1. How to expand in Hungary? Presenter: Tibor Kőrösi CEO of J.PRESS, board member of the Hungarian Franchise Association CEO of J.PRESS, board member of the Hungarian Franchise Association www.franchise.hu Franchise business in Hungary

2. 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 Hungary

3. Fan chart of the GDP forecast Hungary Source: National Bank of Hungary

4. Unemployment rates: commonly used definitions 2001200220032004200520062007200820092010 Hungary5,85,9 6,27,37,57,47,910,711,7 Germany7,58,39,29,710,59,88,37,38,711,6 Slovak Republic19,318,617,518,116,213,311,09,611,813,6 Czech Republic8,27,37,88,37,97,25,34,46,99,2 Unemployment rates: commonly used definitions Source: OECD

5. Slovenia Franchisor : 110 Franchisee : 1.100 Austria Franchisor : 330 Franchisee: 4.700 Romania Franchisor: 170 Franchisee: 1.100 Hungary Franchisor: 350 Franchisee: 18.000 Czech Republic Franchisor : 330 Ukraine Franchisor : 301 Franchisee: 18.170 Croatia Franchisor: 150 Franchisee: 1.000 Serbia Franchisor: 50 Approximate data by national associations The franchise-sector in Hungary is leading in East-Europe Bulgaria Franchisor:140 Franchisee:2900

6. 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 sector 2.To control the ethical franchising behavior in Hungary according to the European Code of Ethics for Franchising 3.To organize events for members 4.To promote the franchise sector

7. 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 fees0 – 15’000 EUR  Investment fee2’000 – 100’000 EUR

8. Foreign franchise-networks in Hungary United States 20 networks, 344 units Germany 14 networks, 244 units Italy 10 networks, 61 units France 8 networks, 87 units United Kingdom 6 networks, 149 units Poland 1 network, 3 units Romania 1 network, 1 unit Denmark 1 network, 2 units Sweden 2 networks, 11 units Ausztria 3 networks, 25 units Belgium 3 networks, 29 units Spain 7 networks, 48 units There are 76 foreign franchise-networks with more than 1000 units operating in Hungary.

9. Hungarian franchise-networks expanding abroad Hungarian franchise-networks expanding abroad Romania14 Slovakia9 Poland6 Czech Republic3 United Kingdom2 Bulgaria2 Italy2 Albania1 Bosnia-Hercegovina 1 Croatia1 Kuwait1 Macedonia1 Moldova1 Montenegro1 Germany1 Serbia1 Ukraine1 In all48

10. 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.

11. Members 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.

12. The 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.

13. Which are those industries that 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.

14. 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:

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