$730,000 recovered from popular food franchises

18 December 2019

The Fair Work Ombudsman has recovered $731,648 in unpaid wages for 780 workers after a national investigation into emerging fast food, restaurant and café franchises.

Fair Work Inspectors audited franchises that have recently commenced operations in Australia – Chatime, GongCha, Hot Star Chicken, PappaRich, Sushi Izu, Nene Chicken and The Sushi 79.

Franchises were selected based on intelligence data that raised concerns about compliance with workplace laws, including anonymous tip offs, requests for assistance and stakeholder referrals.

Six of the seven emerging franchises were founded overseas – five in Asia and one in the USA.

During the audits, Inspectors questioned employers and employees in 76 stores and assessed time and wages records. Inspectors found that almost 80 per cent of the stores they visited breached at least one workplace law.

More than 50 per cent of all businesses audited had underpaid staff.

The most common workplace law breaches related to pay slip obligations, penalty rates and other minimum hourly rates of pay, and record-keeping.

Fair Work Ombudsman Sandra Parker said the audits confirmed concerns about new franchise brands, often from overseas, starting operations without due diligence on workplace law compliance.

“During the audits, franchisees reported receiving little guidance from franchisors on workplace law compliance. Franchisors are on notice that they can be held legally responsible if their franchisee stores don’t follow workplace laws and must take reasonable steps to prevent this occurring.”

“Fair Work Inspectors have recently commenced a second phase of investigations into emerging franchises. We urge franchisees to contact us if they need any assistance with their lawful obligations to their employees before we come knocking on their door,” Ms Parker said.

“Improving compliance among franchises and franchisors is a priority for the Fair Work Ombudsman, especially in the fast food, restaurant and café sector where many vulnerable workers are employed. We will continue to take enforcement action when we find breaches of workplace laws.”

In response to the breaches, Inspectors issued 38 contravention letters, 13 infringement notices (totalling $8780 in penalties for pay slip and record-keeping breaches), eight compliance notices (requiring back-payment of $61,745 for 68 employees) and 26 formal cautions.

Recoveries of underpayments have occurred from 40 businesses, with more recoveries possible in relation to matters still before the court.

The Fair Work Ombudsman also commenced court action against six companies allegedly involved in the most serious breaches, including the operator of three PappaRich outlets in Sydney, a former Chatime franchisee in Sydney, a company and two of its directors operating two The Sushi 79 stores in Brisbane, and the Chatime Australia franchisor Infinite Plus.

In August, the Federal Circuit Court ordered total penalties of $125,700 in the The Sushi 79 action. In November 2019, the FWO also secured $307,802 in penalties in the Papparich action.

The FWO has targeted information to help those in the franchise sector meet their obligations, as well as those working or running businesses in the FRAC sector

Employers and employees can also visit www.fairwork.gov.au or call the Fair Work Infoline on 13 13 94 for free advice and assistance. A free interpreter service is available on 13 14 50.

Sign up to receive the Fair Work Ombudsman’s media releases direct to your email inbox at www.fairwork.gov.au/mediareleases.

Follow the Fair Work Ombudsman @fairwork_gov_au External link icon or find us on Facebook www.facebook.com/fairwork.gov.au External link icon.

Download the Emerging Franchises Compliance Activity Report (PDF 317.4KB) (DOCX 139.6KB)

Media inquiries:

Michael Anderson, Assistant Media Director
Mobile: 0409 120 830
michael.anderson@fwo.gov.au

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