What constitutes an adverse material change in financial condition that would trigger an Event of Default for an Aira Fitness franchise?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
3. Default.
- 3.1. Definitions. The term "Event of Default" means the occurrence and continuation of any one (1) or more of the following events:
- (a) any failure of Debtor promptly and faithfully to pay, observe and perform, when due, any of the Obligations;
- (b) if Debtor becomes insolvent, commits an act of bankruptcy, files a voluntary petition in bankruptcy, or an involuntary petition in bankruptcy is filed, or a permanent or temporary receiver or trustee for the Aira Fitness Business, or all or substantially all of the Debtor's property, is appointed by any court and such appointment is not actively opposed through legal action, or Debtor makes an assignment or arrangement for the benefit of creditors, or calls a meeting of creditors, or Debtor makes a written statement to the effect that he or it is unable to pay his or its debts as they become due, or a levy of execution is made upon Debtor, or an attachment or lien outstanding with respect to the Aira Fitness Business for thirty (30) days, unless the attachment or lien is being duly contested in good faith by Debtor and Secured Party is advised in writing
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to Aira Fitness's 2025 Franchise Disclosure Document, an Event of Default can occur if the franchisee becomes insolvent, commits an act of bankruptcy, files a voluntary petition in bankruptcy, or has an involuntary petition in bankruptcy filed against them. This also applies if a permanent or temporary receiver or trustee is appointed for the Aira Fitness Business or substantially all of the franchisee's property, and such appointment is not actively opposed through legal action.
Further, an Event of Default is triggered if the franchisee makes an assignment or arrangement for the benefit of creditors, calls a meeting of creditors, or makes a written statement indicating an inability to pay debts as they become due. A levy of execution made upon the franchisee, or an attachment or lien outstanding with respect to the Aira Fitness Business for thirty days, also constitutes an Event of Default, unless the attachment or lien is being duly contested in good faith by the franchisee and Aira Fitness is advised in writing.
These conditions are fairly standard in franchise agreements, as franchisors need to protect their brand and system from franchisees who are in severe financial distress. Bankruptcy or insolvency can severely impact a franchisee's ability to operate the business according to Aira Fitness's standards, potentially harming the brand's reputation. Franchisees should be aware of these conditions and maintain sound financial management to avoid triggering an Event of Default and potential termination of their franchise agreement.