If franchise cleaners are 40 percent cheaper, who is actually paying the difference

The arithmetic that should worry procurement teams

There is a simple test buried in New Zealand’s commercial cleaning market, and most corporate procurement teams have never run it. According to a Workforce Development Council report covered in December 2025, labour makes up 85 percent of a commercial cleaning contract’s cost, while franchise-model operators are winning work at 30 to 40 percent below the rates charged by direct-employment contractors.

That gap cannot be explained by clever scheduling or better equipment. When 85 cents in every dollar goes on labour, a discount that deep has to come out of what the people doing the cleaning take home. The same report noted the number of cleaning businesses in New Zealand has grown 63 percent since 2014, many of them owner-operators locked into franchise arrangements.

Why it is legal

The reason this can happen in plain sight is structural, not accidental. Cleaning franchise operators typically require their cleaners to incorporate a company and buy a franchise. That single classification, business owner rather than employee, places them outside minimum wage legislation, outside the Labour Inspectorate’s jurisdiction, and outside trade union coverage.

The industry body has said so bluntly. As reported in April 2025, Building Services Contractors stated that “franchised cleaners are not covered by minimum wage laws, trade unions, or the Labour Inspectorate because they are technically classified as business owners”. BSC has raised the gap with ministers across the political spectrum for years without result. The government’s own guidance on franchisor obligations around ethical work practices cites a range of employment law, but the core problem, that franchisees sit outside employee protection entirely, remains unresolved.

The case study still running today

The named example is Crewcare. In April 2025 a Stuff investigation surfaced 17 franchisees willing to describe income guarantees that were not met, contracts cancelled without notice, and franchisees forced to pay themselves below minimum wage because their sites had been under-quoted. A Business and Human Rights Resource Centre report from April 2025 documented that franchisees, predominantly recent migrants, were sold on promises of guaranteed income that never materialised.

On 29 July 2026, Newsroom reported that former Crewcare franchisee Ronak Patel described his 17 months with the company as the toughest of his life, and is frustrated that the company is still advertising franchise opportunities on Indian-language radio stations. “What they are advertising on these radio stations is full of lies,” he said, “it’s still going on at the same scale.”

This is a competition problem, not just a labour one

Strip away the human story and there is a straight market failure here. A regulatory gap lets one business model systematically undercut compliant direct employers, not through productivity but by pricing labour outside the law. Every direct employer paying minimum wage, holiday pay and ACC levies is losing tenders to operators who carry none of those costs. That is not a level playing field; it is a subsidy for the operators willing to push risk down the chain onto the least powerful workers.

The legislative history shows how stuck this is. Back in August 2016, BusinessNZ criticised a proposed Contractor Bill, with then chief executive Kirk Hope arguing it was “based on confusion” and would make many contracts unworkable across cleaning, transport and construction. That Bill did not pass. A decade on, the gap it was aimed at is exactly where it was.

Where the buyer’s risk sits

For now, the corporates, government agencies and property managers who buy cleaning are largely insulated from direct liability. That insulation is a policy choice, not a law of nature. Australia and the United Kingdom have both extended supply chain liability through modern slavery legislation, and BSC is lobbying for change here. If minimum wage obligations or buyer liability get extended up the chain, procurement teams that never asked how their contractor achieved its price could find themselves exposed both legally and reputationally.

The due diligence question is not complicated. If a cleaning contract comes in 30 to 40 percent below the market rate for direct-employment operators, ask why. The Workforce Development Council data gives buyers the benchmark. The businesses that start asking now are the ones that will not be scrambling to explain themselves when the law finally moves.

Sources

• ‘Punitive’ deals leave cleaning franchisees earning below minimum wage – report (2026-07-29)
• A lack of regulation in the cleaning industry has some contractors earning less than minimum wage (2025-12-27)
• ‘Our dirty little secret’: The dark heart of the cleaning industry (2025-04-26)
• ‘Dreams into reality’: The company making big promises, but leaving a trail of unhappy people (2025-04-08)
• Franchisor’s approach to ethical and sustainable work practices
• Contractor Bill confused (2016-08-17)