Opening a franchise: from signing to the first day of trading

When a franchise agreement is signed, the new franchisee is usually not yet ready to welcome customers or fulfil orders. They first need access to systems, know-how and equipment, then have to establish a functioning business. If you are developing your existing business into a franchise network, plan the period between signing and opening as a distinct stage. The aim is simple: neither party should be required to deliver something before the other has provided what is needed to make it possible.

1. Separate the start of the agreement from the opening of the business

The date the agreement takes effect, the start of preparations and the actual opening date need not be the same. Combining them into a single date can easily leave the franchisee obliged to be fully operational while still waiting for essential access to systems or materials.

In Hungary, franchising is not an unregulated contractual relationship: Sections 6:376–6:381 of Act V of 2013 on the Civil Code govern franchise agreements. The Civil Code’s general rules on contracts, cooperation and the provision of information are also important. There is no general registration requirement with a public authority specifically for franchise systems, nor is there a standard mandatory pre-contractual disclosure document. This does not, however, remove the duty to disclose material circumstances.

The Hungarian Franchise Association’s Code of Ethics is not legislation. As a self-regulatory standard for the franchise sector, it calls for clear obligations and responsibilities; its significance may also depend on membership and contractual commitments.

The agreement prepared with your lawyer should therefore specify separately when initial training and support begin, when each right to use the franchise system becomes exercisable, and what conditions must be met before trading can start. Treat the pre-opening period not simply as a deadline, but as a contractual stage with its own tasks.

2. Create an opening milestone plan covering both parties

An opening plan is more than a to-do list. Each step should have a responsible party, a prerequisite, a deadline and evidence by which completion can be verified. The franchisor’s tasks should be set out in just as much detail as the franchisee’s.

A workable sequence might be:

• Kick-off meeting: the parties agree their points of contact, the planned opening date and the matters requiring decisions.
• Providing access: head office supplies the materials and systems needed for preparation; the franchisee confirms that they can use them.
• Implementation: the franchisee completes the required preparatory tasks, while head office provides the specialist feedback it has committed to give.
• Pre-opening review: the parties jointly record which conditions have been met and which gaps remain.
• Opening decision: the designated person documents whether the contractual conditions for opening have been satisfied.

Set deadlines with dependencies in mind. If the franchisee can only configure a system once head office has provided access, the time allowed for that task should not automatically run from the date the agreement is signed.

Use the experience gained from setting up your own business to create an initial plan, but flag the steps where you previously resolved problems through your own personal intervention. The new franchisee will need clearly defined support for these too.

3. Make handovers and the opening decision verifiable

Sending a document does not necessarily transfer usable knowledge, and creating a user account does not necessarily provide working access. Evidence of a handover should therefore go beyond showing that head office sent an email.

Record what the franchisee received, which version, when, and with what rights of use. For access to technical systems, include a simple functionality test. Assign someone to answer any questions raised during the handover, with a deadline for their response.

Base the opening decision on verifiable conditions communicated in advance. The test should not be whether ‘head office is satisfied’, but, for example, whether the necessary system works, the promised training and preparation have been completed, and any shortcomings preventing opening have been resolved.

Distinguish between defects that prevent opening and minor deviations that can be corrected later. If every small issue carries the same weight, the decision becomes unpredictable. Bear in mind, however, that head office’s contractual approval to open does not replace any regulatory permit or relieve the franchisee of responsibility for operating their own business.

4. Agree the consequences of delays in advance

A delayed opening is not always the result of a franchisee’s failure to act. It may be caused by a delay at head office, a third-party provider’s error or a combination of circumstances. The agreement should not automatically treat these situations in the same way.

Agree who must report an obstacle, when they must do so and what information they must provide. The notification should identify the affected milestone, the likely consequences and the proposed solution. Both parties should confirm the revised timetable; a phone call alone should not quietly rewrite their commitments.

Align the financial consequences with this stage as well. Make clear which payments relate to preparatory services already provided and which obligations only begin once the business is actually operating. Agree in advance who will bear the cost of repeat site visits, rescheduled tasks and any additional work required. Do not automatically pass the burden of delays caused by head office on to the franchisee.

If the opening cannot ultimately go ahead, have a separate settlement procedure for services already delivered, equipment handed over and payments not yet used. Work through the legal consequences with a lawyer.

Practical takeaway: before signing up your first franchisee, create a shared opening checklist with columns for the task, responsible party, prerequisite, deadline, evidence of completion and action in the event of delay. If you cannot give a clear answer for a row, an organisational or contractual decision is still needed.