What are the consequences if an Aira Fitness franchisee fails to keep the equipment insured?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
(b) Insurance. Franchisee shall obtain and maintain for the entire term of this Lease, at its own expense (as primary insurance for Franchisor's Affiliate and Franchisee), property damage and liability insurance and insurance against loss or damage to the Equipment including, without limitation, loss by fire (including so-called extended coverage), theft, collision and such other risks of loss as are customarily insured against on the type of Equipment leased hereunder and by businesses in which Franchisee is engaged, in such amounts, in such form and with such insurers as shall be reasonably satisfactory to Franchisor's Affiliate provided, however, that the amount of insurance against loss or damage to the Equipment shall be the replacement value of the Equipment. Each insurance policy will name Franchisee as an insured and Franchisor's Affiliate as an additional insured and loss payee thereof as Franchisor's Affiliate's interests may appear, shall contain cross-liability endorsements and shall contain a clause requiring the insurer to give Franchisor's Affiliate at least 30 days prior written notice of any material alteration in the terms of such policy or of the cancellation thereof. Franchisee shall furnish to Franchisor's Affiliate a certificate of insurance or other evidence satisfactory to Franchisor's Affiliate that such insurance coverage is in effect, provided, however, that Franchisor's Affiliate shall be under no duty either to ascertain the existence of or to examine such insurance policy or to advise Franchisee in the event such insurance coverage shall not comply with the requirements hereof. Franchisee further agrees to give Franchisor's Affiliate prompt notice of any damage to, or loss of, the Equipment, or any part thereof; all insurance covering loss or damage to the Equipment shall contain a breach of warranty clause satisfactory to Franchisor's Affiliate. In the event Franchisee fails to obtain insurance in accordance with this provision, the Franchisor's Affiliate may, at its option, obtain the insurance or declare Franchisee's failure an event of default. In the event that Franchisor's Affiliate obtains insurance, it shall be entitled to prompt reimbursement from the Franchisee of the costs, including reasonable administrative costs, of doing so.
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to Aira Fitness's 2025 Franchise Disclosure Document, franchisees must maintain property damage and liability insurance for the entire lease term, covering loss or damage to equipment from events like fire, theft, and collision. The insurance amount must equal the equipment's replacement value. The policy should name the franchisee as the insured and Franchisor's Affiliate as an additional insured and loss payee, include cross-liability endorsements, and require the insurer to provide at least 30 days' written notice before any policy changes or cancellation. Franchisees must provide the Franchisor's Affiliate with a certificate of insurance as proof of coverage.
If an Aira Fitness franchisee fails to obtain the required insurance, the Franchisor's Affiliate has the option to either obtain the insurance themselves or declare the franchisee in default. If the Franchisor's Affiliate chooses to obtain the insurance, the franchisee is responsible for promptly reimbursing all costs, including reasonable administrative fees, associated with securing the insurance.
This requirement ensures that the equipment is protected, and the Franchisor's Affiliate's interests are secured. It is the franchisee's responsibility to maintain adequate insurance coverage and provide proof of such coverage to the Franchisor's Affiliate. Failure to do so can result in the Franchisor's Affiliate procuring insurance on the franchisee's behalf, with the franchisee bearing the costs, or potentially lead to a declaration of default under the lease agreement.