Franchise New Zealand’s magazine and website features a section called “Popular Searches” which highlights six types of franchise systems:
- Coffee & Café
- Home-based
- White Collar
- Cleaning
- Building, Renovation & Maintenance
- Food
The food industry consistently remains one of the most popular categories, with many international food franchisors setting their sights on New Zealand. Why is that? Farrah Rose, Head of International Development at The Franchising Centre in the UK and a member of the British Franchise Association, notes that “my recent visit to this wonderful country revealed that New Zealand is one of the most sophisticated, discerning, and well-developed franchise markets in the world.” I would also add that we’re passionate about food and love exploring new flavours from all over the globe.
For franchises in Australia and New Zealand that serve or process food, maintaining high standards of hygiene and staying current with employment laws is crucial. Franchisors must stay informed and offer clear guidance to their franchisees. Notable food franchises that come to mind include McDonald’s, Taco Bell and Subway.
Food safety is very important, and health grades can make or break a restaurant. In New Zealand there are four statutes which govern the Ministry for Primary Industries’ Food Safety Responsibilities, and these are:
- Food Act 2014
- Animal Products Act 1999
- Agricultural Compounds and Veterinary Medicines Act 1997
- Wine Act 2003
All food businesses, including restaurants and cafes with an alcohol licence, have to be registered under the Food Act and any business which is not registered commits an offence and is liable for infringement fees.
The laws not only apply to traditional restaurants but also extend to early childhood education centres that provide food, processors of nuts, seeds, and coffee beans, as well as manufacturers of food for vulnerable populations like infants and the elderly.
Under these regulations, higher-risk businesses are required to have a written food safety plan in place. The Act defines “safety” as a condition where food, in relation to its intended use, is unlikely to cause illness, injury, or harm to human health or public safety.
Local authorities are responsible for assessing and grading food establishments, and franchisors must remain aware of the Food Hygiene Regulations of 1974.
Interestingly, food licenses are graded on a scale from A to E, with no “C” grade. Establishments are either above or below average when it comes to food safety standards. The grading system is as follows: A (High), B (Good), D (Poor), and E (Unsatisfactory).
- Discrimination Is Not Tolerated
It is crucial to understand that in New Zealand, lesbian, gay, bisexual, transgender, and intersex (LGBT) individuals have the same rights as everyone else. The Human Rights Act 1993 prohibits discrimination based on sexual orientation and, by extension, gender identity or expression.
Although instances of discrimination still occur, significant progress has been made in protecting the rights of sexual and gender minorities. Key human rights related to sexual orientation and gender identity include the right to be free from discrimination, the right to be recognized as a person before the law, and the right to life, liberty, and security. Other rights include protection from arbitrary detention, the right to a fair trial, an adequate standard of living (including decent work and housing), access to education and healthcare, protection from medical abuse, participation in public and cultural life, and the right to freedom of expression, association, peaceful assembly, and thought.
Franchisors and franchisees, particularly those employing staff, must be fully aware of LGBT rights and ensure these rights are respected at all times. Any infringement of these rights could constitute sexual harassment. For transgender individuals, it is solely their choice whether to disclose their gender identity, as a person’s sex or gender identity has no bearing on their ability to perform a job. There are very limited situations in which it may be legal to hire a specific gender for a role, but even in these cases, transgender individuals may need to provide evidence of their sex.
- Drug Testing in Employment Agreements
In New Zealand, many employment agreements grant employers the right to randomly test employees for illicit drug use with consent. For businesses involved in food preparation or customer-facing services, it is crucial that employees maintain a drug-free status.
The Misuse of Drugs Act 1975 classifies illegal substances based on their level of risk. The key categories are:
- Class A (High risk): Methamphetamine, magic mushrooms, cocaine, heroin, LSD
- Class B (Moderate to High risk): Cannabis oil, hashish, morphine, opium, ecstasy, amphetamines
- Class C (Moderate risk): Cannabis plants, cannabis seeds, codeine
It is illegal to use, possess, cultivate, or traffic-controlled drugs. Penalties for youth offenders (under 17) are less severe than for adults (17 and over). The most serious offence is trafficking, which includes manufacturing, distributing, or selling illegal drugs.
If drugs are found in the workplace, employers should involve the police, and an employee could be dismissed depending upon the employment contract. While employers are not obligated to provide support, some larger organizations include it in their drug testing policies.
- Tipping in New Zealand
In New Zealand, tipping in cafes and restaurants is not the norm and generally occurs only for exceptional service. When it does happen, tips are usually around 10% of the bill.
Tips are considered taxable income and must be reported by employees on their annual income tax return. Although tips are often given in cash and “under the table,” the Inland Revenue Department (IRD) has clarified that all tips are subject to taxation, whether directly handed to employees or collected in tip jars.
If tips are electronically added to the bill, they should be distributed to employees. If not, the business is liable for GST on those amounts.
Additionally, businesses can levy a 15% surcharge on public holidays to cover the increased cost of staff wages. While many establishments do, others like Lonestar choose not to add this surcharge.
- Franchise Systems
Franchise systems in New Zealand that fall under the laws mentioned above include well-known brands such as Bird on a Wire, Burger Fuel, Columbus Coffee and The Coffee Club. Both New Zealand and Australia also host franchises like Bakers Delight, Brumby’s Bakery, Gloria Jean’s Coffees, and Jamaica Blue. There are also some exciting new entrants on the horizon such as Dear Deers Coffee Roasting Bar, where you can watch your coffee being roasted fresh, and Broke Boy Taco offering American-style tacos.
As franchisors and franchisees operate under a unified brand, it is crucial for everyone involved to understand the laws that govern their operations. Negative publicity for one franchisee can affect the reputation of the entire brand. In the food industry, the regulations I have outlined are particularly important, and ignorance of the law is never an acceptable defence. As such, franchisors must ensure that their franchisees are not only aware of these laws but also consistently adhere to them in their daily operations.
Stewart Germann
Stewart Germann Law Office
Auckland, New Zealand