What Is a Franchise Surety Bond?
In many cases, individuals or companies that have been selected by public bodies to receive a franchise ordinance are required to obtain a franchise surety bond.
The role of the franchise and ordinance bond is to protect the state and its citizens from any unlawful actions committed by a franchise. The bond guarantees that the franchise will follow all applicable rules and regulations in its operations, thus completing its obligations under a franchise grant.
Like other surety bonds, your franchise surety bond is a three-party contract. Your franchise is the principal that has to get the bond. The authority requiring the bond is the obligee. Lastly, the surety underwrites the bond and backs the franchise.
Questions about Franchise Ordinance Bond
Who needs to obtain a franchise surety bond?
A franchise surety bond may be required of individuals and companies that have received a franchise ordinance from government or local authorities. The ordinance needs to contain the complete set of the conditions under which the franchise is granted.
In most cases, franchise surety bonds are required by county and city authorities. When you are setting your franchise grant, it’s best to inquire with your local institutions as to the exact requirements that apply to you.
How much does a franchise surety bond cost?
Your bond cost is formulated on the basis of the bond amount that authorities require from you. These amounts differ between areas, so you need to check the applicable bond requirement in your case.
Whatever your bond amount may be, your bond premium represents a small fraction of it. Typically, standard bonding applicants need to pay 1% to 3% of the bond amount to get bonded. This means that for a $10,000 bond, applicants with good credit can expect a premium of $100 to $300.
How is your franchise surety bond cost determined? To get an exact bond price, you need to apply with your surety. It will assess your personal and business finances, primarily your personal credit score, as well as your business records, and assets and liquidity. Your professional experience may also affect the decision. If your financial situation is stable, you can expect a lower bond premium because getting you bonded isn’t considered risky.
For a full overview of how your bond price is set, you can refer to our surety bond cost page.
Can I get bonded with bad credit?
Getting your franchise surety bond if your finances are troubled can be difficult. Due to our extensive experience of bonding all types of businesses across the country, we’ve devised our Bad Credit Surety Bonds program, to help applicants with low credit scores, tax liens, bankruptcies, or civil judgements obtain the bond they need.
The bonding costs are slightly higher: in the range of 4% and 15%. Still, with Lance Surety Bonds you are guaranteed a top bonding rate. Since we foster partnerships with a number of A-rated, T-listed surety companies, we can shop around for the right bonding option for your particular circumstances.
How do I get my franchise surety bond?
Obtaining your franchise surety bond is a straightforward process. You can apply online right now and get your free bond quote in no time. Your exact bond price is available once you complete a full application and provide all needed documents.
If you would like to delve deeper into the bonding process, you can consult our How to Get Bonded page.
Have questions or need help? Don’t hesitate to call us at (877) 514-5146. Lance Surety Bonds’ specialists will be happy to assist you.
How are bond claims handled for franchise surety bonds?
It’s important to remember that surety bonds function in a different way than insurance. They do not protect you or your business, but instead safeguard the interests of government or local authorities and the general public.
If you fail to follow your obligations under a franchise ordinance, you can face a claim on your bond. If the claim proves valid, compensation will be offered to affected parties, up to the bonding amount required from you. Initially, your surety covers the costs, but you need to reimburse it afterwards.
The best course of action is to avoid claims as much as possible. They can cause financial and reputational damage and may prevent you from getting bonded in the future.