What discount rate is used to calculate the present value of future rentals for Aira Fitness equipment?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
For instance, we require that you modernize the Aira Fitness Business within five years of the Effective Date of this Agreement.
We also require that you replace all fitness equipment within three years of the Effective Date of this Agreement.
If you choose to purchase the fitness equipment, at the end of each three year period, you may offer your old equipment to anyone, but we have the right of first refusal to buy the equipment on the same terms and conditions as any potential buyer.
You must give us seven (7) days' written notice of any potential sale of your old equipment and a reasonable opportunity to match any offer you have that you intend to accept.
We are under no obligation to actually exercise our right of first refusal.
If you choose to lease the fitness equipment, at the end of each three year period, you must return the old equipment to the designated or approved supplier of the fitness equipment or otherwise per the terms of the equipment lease, which designated or approved supplier may be us or our affiliate.
You must then enter into a purchase agreement or lease for replacement equipment with a designated or approved, which may be us or our affiliate.
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
Based on the 2025 Aira Fitness Franchise Disclosure Document, there is no mention of a specific discount rate used to calculate the present value of future rentals for Aira Fitness equipment. The document does discuss the franchisee's option to either purchase or lease fitness equipment, with Aira Fitness retaining the right of first refusal if the franchisee chooses to sell old equipment after purchasing. If the franchisee chooses to lease, they must return the old equipment to a designated supplier and enter into a new purchase or lease agreement for replacement equipment.
Item 23 outlines various financial obligations and conditions related to receipts, maintenance, modernization, and equipment. It details the circumstances under which Aira Fitness may purchase assets from the franchisee upon termination or expiration of the agreement, using a qualified appraiser to determine the purchase price. However, the FDD does not specify how the present value of lease payments would be calculated if a franchisee opts to lease equipment.
A prospective Aira Fitness franchisee should seek clarification from the franchisor regarding the specific terms of equipment leases, including the interest rates, discount rates, or other financial metrics used to determine lease payments and the overall cost of leasing versus purchasing equipment. Understanding these factors is crucial for making an informed decision about the most financially advantageous option for acquiring and maintaining fitness equipment.