Does the Franchisor's Affiliate need to terminate the lease to recover damages from an Aira Fitness franchisee after an Event of Default?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) With or without terminating this Lease, recover from Franchisee damages, not as a penalty, but in an amount equal to the sum of (i) any accrued and all unpaid rent as of the date of entry of judgment in favor of Franchisor's Affiliate plus interest at the rate of eighteen percent (18%) per annum, or the highest amount allowed by law; (ii) 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 entry of judgment in favor of Franchisor's Affiliate; (iii) all commercially reasonable costs and expenses incurred by Franchisor's Affiliate in any repossession, recovery, storage, repair, sale, re-lease or other disposition of the Equipment including reasonable attorneys' fees and costs incurred in connection therewith or otherwise resulting or arising from Franchisee's default; (iv) present value of the agreed upon or esti
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to the 2025 Aira Fitness Franchise Disclosure Document, the Franchisor's Affiliate has the option to recover damages from a franchisee after an event of default, with or without terminating the lease. The damages recoverable are not a penalty, but an amount equal to several factors. These include any accrued and unpaid rent as of the date of judgment with interest at 18% per annum (or the highest amount allowed by law), the present value of all future rentals over the unexpired lease term discounted at the Federal Reserve Bank of Chicago's discount rate as of the judgment date, all commercially reasonable costs incurred in repossession, storage, repair, sale, or re-lease of the equipment including attorney's fees, and the present value of the agreed upon or estimated cost to the Franchisor's Affiliate to perform the Franchisee's obligations under the lease for the remainder of the lease term.
This means that even if the Aira Fitness franchise agreement is terminated due to a default, the franchisee could still be liable for significant financial obligations related to the lease. The franchisor's affiliate has considerable discretion in determining how to handle the equipment and pursue damages, which could include selling the equipment or re-leasing it. The franchisee is responsible for covering costs associated with the franchisor's affiliate's actions, such as repossession and legal fees.
Prospective Aira Fitness franchisees should carefully consider the potential financial risks associated with defaulting on the lease agreement. The fact that the franchisor's affiliate can pursue damages even without terminating the lease highlights the importance of fulfilling all lease obligations. Franchisees should also be aware of the high interest rate (18% per annum or the highest amount allowed by law) that could be applied to unpaid rent, as well as the potential for covering attorney's fees and other costs incurred by the franchisor's affiliate. Understanding these terms is crucial for managing financial risks and ensuring the long-term viability of the Aira Fitness business.