Franchisor Bond Guide

What Are Franchise Bonds? 

A franchise or franchisor bond is a type of surety bond that guarantees a franchisor will follow laws and meet contract agreements. This protects potential buyers and the state from financial harm. 

These bonds are typically not a requirement for all franchisees. However, some states will require them if your financial status is deemed inadequate to cover the potential financial risks and obligations of owning and selling the franchise. 

How Much Do Franchisor Bonds Cost?

Franchisor bonds cost a small percentage of the total coverage amount, typically 0.5–10%. The required bond amount will vary based on the value of the franchise. Your personalized premium rate will depend on your credit score and financial history. Select your state below to apply for a free quote now: 

SuretyBonds.com partners with the top surety providers nationwide to offer the lowest rates with no added fees. 

How Do Franchise Surety Bonds Work? 

Franchise bonds hold franchisees liable to upholding business license laws by creating a legal contract between three parties: 

1. Principal: The franchise owner purchasing the bond 
2. Obligee: The government entity requiring the bond
3. Surety: The company issuing and backing the bond

As the principal, you must uphold the bond terms as promised to the obligee. Otherwise, harmed parties can file claims on the bond to receive reimbursement from the surety. The surety will pay valid claims then seek repayment from you, the franchisor. 

How to Get a Franchisor Bond 

With SuretyBonds.com, you can get your franchise surety bond by following these simple steps: 

1. Verify the bond amount you need
2. Submit a quick online application
3. Receive your free quote
4. Purchase your bond online

After signing and receiving your official bond documentation, file it with the obligee to become officially bonded. 

How Do I Renew My Franchisor Bond?

Franchisor bonds typically require renewal every one to four years. You’ll receive email and phone notifications from SuretyBonds.com starting 90 days before your expiration date. Be sure to pay your renewal invoice and file any additional paperwork as instructed. Learn more about surety bond renewals here. 

How Do I Update My Franchisor Bond Form? 

If you need to make any small adjustments to your official bond form, such as name or address, contact us at [email protected] outlining the requested update. If possible, we’ll issue a bond rider document to amend your active franchisor bond free of charge. 

Can I Get Bonded With Bad Credit? 

Yes, with our bad credit bonding options we’ll work to match you with a provider at the best rate on the market. In some cases, we may request additional financials for underwriting your franchise bond.