Workplace compliance is one of the highest-risk areas for franchisors, and it continues to attract close attention from regulators, courts and franchise lawyers alike. Following the introduction of Australia’s vulnerable worker laws, franchisors can no longer afford to take a passive or hands-off approach to workplace compliance across their franchise networks.
While franchisors are not the employers of franchisee staff, the law now requires franchisors to take reasonable steps to prevent workplace law contraventions within their systems. Recent enforcement action shows that franchisors who fail to do so can face significant penalties, reputational damage and costly legal proceedings.
The legal landscape: vulnerable worker laws
Under the Fair Work Act 2009 (Cth), franchisors may be held liable for certain workplace law breaches committed by franchisees if three key elements are present. First, the franchisee employer must contravene workplace laws, such as underpaying wages or breaching award obligations. Second, the franchisor must have known, or could reasonably be expected to have known, that the contraventions were occurring. Third, the franchisor must have failed to take reasonable steps to prevent those breaches.
These provisions were introduced in response to systemic underpayment issues in franchise-heavy industries such as retail, hospitality and food services. High-profile cases, including the Bakers Delight proceedings discussed in our late-2025 article, demonstrate that regulators will carefully examine what franchisors knew, what they should have known, and how they responded. From a franchise lawyer’s perspective, the key risk is not isolated breaches, but a lack of systems designed to prevent them.
What constitutes reasonable steps is not fixed. Courts assess reasonableness by reference to the size and sophistication of the franchisor, the industry in which it operates, the level of control or influence it exercises, and the resources available to it. Larger franchisors operating in high-risk industries will generally be expected to implement more robust compliance measures.
Five simple ways franchisors can promote compliance
The good news is that franchisors do not need to become HR managers to meet their legal obligations. Franchise compliance is about building practical systems that support lawful conduct, encourage transparency and allow issues to be addressed early.
1. Require franchisees to engage an employer advisory service
One of the most effective steps a franchisor can take is to require franchisees to use a reputable employer advisory service, such as Employsure or a similar provider. These services assist with award interpretation, wage compliance, employment contracts, payroll audits and ongoing HR support.
From a franchise legal advice perspective, this is a strong indicator that a franchisor has taken proactive steps to prevent breaches. To strengthen this further, franchisors should consider including the cost of the service within system fees or direct debit arrangements. Doing so ensures consistent uptake across the network and removes cost as a barrier to compliance.
2. Embed workplace compliance guidance in the operations manual
Franchisors should actively use their operations manuals as compliance tools. Including clear, plain-English guidance on minimum wages, awards, record-keeping, payslips and superannuation helps franchisees understand their obligations and identify risk areas early.
Regulators and franchise lawyers routinely review operations manuals when assessing whether a franchisor took reasonable steps. The manual does not need to replace legal advice, but it should clearly direct franchisees to appropriate professional support.
3. Deliver training at onboarding and throughout the franchise term
Franchisors should provide workplace compliance training at the outset of the franchise relationship and reinforce it throughout the term. Ongoing training, particularly when laws or awards change, demonstrates that compliance is an active and continuing priority.
Training can take many forms, including webinars, online modules or written updates. What matters is that franchisors can show they actively educated franchisees, rather than assuming compliance knowledge.
4. Ensure employees know they can contact head office
Franchisors should ensure employees within the network understand they can raise workplace concerns directly with head office. This can be achieved by including contact details in induction materials, displaying notices in-store, or requiring franchisees to provide staff with written information.
Courts view this positively because it allows franchisors to detect issues early and intervene before breaches escalate. When franchise lawyers assess liability risk, the ability to identify and respond to complaints quickly is a critical factor.
5. Respond decisively to complaints and stay informed
When concerns arise, franchisors must act. Ignoring complaints, audit results or warning signs significantly increases legal risk. Franchisors should investigate issues promptly and take proportionate action where required.
Franchisors should also stay informed by subscribing to Fair Work Ombudsman updates, industry newsletters and franchise legal updates. Staying current with workplace laws strengthens compliance systems and supports better decision-making.
Final thoughts
Franchisors are not expected to police every payslip, but they are expected to be proactive, informed and responsive. The vulnerable worker laws make it clear that inaction is no longer a defensible position.
By implementing practical compliance systems, supporting franchisees with training and professional advice, and responding promptly to concerns, franchisors can reduce legal risk and build stronger, more sustainable franchise networks. If in doubt, early franchise legal advice can make the difference between managing risk and inheriting liability.