Franchise trade marks: are you entitled to use the brand?

When you buy a franchise, you do not acquire ownership of the brand. Instead, you gain the right to use its name and other protected elements under specified conditions. So, when joining a franchise network, seeing its logo on numerous shops is not enough. Before making your first substantial payment, check whether the party you are contracting with can actually authorise you to use the brand in Hungary, and what happens if that authority later ends.

1. Identify exactly which trade marks you will be using

A brand name, a company name and an internet domain are not the same thing. A registered company or an active website does not, in itself, prove that the franchisor holds the trade mark rights to the branding on offer. Rather than accepting a general reference to a ‘right to use the brand’ in the agreement, ask for precise, verifiable details.

The documentation should include:

• details of the word marks and figurative marks you may use;
• the registration number or, for a pending application, the application number;
• the rights holder’s name and the territorial scope of protection;
• the list of goods and services covered;
• the current status of protection and the renewal due date.

You can check Hungarian national trade marks in the Hungarian Intellectual Property Office’s register, and European Union trade marks in the European Union Intellectual Property Office’s register. For an international registration, you must also check whether protection actually extends to Hungary or the European Union.

An application is not the same as a registered trade mark. If protection for the brand is still pending, obtain a separate risk assessment. Nor is it enough simply to find the name in the register: you also need to examine whether the scope of protection covers your planned products and services.

2. Trace the licensing chain

You will often be contracting with someone other than the trade mark owner. The Hungarian franchisor may be a foreign brand’s local licensee or master franchisee. That is not a problem in itself, but there must be evidence that it can grant you a further licence.

Ask for a document or an appropriately redacted extract from the underlying agreement showing the authority to grant licences, its territorial scope, duration and conditions. A general statement that the franchisor is ‘the brand’s official representative’ does not necessarily establish this.

It is particularly important to compare the duration of that authority with the term of the franchise agreement offered to you. If the franchisor’s underlying agreement could expire sooner, ask what safeguards protect your longer-term investment. An intended renewal is not the same as rights already secured.

Also clarify whether, if the underlying agreement ends, you can continue operating under a direct arrangement with the brand owner. Do not assume that you have an automatic right to continue: the terms of any such arrangement must be agreed in writing with the parties concerned.

3. Understand the Hungarian legal framework

Hungary has no separate, comprehensive franchise act, but franchise relationships are not unregulated. Sections 6:376–6:381 of Act V of 2013, the Hungarian Civil Code, expressly provide for franchise agreements. A key element is permission to use copyright, industrial property rights and protected know-how.

Under the Civil Code, the franchisor must ensure the continuous, undisturbed exercise of the rights granted. Contractual provisions are therefore more than administrative details: they explain how this obligation will be met and what procedures will apply if a problem arises. The Civil Code’s general rules on contracts and breach of contract are also important.

Hungarian national trade marks are governed by Act XI of 1997 on the Protection of Trade Marks and Geographical Indications. For European Union trade marks, the EU Trade Mark Regulation is also relevant. Checking the register is therefore a matter of trade mark due diligence, not evidence that the state has approved the franchise system.

Your lawyer’s review should also examine whether the franchise agreement departs from the Civil Code’s default rules, and whether it limits liability for defects in the right to use the brand.

4. Specify what the permitted use covers

Permission to display a shop sign does not necessarily cover every digital or local use. The agreement should make clear whether you may use the branding on your own website, social media accounts, advertisements, packaging or at local events.

Ask for a clear approval process: which channels require prior permission, who decides, within what timeframe, and against which brand guidelines. Do not treat silence as automatic consent.

A schedule listing the permitted marks and forms of use is helpful. If a new logo is introduced later, it should also be clear when you may start using it and what happens to advertising materials previously produced in compliance with the rules.

5. Plan for problems affecting your use of the brand

Before signing, ask about ongoing trade mark disputes, who is responsible for renewals and any third-party claims. Require a contractual obligation to notify you of any event that could jeopardise your use of the brand.

Agree who will organise and fund the legal defence if you receive a formal demand. Specify how fee payments, interim operations and substantiated losses will be handled if lawful use of the brand is disrupted. These protections do not arise automatically in every case: you need contractual arrangements that work alongside the remedies available under the law.

Practical takeaway: commit only when the trade mark register details, the franchisor’s licensing authority and the rights granted to you all align. A recognisable name delivers value to you only if your right to use it can be demonstrated.