A concessionaire is a firm or a person that runs a business in a location that is owned by another business (the grantor). A concessionaire usually pays the grantor a fee or a percentage of what the concessionaire sells.
The three parties of this bond include the obligee, the principal, and the surety company. The obligee is the grantor that is requiring the principal to be bonded. The concessionaire (principal) must be bonded in order to legally sell goods in a location owned by another business. The surety company is the party that underwrites and ensures the bond.
The bond ensures that the grantor will be paid in full and on time by the concessionaire. With this bond, the grantor is guaranteed to be paid dues from letting the concessionaire operate within the grantor’s location of business.
The surety bond is an agreement between the three parties that the principal will act accordingly to what is stated in the bond. If the concessionaire acts fraudulently or fails to abide by the bond requirements, then the surety company will cover the claim filed against the principal.
For example, if an individual is selling food and drinks at a booth in a fair, then the individual (or concessionaire) must pay rent in order to reserve a spot for the booth. The grantor in this case would be whoever rents out spaces for selling items in the fair.
As stated before, the grantor requires the concessionaire to be bonded. The bonding requirements state that the principal will pay all fees owed to the grantor. It is a good idea for the principal to be informed on all requirements before applying for a bond. If the principal acts against the bond and a claim is filed, then the surety company will pay for all paid claims which the principal must pay back to the surety.
Some of the major bonding requirements state that the concessionaire is responsible for the property where they sell goods along with payment for all rent and fees that are due.
The cost for the bond is also referred to as the bond premium. The bond premium is the one cost that the surety company sets. All other fees that are related to the bond are set by the obligee. The bond premium is only a small percentage of the bond amount. Premiums are charged annually until the work is completed and the bond has been released by the municipality.
The bond amount is set by the municipality, not the surety company. It is important for the principal to understand that the municipality is the only party that can release the bond once the grading is completed and approved. The bond amount is the amount of coverage the surety company will pay out to the party harmed if a claim is filed against the bond.