Is the damage amount recovered from an Aira Fitness franchisee considered a penalty?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
In the event of any default by you that results in a premature termination of this Agreement (regardless of which party actually terminates this Agreement), without prejudice to any other remedy we may have under the terms of this Agreement or otherwise, you must pay us, as liquidated damages and not as a penalty, an amount equal to thirty-six (36) times the Royalty owed to us over the past twelve (12) month period immediately preceding the date of termination (or if you have been in business less than twelve (12) months, then during the entire period you have been in business).
The parties acknowledge and agree that such amount represents
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to the 2025 Aira Fitness Franchise Disclosure Document, in the event of a franchisee default leading to premature termination of the Franchise Agreement, Aira Fitness requires the franchisee to pay liquidated damages, which are explicitly stated not to be a penalty. This applies regardless of which party terminates the agreement.
The liquidated damages are calculated as thirty-six times the Royalty owed to Aira Fitness over the twelve-month period immediately preceding the termination date. If the franchisee has been in business for less than twelve months, the calculation is based on the entire period they have been in business.
The FDD states that both parties acknowledge and agree that this amount is a reasonable estimate of the damages Aira Fitness will incur due to the default and premature termination. This suggests that Aira Fitness aims to recover a fair estimation of their losses rather than impose a punitive fee.