangement in good faith. However, if an agreement cannot be reached, Healthsource Chiropractic reserves the right to terminate the agreement, in which case the post-termination obligations outlined in Section 16 will apply. This clause protects Healthsource Chiropractic's financial interests in the event that the agreed-upon fee structure becomes untenable.