Can the Franchisor's Affiliate take possession of the equipment with or without cancelling the lease after an Aira Fitness franchisee's default?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 23: **RECEIPTS]
(a) Upon written notice to Franchisee cancel this Lease and any or all Lease Schedules executed pursuant thereto;
(b) If Franchisor's Affiliate decides, in its sole discretion, not to take possession of the Equipment, Franchisor's Affiliate continues to be the owner of the Equipment and may, but is not obligated to, dispose of the Equipment by sale or otherwise, all of which
determinations may be made by Franchisor's Affiliate in its sole discretion and for its own account;
(c) Declare immediately due and payable all sums due and to become due hereunder for the full term of the Lease (including any renewal or purchase options which Franchisee has contracted to pay);
(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 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 entry of judgment in favor of the Franchisor's Affiliate; and (v) any indemnity, if then determinable, plus interest at eighteen percent (18%) per annum, or the highest amount allowed by law;
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to the 2025 Aira Fitness Franchise Disclosure Document, if a franchisee defaults on their lease agreement, the Franchisor's Affiliate has specific rights regarding the equipment. The Franchisor's Affiliate can provide written notice to the franchisee to cancel the lease and any associated lease schedules. Alternatively, the Franchisor's Affiliate can choose not to repossess the equipment, maintaining ownership and having the option to dispose of it through sale or other means, at their sole discretion and for their own benefit.
Whether or not the lease is terminated, the Franchisor's Affiliate can demand immediate payment of all outstanding sums due for the entire lease term, including any renewal or purchase options the franchisee agreed to pay. Additionally, the Franchisor's Affiliate can recover damages from the franchisee, which are not considered a penalty, but rather an amount equal to several factors. These include accrued and unpaid rent with an interest rate of eighteen percent (18%) per annum (or the highest amount allowed by law), the present value of all future rentals discounted at the Federal Reserve Bank of Chicago's discount rate, all commercially reasonable costs related to repossession, storage, repair, or sale of the equipment, the present value of the equipment's residual value (discounted at the same Federal Reserve rate), and any applicable indemnity, also with an eighteen percent (18%) interest rate per annum (or the highest amount allowed by law).
These provisions outline the Franchisor's Affiliate's broad rights in the event of a franchisee default, allowing them to either repossess and dispose of the equipment or to continue owning the equipment while pursuing financial recovery from the franchisee. The franchisee is responsible for various costs and payments in case of default, potentially leading to significant financial burdens. Prospective Aira Fitness franchisees should carefully consider these default terms and seek legal counsel to fully understand their obligations and potential liabilities under the lease agreement.