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A Guide to Franchising in the Nations of East and Central Europe

East & Central Europe: Country Overviews
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The flag of HungaryHungary

Capital City: Budapest
Population (Millions): 10

ECONOMIC OVERVIEW

GDP Per Capita: US$ 18,800
GDP per Sector:
Agriculture - 2.8%
Industry - 34.7%
Services - 62.5%
Currency: Forint (HUF)
Ex.Rates: forints (HUF) per US dollar - 200.64
Big Cities (>100,000): Debrecen, Miszkolc, Szeged
Urban Population: 0.68
Languages: Hungarian 93.6%, other or unspecified 6.4%

Background:

Hungary became a Christian kingdom in A.D. 1000 and for many centuries served as a bulwark against Ottoman Turkish expansion in Europe. The kingdom eventually became part of the polyglot Austro-Hungarian Empire, which collapsed during World War I. The country fell under Communist rule following World War II. In 1956, a revolt and an announced withdrawal from the Warsaw Pact were met with a massive military intervention by Moscow. Under the leadership of Janos KADAR in 1968, Hungary began liberalizing its economy, introducing so-called "Goulash Communism." Hungary held its first multiparty elections in 1990 and initiated a free market economy. It joined NATO in 1999 and the EU in 2004.

National Franchise Association

Hungarian Franchise Association

Hungarian Franchise Association
Mr. László Murányi
ceo@franchise.hu



LEGAL OVERVIEW

Franchising in Hungary started in the early 1990’s, after the collapse of the old political regime in 1989. Some of the first franchises in Hungary included important hotel chains and fast food franchises.

Currently 400-450 companies in Hungary qualify themselves as “franchises.” Excluding multi-level marketing systems, the Hungarian franchise community consists of approximately 300 brands, 50 % of which are Hungarian owned. The other 50 % are either subsidiaries of international companies or Hungarian master franchisees.

There are approximately 20,000 franchisees in Hungary, and there has been continuous interest in franchising over the last 15 years. Entrepreneurs contact the Hungarian Franchise Association every week enquiring about starting franchise operations or seeking international business partners.

Several Hungarian franchise companies are active internationally. Most expand in countries around Hungary under master agreements. The Hungarian gas station company MOL is among these franchises, but there are smaller companies as well such as the curtain retailer Gardenia and the floor covering system Diego. The biggest international network belongs to the bakery product retailer Fornetti, which has licensees in 16 countries including Sweden, Kuwait and Ukraine.

For purposes of Hungarian law, a franchise agreement is considered an atypical agreement, and neither any specific law nor the Hungarian Civil Code regulate such agreements. Moreover, there are no complete statistics regarding franchising in Hungary as companies are not required to be recorded as franchises. Many companies claim to operate franchise systems even through they do not fulfil the rules for franchising in the European Code of Ethics.

For instance, some pizza restaurant chains in Hungary call their master agreements “franchise agreements”, even though the owner of the chain holds a stake in the counterparty’s business.

Hungarian jurisprudence does not specifically regulate franchising, although the European Code of Ethics for franchising came into force in Hungary on the January 1, 1991.

Approximately 20% of all franchise companies in Hungary are members of the Hungarian Franchise Association, which is a lobby for the ethical operation of franchise businesses. The Hungarian Franchise Association assists franchisees to operate according to the European Code of Ethics. As mentioned above, while there are no special regulations for franchise operations in Hungary, however franchise businesses can operate legally, ethically and profitably in Hungary.

The Hungarian Franchise Association was established in May 1991 by 17 companies including McDonald's. Of these founders, only McDonald's has remained a member of the Hungarian Franchise Association, others were replaced by new coming franchise companies. Some consultants have worked for the Association from the beginning.

The Hungarian Franchise Association has three major areas of activity. The first and the most important one is to promote ethical franchising by influencing and controlling related regulations. The second area is to extend the knowledge of ethical franchising principles through regional conferences with county chambers. Finally, the Association’s market organizing activities help appropriate franchisors and franchisees find each other.

Noerr is an international partnership of attorneys, tax advisors and auditors.
Dr. Zoltán Nádasdy
tel +36 1 2240901
Kanzlei Noerr & Partner
Fo utca 14-18
1011 Budapest, Ungarn

 

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