Buying a franchise: what information should you request before signing?

When joining a franchise network, reading the introductory material and the latest draft of the agreement is not enough. To make an informed decision, you also need to know who you are contracting with, what support the franchisor commits to providing, and on what terms they may ask you to pay money during negotiations. Taking a structured approach to pre-contract disclosure helps you distinguish verifiable facts from plans and sales promises.

1. Understand Hungary’s disclosure rules

Hungary has no standalone, comprehensive franchise act, but that does not mean franchise agreements are unregulated. Act V of 2013, the Hungarian Civil Code, regulates this type of agreement as a franchise agreement (jogbérleti szerződés) in Sections 6:376–6:381. General contract rules also apply.

Section 6:62 of the Civil Code is particularly important for pre-contract information exchange: even during negotiations, the parties must cooperate and inform each other of material circumstances affecting the agreement. This is a mutual obligation: you must also provide an accurate picture of, for example, your available funds and the personal involvement you undertake to provide.

There is no generally mandatory, standard Hungarian franchise disclosure document, franchise-specific registration with a public authority, or statutory waiting period that applies to every transaction. Industry codes of ethics are self-regulatory standards, not legislation. Whether they apply may depend on membership obligations and the terms of the agreement. You should therefore not treat a 14-day review period mentioned in industry guidance as a universal statutory guarantee.

The absence of a mandatory template does not make disclosure of material circumstances optional. Nor does it remove the need for your own checks: do not leave the verification of information available in public registers entirely to the franchisor.

2. Request a dated, written information pack

Send a structured list of questions early in the negotiations. Ask for the franchisor’s answers to be dated, to identify the person responsible, and to include supporting documents where necessary. The point is not the volume of material, but whether statements that influence your decision can be traced later.

The information pack should cover at least the following:

• The contracting party: exact company name, registered office, company registration number, representative, and clarification of which company you will be paying.
• The network’s operating history: how long the concept has been operating, which outlets are company-run, and which are run by independent franchisees.
• Changes within the network: how many outlets have opened, closed or changed operator over a specified period, and the known reasons for those changes.
• Support with opening: who provides training, on-site assistance and pre-opening support, when these are provided, and on what terms.
• Advance payments: whether any reservation, preparatory or other fees are required, and when they are refundable.
• Material obstacles: whether any ongoing legal dispute, supply problem or organisational change could affect your joining the network.

These are practical due diligence questions, not fields in a disclosure form prescribed by law. The scope of the duty to disclose must always be assessed in light of the circumstances of the particular transaction.

3. Check the answers against other sources

Compare the company details with the company register, and assess its financial position using its published accounts. Check whether the business named in the introductory material is the same as the franchisor named in the draft agreement. If they differ, ask for a clear explanation of their roles and how responsibility is divided.

Ask for the opportunity to speak to current franchisees and, where possible, former ones. Do not simply ask whether they are satisfied. It is more useful to gather specific experiences: whether opening support arrived on time, who dealt with problems, and which terms came as a surprise.

A personal account alone does not substantiate every claim. If you find discrepancies, ask the franchisor for written clarification and record which questions remain unresolved. Do not gloss over a contradiction: establish why it exists.

Protecting trade secrets may justify a confidentiality agreement or the provision of anonymised information. It is not, however, a good reason to leave all your substantive questions unanswered. Data protection requirements must also be respected when sharing personal data and franchisees’ contact details.

4. Put matters on record before signing or paying

Create a simple question-tracking table with columns for the question, answer, evidence, discrepancy requiring clarification, and how the issue is addressed in the agreement. This will also help your lawyer identify which business promises matter to you and which have not yet been properly documented.

For example, if the franchisor promises in-person support with opening, the agreement or a schedule should define its scope, timing and conditions. A brochure alone will not necessarily create the same obligation as a clear contractual commitment.

Pay particular attention to any declarations stating that you have received all the necessary information. Do not sign an acknowledgement of receipt that does not reflect the facts. List any missing schedules and outstanding answers individually.

Before making an advance payment, clarify in writing what the payment is for, the conditions for a refund, and what happens if the final agreement is not concluded. Buying a franchise is usually a business transaction: do not automatically assume that you have a consumer right to withdraw. Where misleading information has been provided, the legal consequences depend on the evidence and the individual circumstances; seek independent legal advice.

Practical takeaway: first obtain documented answers, then verify them, and finally have the key commitments written into the agreement. Pressure to act quickly is no substitute for an informed decision.