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.
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:
Like all types of surety bonds, a franchise surety bond is a legal agreement between three essential parties:
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.
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.
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.
At Viking Bond Service, we make obtaining a surety bond easy. You can get your franchise bond in three simple steps:
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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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