Franchise agreements: who is authorised to sign on behalf of the franchisor?

When joining a franchise network, you may deal with the same contact throughout: they introduce the brand, negotiate the terms and send you the agreement. That does not necessarily mean they have authority to bind the franchisor. Before buying a franchise, check both the identity of the business you will be contracting with and the signatory’s authority to represent it. This is not merely an administrative exercise: it establishes who you can hold responsible for delivering the promised services.

1. Identify the contracting party behind the brand

The brand name on promotional materials is not necessarily the name of the company entering into the agreement. Negotiations may be handled by an intermediary, the network’s organiser in Hungary or an employee of another group company. Your first step should therefore be to establish exactly which legal entity will be the franchisor under your agreement, rather than looking for a specimen signature.

Ask for the full company name, registered office address, company registration number and representative’s name. Compare these with the details in the draft agreement, any payment request and any separate undertakings. If you find a discrepancy, ask for a written explanation before making a payment.

Draw up a short list of roles:

• who is negotiating with you;
• who will be your contractual counterparty;
• who will sign the agreement;
• who will receive your payment;
• who is obliged to provide the support specified in the agreement.

Having different parties fulfil these roles is not improper in itself. The risk arises when their relationships and authority are unclear. If an intermediary sends you bank account details or a version of the agreement, have the franchisor confirm them through independently verified contact details. An email signature featuring the brand’s logo does not, by itself, prove authority to represent the company.

2. Check how the company must be represented, not just the name

For a Hungarian company, the company register is an important starting point. Check whether the signatory is listed among those authorised to represent the company, and whether they may act alone or must act jointly with someone else. Where joint representation is required, a single signature may not be enough. Make sure the people required under the applicable signing arrangements are involved.

A notarised specimen signature or a specimen signature countersigned by a lawyer can be a useful supporting document, but it does not replace a check of current representation details. An older document does not, on its own, establish that the person concerned is still authorised to act.

Have the details checked again shortly before signing, particularly if negotiations have been going on for months. Seek clarification if there has been a change in management or if the draft names a different signatory from the person previously identified.

For a franchisor based outside Hungary, start with the relevant local register and the representation rules under the applicable law. Do not assume that a foreign executive title automatically carries authority to sign alone. Agree with your legal adviser which documents, translations and any further supporting evidence are needed for the checks.

3. If someone signs under a power of attorney, read its scope too

The agreement need not be signed only by a representative listed in the register: another person may act under an appropriate power of attorney. In that case, you must also check the power of attorney itself. Job titles such as ‘regional manager’, ‘development director’ or ‘franchise consultant’ do not, by themselves, establish what someone is authorised to do.

Ask for the power of attorney and have a lawyer check:

• whether it was granted by someone authorised to act on behalf of the franchisor;
• whether the authorised person can be identified;
• whether it covers entering into the specific franchise agreement;
• whether it contains any time limits, financial limits or other restrictions;
• whether it meets the formal requirements for the intended legal act.

Pay particular attention to the distinction between authority to negotiate and authority to enter into an agreement. A contact authorised to receive documents may not necessarily be able to agree to a fee discount or commit to providing additional services.

If there is a separate agreement alongside the main contract, for example covering support for the opening, check the authority to sign that document too. Do not leave a material commitment outside the main agreement if it has only been confirmed by an employee whose authority is uncertain.

4. Hungary’s legal framework and a safe signing sequence

Hungary has no standalone, comprehensive franchise act, but franchise relationships are not unregulated. Sections 6:376–6:381 of Act V of 2013, the Hungarian Civil Code, govern franchise agreements. The general rules on contracts, as well as the provisions on representation, powers of attorney and legal persons, also apply.

There is no universally mandatory, standardised franchise disclosure document or separate franchise registration requirement. Checking the company register is a distinct task: it helps establish details of the contracting company and its representative, among other things, rather than assessing the commercial quality of the brand.

If someone makes a legal declaration without authority to represent a party, or exceeds that authority, its legal effect may depend on subsequent approval by the party they purported to represent. Do not therefore assume that everything is in order simply because you have received a signed copy.

Before signing, complete the checks, resolve any issues with the power of attorney, and identify the final version of the agreement and its schedules. Wherever possible, arrange to make payment only after receiving the properly signed documents. Keep the documents used for your checks, along with the franchisor’s confirmations.

Practical takeaway: before you sign or transfer money, make sure you have documented answers to three questions: who are you contracting with, who represents them, and what does the signatory’s authority cover?