A compliance blitz of a popular "cheap eats" precinct in Sydney has found 70 per cent of businesses were in breach of workplace laws.

As part of an ongoing "intelligence-led" campaign into the hospitality industry, the Fair Work Ombudsman audited 67 cafes, restaurants and fast food businesses on Glebe Point Road in Glebe.

After interviewing staff and scrutinising employment records, inspectors recovered $188,125 in under-paid wages for 176 employees at 29 businesses.

They slapped 20 businesses with on-the-spot fines and issued 18 formal cautions and two compliance notices.

Underpayment of hourly wages was the most common breach (38 per cent), followed by a failure to provide appropriate payslips to employees (17 per cent).

Fair Work Ombudsman (FWO) Natalie James was disappointed by the high levels of non-compliance uncovered but said she wasn't surprised.

She said one in 10 disputes resolved by the ombudsman last financial year involved a restaurant, cafe or takeaway food outlet, and nearly one third of the most serious cases taken to court involved the hospitality sector.

"Our experience is that addressing entrenched, cultural non-compliance requires a combination of regulatory intervention, public awareness and industry leadership," Ms James said.

"This is an industry-wide problem and it needs an industry-wide response. There are over 50,000 cafes, restaurants and takeaway outlets in Australia and the FWO cannot fix this one cafe at a time."

'Too-good-to-be-true prices feeding non-compliance'

Auditors also made unannounced visits to two other foodie precincts across the country at Victoria Street in Richmond, Melbourne, and Fortitude Valley in Brisbane.

"Each of these precincts is an established 'cheap eat' destination where businesses are often (but not exclusively) seven-day operations," the Food Precincts Activity report stated.

"The FWO had concerns about high rates of labour turnover, readily accessible (and often vulnerable) workforces, and menu prices that appeared to be 'too good to be true', creating a potential environment of systemic non-compliance."

Across the three cities, this blitz found workers were owed $471,904.

The non-compliance rate was the highest on Victoria Street in Melbourne, with 81 per cent of businesses not meeting workplace law requirements.

Marwan Sheivan has owned the cafe Badde Manors on Glebe Point Road for 15 years.

He said underpayment is rife within the service and hospitality industries but was shocked to hear how widespread it is amongst his local competitors.

"Small business need good employees and if they want to hold onto good employees they normally pay them the right and fair pay," he said.

"I'm surprised it is that endemic in the area."

Mr Sheivan said small businesses had previously been under pressure to match big companies with weekend penalties rates.