Does the Aira Fitness franchisee's obligation to pay for damaged equipment depend on insurance coverage?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
Equipment (or any part thereof) and irrespective of payment from any insurances coverage maintained by Franchisee, but applying full credit therefor, Franchisee shall at the option of Franchisor's Affiliate, (a) place the Equipment in good repair, condition and working order; or (b) replace the Equipment (or any part thereof) with like equipment in good repair, condition and working order and transfer clear title to such replacement equipment to Franchisor's Affiliate, whereupon such replacement equipment shall be deemed the Equipment for all purposes; or (c) pay to Franchisor's Affiliate, not as a penalty, but herein liquidated for all purposes, an amount equal to the sum of (A) any accrued and unpaid rent as of the date the loss, theft, damage or destruction occurred ("Date of Loss") plus interest at the rate of eighteen percent (18%) per annum or the highest rate allowed by law; (B) the present value of all future rentals reserved in the Lease and contracted to be paid over the unexpired term of the Lease discounted at a rate equal to the discount rate of the Federal Reserve Bank of Chicago as of the Date of Loss; (C) the present value of the agreed upon or estimated residual value of the Equipment as of the expiration of this Lease or any renewal thereof discounted at a rate equal to the discount rate of the Federal Reserve Bank of Chicago as of the Date of Loss; and (D) any other amount otherwise then due and owing under the Lease or which otherwise will become due and owing irrespective of the fact that the Equipment has been damaged, destroyed, lost or stolen including any additional taxes or other charges that may otherwise arise by reason of the damage, destruction, loss or theft of the Equipment. Upon Franchisor's Affiliate's receipt of such payment, Franchisee shall be entitled to the proceeds of any recovery in respect of any such item of Equipment from insurance or otherwise to the extent that any excess shall be retained by Franchisor's Affiliate.
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to the 2025 Aira Fitness Franchise Disclosure Document, a franchisee's obligation to repair or replace damaged equipment exists irrespective of insurance coverage. Even if the franchisee receives payment from insurance, they are still obligated to either repair the equipment, replace it, or compensate the Franchisor's Affiliate for the loss. The franchisor's affiliate has the option to decide which of these actions the franchisee must take.
Specifically, the franchisee must, at the Franchisor's Affiliate's option, either repair the equipment, replace it with equipment in good condition, or pay the Franchisor's Affiliate a sum that covers accrued unpaid rent with interest, the present value of future rentals, the present value of the equipment's residual value, and any other amounts owed. If the franchisee makes such a payment, they are then entitled to any insurance recovery proceeds, with any excess retained by the Franchisor's Affiliate.
This arrangement means that even with insurance, an Aira Fitness franchisee could face significant out-of-pocket expenses for damaged equipment, especially if the insurance payout does not fully cover the costs as determined by the Franchisor's Affiliate. The franchisee is responsible for maintaining adequate insurance, including property damage and loss coverage, with the Franchisor's Affiliate named as an additional insured and loss payee. The franchisee must provide proof of insurance and promptly notify the Franchisor's Affiliate of any equipment damage or loss.