What happens if the interest rate of 18% on unpaid rent for Aira Fitness equipment loss is higher than the rate allowed by law?
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 Aira Fitness's 2025 Franchise Disclosure Document, if a franchisee experiences equipment loss, theft, damage, or destruction, they are responsible for paying Aira Fitness's affiliate an amount that includes accrued and unpaid rent as of the date of the loss. This amount includes interest at a rate of 18% per annum. However, the agreement specifies that if the 18% interest rate exceeds the highest rate allowed by law, the franchisee will only be charged the highest legally permissible interest rate.
This provision protects the franchisee from potentially usurious interest rates that may be illegal in their jurisdiction. It ensures that Aira Fitness complies with applicable laws regarding interest charges on unpaid amounts. The franchisee will not be subject to an interest rate higher than what is legally allowed, even if the standard rate specified in the lease agreement is higher.
For a prospective Aira Fitness franchisee, this clause offers a degree of financial protection. It is important to be aware of the specific laws in their state or region regarding maximum interest rates to fully understand their rights and obligations under the lease agreement. This also highlights the importance of maintaining insurance coverage on the equipment, as any insurance proceeds will be credited to the franchisee, with any excess retained by Aira Fitness's affiliate.