Franchise deposits in Hungary: when can you get your money back?

The first financial decision when joining a franchise network often comes before you pay the full initial franchise fee. The franchisor may ask for money to process your application or reserve an opportunity before the final agreement is signed. What matters is not the name given to the payment, but the obligations it creates, what you receive in return and what happens if your business never opens.

1. Advance payments, contractual deposits and reservation fees are not the same

Before paying, ask for written confirmation of the payment’s legal basis and terms. Labels such as ‘registration fee’, ‘security’ or ‘reservation’ do not, on their own, tell you whether the money is refundable. The substance of the agreement and the service promised are what count.

An advance payment (Hungarian: előleg) is typically part of a future payment made ahead of time. It does not, in itself, carry the consequences associated with forfeiting a contractual deposit or repaying twice its amount. If the transaction falls through, however, other contractual claims may affect the final settlement: do not assume that the money must always be returned without deductions.

A contractual deposit (Hungarian: foglaló) serves to reinforce a contractual commitment. Under Hungary’s Civil Code, a payment qualifies as a foglaló only if that purpose is clear from the agreement. When the contract is performed, the deposit is credited against the amount owed. If performance fails for a reason for which neither party, or both parties, are responsible, the deposit must be returned. If the party who paid the deposit is responsible for the failure, they forfeit it. If the party who received it is responsible, they must repay twice the amount received.

A reservation or application fee may cover a separate service. Ask exactly what work will be done in return, by when, and how completion will be demonstrated. A fee for a separate service that has genuinely been delivered may be treated differently from an advance payment towards the initial franchise fee.

2. Which Hungarian rules protect your payment?

Hungary has no separate, comprehensive franchise act, but that does not mean franchise agreements are unregulated. Act V of 2013, the Civil Code, expressly recognises franchise agreements, with provisions in Sections 6:376–6:381. The general rules on entering into contracts, co-operation, disclosure, breach of contract and settlement also apply. Section 6:185 of the Civil Code sets out the rules on contractual deposits.

There is no generally required franchise-specific disclosure document, nor an official franchise register that, by itself, guarantees the safety of your payment. Guideline 2002/1 (IX. 18.) of the Hungarian Franchise Association recommends allowing at least fourteen days to review the agreement before signing. This is not a statutory waiting period and does not create an automatic right to a refund or to withdraw.

Nor should you assume that consumer protection rules apply when you join a franchise for business purposes. Conducting discussions online does not, in itself, give you a general fourteen-day consumer right to withdraw. Protection for your payment therefore needs to be clearly set out in the agreement itself.

3. Link refunds to specific events, not promises

Rather than relying on ‘we’ll sort it out if things don’t work out’, draw up a short list of possible events. For each one, specify the consequences, the evidence required and the relevant deadline.

• The franchisor rejects your application: what will be refunded, and can anything be deducted for the assessment already carried out?
• No suitable premises can be found: how long will the search continue, and who decides whether a location is acceptable?
• Your finance application is rejected: is loan approval a condition of proceeding, and what document will prove that finance has been refused?
• The franchisor withdraws the opportunity: what refund will they provide, and by when?
• You decide to pull out: which amounts may the franchisor retain, on what legal basis and under which previously agreed conditions?

Failure to secure finance, for example, does not automatically make your payment refundable. If funding is a decisive condition for you, make sure it is included in the agreement before you transfer any money.

Also agree separately what happens if the final draft agreement differs from the offer originally presented. Do not leave it entirely to the franchisor to decide whether a change justifies your withdrawal. Set a specific refund deadline and a clear notification procedure.

4. Put together a checklist before transferring money

Ask for a signed agreement identifying the business receiving the money, the purpose of the payment and the franchise opportunity concerned. Check the company details and the signatory’s authority to act on its behalf. If the company requesting payment is not the one you will eventually contract with, clarify its role and establish who is responsible for any refund.

The document should expressly state whether the payment will be credited towards the initial franchise fee. The tax treatment, total amount payable and arrangements for issuing the appropriate invoice or receipt should also be clear. You should not end up paying twice for the same service simply because the promise to credit the payment was only verbal.

Ask for an itemised explanation of every possible deduction. Wording such as ‘after deduction of preparatory costs’, without a cap or rules for accounting for those costs, creates a risk that is difficult to budget for. For larger payments, ask a lawyer whether staged payments or funds held in escrow by a lawyer, subject to specific release conditions, would be appropriate.

Practical takeaway: do not transfer any money until a single document clearly explains what you are paying for, what the payment will be credited towards, and in which circumstances—and by what deadline—you will get it back.