Franchise

In a franchise arrangement, the franchisee (the individual or group starting the business) pays for the right to operate under the name of an established brand (the franchisor). This includes using the brand's trademarks, systems, and business methods. Franchises are common in industries like fast food, retail and services.

Franchises and Fair Work responsibilities

Each franchisee is usually the employer of its own staff and is responsible for paying them correctly. Under the Fair Work Act, a franchisor can also be liable for underpayments by a franchisee if it has a significant degree of influence or control over the franchisee's affairs, knew or could reasonably be expected to have known about the contraventions, and did not take reasonable steps to prevent them. For example, a fast food franchisor that sets rosters and payroll systems for its franchisees should check their pay practices.

An HR compliance audit can help franchisees and franchisors check pay rates. Read our guide to back pay.