What happens to insurance proceeds if the Aira Fitness franchisee pays the liquidated amount for a lost or damaged Pod?
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's Pod is lost, stolen, damaged, or destroyed, the franchisee is responsible for the loss. Irrespective of any insurance coverage, the franchisee must either repair the Pod, replace it, or pay a liquidated amount to Aira Fitness's affiliate. This amount includes accrued rent, the present value of future rentals, the present value of the Pod's residual value, and any other amounts owed under the lease.
If the franchisee pays the liquidated amount, they are entitled to the proceeds from any insurance recovery related to the Pod. However, Aira Fitness's affiliate retains any excess amount from the insurance proceeds. This means that while the franchisee receives the initial benefit of the insurance payout up to the amount they paid in liquidated damages, Aira Fitness's affiliate keeps any remaining funds.
This arrangement ensures that Aira Fitness is made whole for the loss of the Pod, while also allowing the franchisee to recoup their costs up to the amount of the liquidated damages paid. The franchisee is responsible for maintaining insurance on the Pod, and failure to do so allows Aira Fitness's affiliate to obtain insurance at the franchisee's expense. This protects Aira Fitness's investment in the equipment and ensures continuous coverage.