Franchising Compliance Update
Fair Work and Superannuation Risk in Franchise Networks
Franchisors are operating in a rapidly evolving regulatory environment and expectations around compliance have never been higher.
Recent enforcement activity and case law make one thing clear: franchisors are now expected to take an active and ongoing role in monitoring, managing and responding to compliance risks across their networks.
A passive approach is no longer sufficient.
Franchisors who do not have robust, documented and proactive compliance frameworks in place face increased legal, commercial and reputational exposure.
Fair Work Obligations: Responsible Franchisor Liability
Franchisors are classified as “responsible franchisor entities” under the Fair Work Act 2009 (Cth).
In practice, this means franchisors sit squarely within the Fair Work compliance framework and may be exposed to civil liability where:
- A franchisee contravenes the Fair Work Act, National Employment Standards or an applicable Award;
- The franchisor knew, or ought reasonably to have known, that non-compliance was occurring or likely to occur; and
- The franchisor failed to take reasonable, timely and proportionate steps to prevent or address the issue.
Importantly, the statutory test is deliberately broad. Liability does not require direct involvement in employment practices, nor proof that the franchisor approved the conduct. It is sufficient that the risk was foreseeable and not properly managed.
This position has been reinforced by enforcement activity and case law, including Bakers Delight Holdings Ltd v Fair Work Ombudsman, where franchisors were held accountable for systemic wage underpayments within their networks.
Where Risk Commonly Arises
In our experience, exposure most often arises in relation to:
- Systematic underpayment of wages, penalty rates or minimum entitlements
- Incorrect Award classification or misapplication of Award provisions
- Failure to properly account for overtime, allowances and leave entitlements
- Deficiencies in timekeeping, payroll records and payslip compliance
Regulators are increasingly focused on systemic and network-wide risks, not isolated breaches.
Where issues are repeated across multiple franchisees — or where known problems are not escalated or addressed, franchisors face heightened enforcement risk and reputational damage.
The key question is no longer “who is responsible under the contract?”
It is: what has the franchisor actually done to monitor and manage compliance?
Superannuation Compliance as a Key Risk Area
Superannuation compliance is now being treated as an extension of broader employment law obligations.
While franchisees remain directly responsible, failures to meet superannuation obligations can expose franchisors where issues are widespread or inadequately addressed.
Common risk indicators include:
- Delayed or missed superannuation payments
- Reliance on quarterly payment cycles as a baseline
- Payroll systems that do not reconcile super obligations in real time
These risks are expected to increase significantly with upcoming legislative changes.
Payday Super – Changes Effective 1 July 2026
From 1 July 2026, employers will be required to pay superannuation contributions at the same time as wages, with contributions reaching employees’ super funds within seven business days.
For franchise networks, this reform has practical implications:
- Increased cash flow pressure, particularly for weekly or fortnightly payroll cycles
- The need for payroll and accounting systems capable of handling real-time processing
- A higher risk of inadvertent non-compliance during the transition period
Early preparation will be critical.
What Franchisors Should Be Doing Now
To mitigate risk and meet evolving regulatory expectations, franchisors should take a proactive approach.
- Communicate Early Across the Network
Franchisees should be informed of upcoming changes, particularly around payday super and operational impacts.
- Ensure Payroll and System Readiness
Engage with software providers and encourage franchisees to confirm system compliance ahead of the deadline. Where possible, consider centralised payroll systems.
- Strengthen Compliance Monitoring
Implement training, audits and reporting frameworks to identify risks early and consistently across the network.
- Establish Clear Escalation and Remediation Processes
Document how issues are identified, escalated and resolved. Passive or inconsistent responses materially increase exposure.
- Review Network Documentation
Franchise agreements, operations manuals and policies should be updated to reflect current employment and superannuation expectations and clearly define responsibilities.
The Bottom Line
The regulatory direction is clear: franchisors are expected to play an active role in compliance management.
A “hands-off” approach to employment compliance is no longer defensible.
Franchisors who invest in strong systems, documentation and oversight will not only reduce risk — they will also strengthen the resilience and credibility of their networks.
How Quest Legal Can Help
At Quest Legal, we work closely with franchisors to:
- Conduct Fair Work and superannuation compliance reviews
- Develop onboarding and education frameworks for franchisees
- Update franchise agreements, manuals and policies
- Build practical, defensible compliance systems
If you would like to review your current framework or prepare your network for upcoming changes, our team would be pleased to assist.
