If an Aira Fitness franchisee authorizes a voluntary petition in bankruptcy, is that an event of default?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
In the event any of the following defaults occurs, you will have no right or opportunity to cure the default and this Agreement will terminate effective immediately on our issuance of written notice of termination: (i) you have failed to identify a mutually acceptable site for the operation of the Aira Fitness Business or to open the Aira Fitness Business for business within the time period provided by this Agreement; (ii) you or any Owner has made any material misrepresentation or omission in your franchise application or any other report to us; (iii) your voluntary abandonment of this Agreement or the Authorized Location, (iv) the loss of your lease, or the failure to timely cure a default under the lease, (v) the loss of your right of possession or failure to reopen or relocate under Section 5.G.; (vi) the closing of the Aira Fitness Business by any state or local authorities for health or public safety reasons; (vii) any unauthorized use of the Confidential Information; (viii) voluntary or involuntary bankruptcy by or against you or any Owner or guarantor, insolvency, making an assignment for the benefit of creditors or any similar voluntary or involuntary arrangement for the disposition of assets for the benefit of creditors; (ix) conviction of you, any Owners, or guarantors of (or pleading no contest to) any felony or misdemeanor that brings or tends to bring any of the Marks into disrepute or impairs or tends to impair your reputation or the goodwill of the Marks or the Aira Fitness Business, (x) you, any Owner, guarantor or an affiliate of any of you are listed by the United States or United Nations as being a terrorist, financier of terrorism or otherwise restricted from doing business in or with the United States; (xi) intentionally underreport membership sales or Gross Sales, falsify financial data, or otherwise commit an act of fraud with respect to your acquisition of this franchise or your rights or obligations under this Agreement, or any understatement or 2% variance on a subsequent audit within a two- year period under Section 10.C., (xii) any unauthorized transfer or assignment in violation of Section 12; (xiii) your failure to use the approved payment processor, (xiv) you failed to meet the Minimum Membership Requirement for six (6) consecutive months, (xv) you failed to meet the Minimum Monthly Gross Sales Requirement for six (6) consecutive months, or *(xv)*any default by you that is the second same or similar default within any 12 month consecutive period or the third default of any type within any 24-month consecutive period.
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to Aira Fitness's 2025 Franchise Disclosure Document, a franchisee filing a voluntary petition in bankruptcy constitutes an event of default that can trigger immediate termination of the franchise agreement. Specifically, under Section 14.B.2, such an action provides Aira Fitness with the right to terminate the agreement immediately upon written notice, without affording the franchisee any opportunity to cure the default.
This provision means that if an Aira Fitness franchisee faces financial difficulties and files for bankruptcy, they risk losing their franchise immediately. This is a significant risk for franchisees, as bankruptcy can arise from various unforeseen circumstances. The franchisee would lose all rights to operate under the Aira Fitness brand and would likely forfeit any investments made in the franchise.
It is important for prospective Aira Fitness franchisees to understand the implications of this clause. They should carefully consider their financial stability and risk tolerance before entering into a franchise agreement. Additionally, franchisees should seek legal and financial advice to fully understand their rights and obligations in the event of financial distress or bankruptcy. This type of clause is relatively standard in franchise agreements, as franchisors want to protect their brand and system standards from the negative impacts of a franchisee's financial instability.