An introduction to franchising in Hungary

By Dr. István Kiss, CEO, Hungarian Franchise Association www.franchise.hu (in Hungarian)

The Hungarian Franchise Association welcomes the publication of European Franchising as a result of the cooperation between the EFF and (the publisher) Franchise Development Services. We hope that this cooperation will open the continental communication channels and give European franchising a voice. In order to contribute to this initiative, we introduce the Hungarian franchise business community in general and its representation of interests, the Hungarian Franchise Association.

The Hungarian Franchise Association was established in May 1991 by 17 companies operating in different fields of franchising including a Hungarian franchise called City Grill and McDonald's.

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 per cent of which are Hungarian owned. The other 50 per cent 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 our 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. Hungarian gas station company MOL is among these franchises, but there are smaller companies as well such as curtain retailer Gardenia and floor covering system DIEGO. The biggest international network belongs to bakery product retailer FORNETTI, which has licenses in 16 countries including Sweden and Kuwait.

Membership of the association accounts for 20 per cent of all franchise companies in Hungary, which is a good background for significant lobby activity for ethical franchising. The association assists franchisees to operate according to the European Codes of Ethics, and there are no additional regulations for franchise operations in Hungary. After terminating the Block Exemption Regulation of EU, there is no legal paragraph containing the word 'franchise', however all legal condition is provided for operating an ethical franchise business in Hungary.

As a result of the association's lobby activity, this is the second four year government cycle that involves franchises among the subsidised business types. The government subsidised more than 200 Hungarian franchisees with one billion HUF non-refundable financial support in the previous government cycle and this fund exists in the National Development Plan. As a result of this 40-60 million HUF non refundable financial support is available indirectly from the EU.

A weekly franchise radio programme will start soon, and apart from the association more companies organise franchise exhibitions and issue publications. This clearly shows that franchising has reached the level of significance in Hungary. The next official International Franchise Conference and Exhibition in Hungary will be in Budapest next April (28th-29th).