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Franchise Surety Bond

Buying a franchise is a big investment that can pay off handsomely. You buy into existing name recognition, a support structure, training, and much more. But what if the franchisor is a fraud? Or simply fails to live up to their contractual obligations for the new franchise? Your dreams of a profitable business can become a financial nightmare. This is why states, counties, and city governments require a franchise surety bond to protect the state and anyone who purchases a franchise there.

What is a Franchise Surety Bond?

A franchise surety bond guarantees that bonded franchisors will follow the law and abide by all contracts, behaving ethically in the sale and support of franchises. It creates a financial incentive to follow the law and a mechanism for injured parties to recoup any damages if the franchisor breaks the law or contract.

A franchise bond guards against the following actions, among others:

  • Fraud
  • Misrepresentation
  • Breach of contract
  • Failure to pay franchisees
  • Failure to file annual reports

How Do Franchise Surety Bonds Work?

Like all types of surety bonds, a franchise surety bond is a legal agreement between three essential parties:

  • The Obligee – This is the entity that requires the bond.
  • The Principal – The bonded party is called the principal.
  • The Surety – The company that underwrites the bond is the surety.

If someone has been damaged by a franchisor, the injured party can file a claim with the surety. The surety investigates thoroughly. If they find in favor of the claimant, the surety pays compensation up to the full value of the franchise bond. Then, they seek repayment from the principal. If the surety finds in favor of the principal, they dismiss the claim.

Who Needs a Franchise Bond?

Various state, county, and city governments require a franchise bond before you sell a franchise in their jurisdiction. If you are a franchisor, contact the experts at Viking Bond Service to help you navigate the bonding process. We will help you learn where you need bonding and where you don't. And we will guide you through the process.

How Much Does a Bond for a Franchise Cost?

The cost of a surety bond, like a franchise business bond, is a tiny fraction of the bond's value. The state, county, or city government that requires the franchise bond also determines the value. The cost of the bond is typically just 1% to 5% of the bond value, depending upon the principal's credit. So, a $200,000 bond would generally cost between $2,000 and $10,000. We work to help applicants with troubled credit get bonded for the lowest possible price.

How Can I Get a Franchise Surety Bond?

At Viking Bond Service, we make obtaining a surety bond easy. You can get your franchise bond in three simple steps:

  1. First, complete our online bond application.
  2. Next, we will perform a credit check.
  3. Finally, if we need additional documentation, you provide them.

That's it. We'll get back to you with a competitive quote ASAP.

Get Your Free Quote Today for a Franchise Bond

At Viking Bond Service, we are your surety bond partner! Request a quote online or give us a call at 1-888-2-SURETY (1-888-278-7389). We're always ready to help.

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