Franchises in Australia and New Zealand which serve or process food have to stay on top of hygiene and employment issues and franchisors need to be aware of current laws and provide guidance to their franchisees.





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 do not just affect traditional restaurants but they extend to early childhood education centres that serve food, processors of nuts, seeds or coffee beans, and manufacturers of food for vulnerable people like babies or the elderly.


Under the new rules, higher-risk businesses need to use a written plan for food safety. Under the Act, safety means a condition in which food, in terms of its intended use, is unlikely to cause or lead to illness or injury to human life or public health.’ 


Local authorities are responsible for grading food premises and franchisors must be aware of the Food Hygiene Regulations 1974.


Interestingly, there are four grades for a food licence – A, B, D and E.  There is no C grade as all food premises are either above or below the average food safety standards.  A equates to High, B Good, D Poor and E Unsatisfactory.


Discrimination is Unacceptable


It is important to recognise that lesbian, gay, bisexual, transgender and intersex (LGBT) people have the same rights in New Zealand as other people. The Human Rights Act 1993 outlaws discrimination on the grounds of sexual orientation and, implicitly, gender identity/expression. 


Some examples of discrimination still occur but significant progress has been made towards better protection of the rights of sexual and gender minorities. Human rights in relation to sexual orientation or gender identity include, for example, the right to freedom from discrimination; recognition as a person before the law; life, liberty and security of the person; freedom from arbitrary detention and to a fair trial; an adequate standard of living, including decent work and housing; education; health and protection from medical abuses; participation in public life and in cultural life; freedom of expression; freedom of association and peaceful assembly; and freedom of thought, conscience and religion. 


Franchisors who employ staff and franchisees who need and employ many staff must be aware of the rights of LGBT people at all times and if their rights are infringed it could amount to sexual harrassment.  For trans-gender/trans-people it is solely their decision whether they wish to disclose that they are trans-gender, as sex or gender identity has no bearing on a person’s ability to do the job.  There are some very limited circumstances where it is legal to employ only a woman or a man for a particular position but in those limited situations, some trans-gender people may need to provide evidence about their sex.


Employment Agreements


Most employment agreements in New Zealand allow an employer to randomly test employees by consent for elicit drug use.  If you have employees engaged in food preparation and presentation or other services, it is important for all employees to be “clean”.  There is a wide range of controlled and illegal drugs which the Misuse of Drugs Act 1975 classifies according to the level of risk or harm they pose to people misusing them.  Those categories are:


  • Class A (very high risk): methamphetamine, magic mushrooms, cocaine, heroin, LSD (Acid)
  • Class B (high risk): cannabis oil, hashish, morphine, opium, ecstasy and many amphetamine-type substances
  • Class C (moderate risk): cannabis seed, cannabis plant, codeine


It is an offence under the Misuse of Drugs Act 1975 to use, possess, cultivate or traffic (deal) in illegal drugs.  Youth offenders under the age of 17 are not subject to the same penalties as adults (17 and over).  There are definitions for use, possession and cultivation but probably the most serious offence is trafficking which includes the preparation of a drug of dependence for distribution; manufacturing an illegal drug; and selling, exchanging or agreeing to sell, offering for sale or having possession for sale, an illegal drug.


Usually if an employer detects drugs in the workplace the Police will be called as it is a criminal offence and normally the employer can summarily dismiss the employee.  Employers are not legally required to offer support but some large companies choose to write it into their drug testing policy.


Who gets the tips?


In New Zealand, waiting staff in cafés and restaurants get paid a higher hourly rate than in many overseas countries. It is generally uncommon for locals to tip except for very exceptional service. If a person does want to tip then the amount is at the discretion of the tipper and would generally be in the range of 10 percent according to the value of the meal/services. 


Any tips being of benefit to the employee are liable to tax but they are often ‘under the table’ and made in cash. The tip is income to the employee who receives it and although the employee should pay tax on all tips, I imagine that this rarely happens. 


The IRD has advised the Restaurant Association of New Zealand that tips given directly to an employee, or placed in a tip jar and divided up between relevant employees, will constitute taxable income to those employees.  It is the responsibility of the employees to return any tips as income by completing an income tax return at the end of the financial year.  Whether that happens or not in practice is doubtful in my opinion.  Tips can be added to a bill electronically (such as eftpos) and these should be shared with employees.  In the unlikely event that the tips are not distributed to the employees, then the tips become taxable income and the business is liable for GST on those amounts.  If an amount is an involuntary addition to a bill (such as a public holiday surcharge) then it is a cost for goods and services provided and constitutes income to the business which must account for GST.


On statutory holidays, staff wages are higher by law. It is permissible for restaurants and cafés to make a 15 percent surcharge to cover the additional costs of employing staff on those days and many do so; however, others like Lonestar for example do not add on any surcharge and they advertise accordingly.


Franchise Systems


Franchise systems in New Zealand which would be caught by the laws as described above include for example Bird on a Wire, Burger Fuel and Columbus Coffee to name but a few.  In both New Zealand and Australia there is Bakers Delight, The Coffee Club, Brumby’s Bakery, Gloria Jean’s Coffees and Jamaica Blue.


Because franchisors and franchisees operate under a common brand, it is important for everyone to be aware of the laws governing how they operate.  Bad publicity for one is bad publicity for all.  In the food sector, the laws which I have described will apply and ignorance of the law is no excuse for business owners.  Therefore, franchisors need to ensure that their franchisees are not just aware of the laws but comply with them every day.




Stewart Germann founded Stewart Germann Law Office (SGL) in 1993 as a boutique law firm at Auckland, New Zealand, specialising in franchising, licensing and business law. Stewart has over 40 years’ experience in franchising law and acts for franchisors in New Zealand, Australia, USA and the UK. SGL also act for franchisees and provides legal advice. Stewart has spoken at franchising conferences in New Zealand, Australia, Italy, South Korea and USA and he was on the Board of the Supplier Forum of the International Franchise Association (“IFA”) for 6 years until March 2007. Email: | Web: