Hungary - Country Commercial Guide
Franchising

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2021-11-19

Overview

Franchising in Hungary started in the 1990s, after the collapse of the old political regime in 1989, by the opening of well-known hotel chains and by the entry of the most iconic fast-food multinational, McDonald’s. Since that time, franchising has been developing swiftly throughout the country.  There are Hungarian franchisors known in the region such as beauty salons, fashion outlets, real estate agencies, and more.

The Hungarian franchise community consists of approximately 350 companies, half of which are foreign-owned. The number of franchisees is approximately 20,000 and more than 100,000 employees work in the franchise sector, when including suppliers. With these numbers Hungary is ahead of its neighboring countries. These networks, some of which have only a few members and some which link thousands of businesses, have combined revenues running into the billions of dollars. Twenty-six percent of the foreign-owned franchise networks in Hungary are owned by US companies. The U.S. hamburger chain McDonald’s can be considered the leader of fast-food franchisors in Hungary and Central Europe, as it has pursued a very successful transnational strategy, and has almost 100 stores in the country. Others that have found success in the Hungarian market include KFC, Burger King, Subway, Starbucks (AmRest), Curves, Hertz, Avis, and Budget. Most recently US fashion chain The Gap entered the Hungarian market, having signed a franchise agreement with Ganeta Pannónia, the new partner of the chain.  The first Gap shop is a 350m2 store in the Etele Plaza shopping mall in Budapest’s 11th District, opened in the fall of 2021. Ganeta plans to launch an online Gap shop by the end 2021.

Local franchises offering a wide range of services are also surging. Hair salons (BioHair), pharmacies (BENU, Alma Pharmacies), bakeries (Fornetti, P&P Pékáru, Pékpont), wine shops (Borháló), real estate chains (Duna House, Otthon Centrum), and food supplements are among the most successful ones.

Some franchisors have left the Hungarian market, due to different tastes and practices. Dunkin’ Donuts, Dairy Queen, Wendy’s, and New York Bagel are examples of U.S. companies with a short-lived presence in Hungary.

Sub-Sector Best Prospects

According to industry experts, adopting local characteristics, selling sub-franchises, providing financing, setting lower master franchise fees and/or using foreign master franchisees are keys to success in the Hungarian market. Franchising is still relatively underdeveloped in certain segments such as home healthcare, elderly care, and automotive services, compared to American or Western European standards. Demographic ageing will lead to rising demand for healthcare services, and for age-related products and services. People aged 65 and over already make up 20.7% of the population, a share that is expected to rise to 22.3% by 2025, thus creating a bigger market for elderly care franchising. Relatively inefficient delivery of goods and services and a developing middle class suggest that there are significant, growing opportunities in franchising.

Opportunities

  • Food (family casual, fast food, ethnic food, and healthy quick service restaurants)
  • Home Healthcare
  • Automotive Services (quick oil change or auto tuning)
  • Hair and nail services
  • Janitorial services
  • Mobile pet grooming
  • Dry cleaning and laundry
  • Education such as coding and language
  • Elderly care

There are many franchise companies operating in Hungary, primarily because of the country’s favored location in the heart of Europe, its relatively cheap workforce, and the growing demand for quality products and services. Local Hungarian businesses are not known for good customer service, so a franchise system with good customer service in almost any sector can find opportunities in the Hungarian market.  Potential franchisors should observe local market characteristics, conditions, and taste (in case of food franchises).  The average purchasing power/capita equals EUR 7,416 (USD 8,745) in Hungary (50.3% of the European average) whereas it stands at EUR 9,230 (USD 10,885) in Budapest – a 12% increase compared to 2018, 62.6% of the European average.

Hungarian consumers tend to prefer innovative products that fit local traditions and taste.  IT-related franchises are becoming more and more popular, and so are clothing brands, but there are also blank spots on the map of fast food.  For example, there are no doughnut or pie chains operating in the Hungarian market. It is also a huge plus if the customer is familiar with the name of the brand, so developing brand awareness from an early stage is key to achieving success in the market. Franchises with low initial investments (in the range of USD 100,000-150,000) continue to encounter more market opportunities than those requiring larger investments (USD 500,000+).

Resources

U.S. Embassy - U.S. Commercial Service
Eva Bosze, Commercial Specialist
Budapest, Hungary
Tel:  +36 (1) 475-4234
Email: eva.bosze@trade.gov