How to expand in How to expand in

Hungary?Hungary?

Presenter:Presenter: Tibor Kőrösi Tibor Kőrösi CEO of J.PRESS, board member of the Hungarian CEO of J.PRESS, board member of the Hungarian

Franchise AssociationFranchise Association

www.franchise.hu

Franchise business Franchise business in Hungaryin Hungary

• Area: 93,000 km2

• Population: 10.005.000

• GDP (2009): 93 billion EUR

• Main cities: - Budapest 1,712,210 inhab.

- Debrecen 207,200

- Miskolc 169,226

- Szeged 169,731

- Pécs 157,680

• Strategic geographical location

• Member of EU

Important facts about HungaryImportant facts about Hungary

Fan chart of the GDP forecast Fan chart of the GDP forecast HungaryHungary

Source: National Bank of Hungary

-8-7-6-5-4-3-2-10123456

07 Q

107

Q2

07 Q

307

Q4

08 Q

108

Q2

08 Q

308

Q4

09 Q

109

Q2

09 Q

309

Q4

10 Q

110

Q2

10 Q

310

Q4

11 Q

111

Q2

11 Q

311

Q4

12 Q

112

Q2

12 Q

312

Q4

Per cent

-8-7-6-5-4-3-2-10123456

Per cent

    Unemployment rates: commonly used definitions    

  2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Hungary 5,8 5,9 5,9 6,2 7,3 7,5 7,4 7,9 10,7 11,7

Germany 7,5 8,3 9,2 9,7 10,5 9,8 8,3 7,3 8,7 11,6

Slovak Republic 19,3 18,6 17,5 18,1 16,2 13,3 11,0 9,6 11,8 13,6

Czech Republic 8,2 7,3 7,8 8,3 7,9 7,2 5,3 4,4 6,9 9,2

Unemployment rates: commonly used definitionsUnemployment rates: commonly used definitions

Source: OECD

Slovenia

Franchisor : 110Franchisee : 1.100

Austria

Franchisor : 330Franchisee: 4.700

Romania

Franchisor: 170Franchisee: 1.100

Hungary

Franchisor: 350Franchisee: 18.000

Czech Republic

Franchisor : 330

Ukraine

Franchisor : 301 Franchisee: 18.170

Croatia

Franchisor: 150Franchisee: 1.000

Serbia

Franchisor: 50

Approximate data by national associations

The franchise-sector in Hungary isThe franchise-sector in Hungary isleading leading in East-Europein East-Europe

Bulgaria

Franchisor:140Franchisee:2900

Hungarian Franchise Association (HFA)Hungarian Franchise Association (HFA)

Currently 350 companies operate in Hungary as franchisors. The number of franchisees is >18’000 and 100’000 employees work in the franchise sector.

The HFA was established in May 1991 by 17 companies.

The roles of HFA:

1. To represent the Hungarian franchise sector2. To control the ethical franchising behavior in Hungary

according to the European Code of Ethics for Franchising3. To organize events for members4. To promote the franchise sector

Hungarian Franchise Association (HFA)

The HFA has 50 members

The number of franchise units of the members

> 7’000

The number of employees of the members are

> 55’000

Franchise fees 0 – 15’000 EUR

Investment fee 2’000 – 100’000 EUR

Foreign franchise-networks in HungaryForeign franchise-networks in Hungary

United States20 networks, 344 units

Germany14 networks, 244 units

Italy10 networks, 61 units

France8 networks, 87 units

United Kingdom6 networks, 149 units

Poland1 network, 3 units

Romania1 network, 1 unit

Denmark1 network, 2 units

Sweden2 networks, 11 units

Ausztria3 networks, 25 units

Belgium3 networks, 29 units

Spain7 networks, 48 units

There are 76 foreign franchise-networks with more than 1000 units operating in Hungary.

Hungarian franchise-networks expanding abroadHungarian franchise-networks expanding abroad

Romania 14Slovakia 9Poland 6

Czech Republic 3United Kingdom 2Bulgaria 2Italy 2Albania 1Bosnia-Hercegovina 1Croatia 1Kuwait 1Macedonia 1Moldova 1Montenegro

1Germany 1Serbia 1Ukraine 1

In all 48

Hungarian franchise-networks by sectors Hungarian franchise-networks by sectors

Services (50)

Clothes (46)

Food (31)

Health & Care (30)

Retail (29)

Business Services,Consultancy (28)

Real estate (25)

Restaurants (23)

Education (22)

Miscellaneous (18)

Furniture & Decoration(16)

Cars (13)

Hotels (6)

Sport (4)

Around 350 franchise-networks are operating in Hungary, with more than 18000 franchisee.

MembersMembers

50% of franchise systems are based on Hungarian ideas and owned by Hungarian companies as well. The other 50% are international licenses and coordinated by either subsidiaries of international companies or Hungarian companies owned by Hungarian master licensees.

20% of all franchise companies in Hungary are member of the Hungarian Franchise Association.

The activities of the HFA have three major scopesThe activities of the HFA have three major scopes

• The first and the most important one is to provide the possibility of ethical franchising by influencing and controlling all regulations connected.

• The second one is to extend the knowledge related to ethical franchising thru regional conferences in cooperation with country chambers.

• Last but not least, the Association helps to meet franchisors and franchisees, and in relation to this we do market organizing activities as well.

Which are those industriesthat would have good potential in Hungary:

- brand new and interesting products and services

- low investment

- home-based franchise

- services sector

- e.g.: café, accessories

Peculiarities of the Hungarian Market - I.Peculiarities of the Hungarian Market - I.

Peculiarities of the Hungarian Market - II.Peculiarities of the Hungarian Market - II.

- proper measure of franchise-fee- tailoring the business model and assortment to local needs- continuous assistance is expected- registered trademark- cultural differences- correct adaptation of the concept to the market- foreign brands are unknown to Hungarians

Negative example:

- Wendy’s, Quick, Dunkin’ Donuts didn’t take the local peculiarities into account, and had to retreat.

Tips and suggestions about entering the Hungarian market, mistakes to avoid:

THANK YOU