Franchising in Hungary
Economy
After the collapse of the old political regime in 1989, Hungary
successfully changed its economy from a centrally planned economy
to a market economy. It now has a GDP of EUR 101 billion making it
Europe’s 18th largest economy. Its per capita income is about EUR
15,500 EUR which is two-thirds of the EU average. The Hungarian
economy continues to grow particularly in the mechanical
engineering and vehicle manufacturing sectors.
Legislation
Hungary has no specific franchise law. Franchisees are protected
reasonably well given that Hungary partially adapted the relatively
high German and Austrian standards of franchise protection, yet due
to its socialistic history still lacks thorough implementation in
many legal fields.
Franchise Market
There are about 300 franchise networks in Hungary. About 50% of
the brands are locally owned, whereas the remaining 50% are either
subsidiaries of international franchisors or Hungarian master
franchisees of international brands.
Among Hungary’s top 20 franchisors are leading international
brands such as McDonald’s and Subway. Smaller domestic brands such
as MOL (gas stations) and Fornetti (bakery products) have recently
started to expand in countries around Hungary or beyond.
One factor that acts as a brake for expansion in Hungary are the
limited financial funds which are often available to franchisees.
As part of the National Development Plan the Hungarian government
tries to counter this effect by subsidizing certain franchise
businesses as part of a financial support scheme.
Franchise Legislation
Hungary is a civil law country and has been strongly influenced
by the German and Austrian legal systems.
- There is no franchise disclosure law in
Hungary, but in order to maintain an enforceable contract the
franchisor should advise the franchisee on key facts and keep a
record.
- There is no franchise registration.
- The general principles of Hungarian civil law
apply to franchise agreements.
Conclusion
A careful review of legal documentation is essential before
franchises are sold in Hungary. In addition to compliance with
mandatory laws a good understanding of local business practice is
key to local success. An appropriately customised disclosure
document would also be applicable.
For more information please contact Babette
Marzheuser-Wood.