Corruption Risks Facing Franchisors

Over the past few years, Canadian companies have become increasingly aware of potential civil and criminal liability arising from improper business practices abroad. Specifically, companies are increasingly aware that they are liable under the Corruption of Foreign Public Officials Act (CFPOA) and the U.S. equivalent, the Foreign Corrupt Practices Act (FCPA) if they are engaged in “direct or indirect” bribery of foreign officials. Under the CFPOA, companies can face unlimited fines and individuals can face up to 14 years in jail.

While it has become quite commonplace for parent companies to be aware of their liabilities with regards to their subsidiaries under the CFPOA and FCPA, liability of franchisors for franchisees’ actions has garnered less public attention but remains equally important.