Buying a franchise: do you have to be there in person?

Joining a franchise network means committing not just money, but also time and management attention. Before buying, it is therefore essential to establish whether you must run the unit yourself each day or can entrust its operation to an employed manager. Owning your own business does not necessarily mean you are free to delegate: clarify the expectations for your personal involvement before finalising your financial plan.

1. Are you joining as an investor or a day-to-day manager?

Start by defining your own role. Would you work in the business full-time, oversee it alongside another venture, or limit yourself to decisions as an owner? All three approaches can make sense, but not every franchise system accommodates all of them.

Ask for a clear explanation of what the franchisor means by “active owner involvement”. This could mean being on site every day, attending regular management meetings, completing compulsory training or making certain decisions yourself. Do not settle for a vague statement that “the owner needs to keep an eye on things”.

In particular, clarify:

• whether you must spend a specified amount of time at the premises;
• whether you may take on other work or business commitments;
• who is responsible for opening up, managing staff and handling complaints;
• whether expectations differ between the launch period and ongoing operations.

Speak to franchisees who employ managers, too. Their experience can reveal how much owner involvement is needed in practice, but it is no substitute for written commitments made to you.

2. What does Hungarian law say, and what needs to be in the contract?

Hungary has no standalone, comprehensive franchise act, but it would be incorrect to say that franchise agreements are unregulated. Act V of 2013 on the Civil Code regulates franchise agreements as a distinct type of contract. The Civil Code’s general contractual rules also apply, including provisions on co-operation and the provision of information.

These rules do not impose the same daily attendance requirement on every franchisee. The specific expectations must be established from the agreement and any documents incorporated into it. The rules governing the manager’s engagement depend on the legal relationship chosen; where the manager is an employee, Act I of 2012 on the Labour Code is particularly relevant.

There is no general mandatory US-style Franchise Disclosure Document (FDD) system or general requirement to register a franchise. The Hungarian Franchise Association’s guideline on pre-contractual disclosure is self-regulatory guidance, not a law binding on everyone. This makes it all the more important to obtain answers to the key questions about your personal role before signing.

Distinguish between the obligations of the contracting business and those of its owner. If your company will be the franchisee, have an adviser check whether you must also sign a separate declaration or undertaking to participate personally as an individual. These are not the same thing.

3. How can you appoint a manager?

If operating through a manager is permitted, agree the appointment process in writing as well. The phrase “subject to the franchisor’s approval” offers little certainty for planning unless it is accompanied by a deadline and clearly defined requirements.

Ask for written requirements covering experience, qualifications, training and any assessments. Make sure it is clear which documents you must submit, who decides on the candidate and when you can expect a response. If the franchisor can reject a candidate, ask for objective criteria and written reasons for any rejection.

It is also worth settling:

• who pays for the manager’s training and travel;
• whether they can start work before approval is granted or training is completed;
• whom they report to directly, and on which matters;
• the circumstances in which the franchisor can require their replacement.

The franchisor’s approval does not replace your own decisions as an employer. You must also draw up the manager’s job description, decision-making authority and reporting arrangements. Delegating tasks does not, in itself, release the contracting business from its franchise obligations.

4. Calculate the true cost of your own work

A financial plan can easily paint too favourable a picture if the owner’s labour is treated as a free resource. Prepare two versions: one in which you manage the unit yourself, and another in which you employ a paid manager. In both, account for the actual duties involved, not just a job title.

The manager-run version should include the full cost of employment, recruitment, induction and cover. If you plan to do the work yourself, put a cost against your time too. Otherwise, you cannot tell whether the business generates a profit or primarily provides you with a job.

Also consider what happens if the manager leaves. Would you have to step in temporarily? Would that fit with your other commitments? When budgeting for a contingency reserve, allow not just for a new employee’s salary, but also for handover costs and any period when both managers are employed.

5. Put workable cover arrangements in place

The business must keep running during illness, holidays or an unexpected change of manager. The agreement should set out when simply notifying the franchisor about cover is sufficient, when prior approval is needed and how long an interim manager may remain in place.

Ask for a reasonable period to resolve the situation if the designated person unexpectedly becomes unavailable. Clarify when a prolonged management vacancy could amount to a breach of contract, and what notice and opportunity to remedy the breach must precede more serious consequences. Do not assume the franchisor will automatically help: agree separately on the scope and cost of any temporary support.

Practical takeaway: only commit once the agreed ownership role, manager appointment process and cover arrangements are set out in writing and fit both your personal circumstances and your budget.