Before we left for China, a Cal Poly Alumni, Bill Chillingworth, told us about his franchised business with Subway in Shanghai. What I didn’t know about Subway was that it’s not just Bill Chillingworth is not the only franchisee… everyone Subway store is owned by a franchisee. On a rainy day in Shanghai, and it was a downpour, we were met by the ambitious Mr. Kurt Lipson. Kurt has my dream: to be trained in Chinese by his company to work in China in management. Kurt spoke fluent Chinese and hails from Los Angeles. I had a lot of questions, namely, how Chinese business practices affected his business. I’ve heard before that Chinese tend to cheat whenever possible, even in the face of full business contracts that would normally be honored in Western society. One really has to watch their back in China, I thought. But Kurt said he does not have issues like that, or maybe does not wish to comment. One of the main tenets of Subway is “consistency”. Everything must be the same across all Subway stores, even though they are franchises. It does not mean that they are not allowed to create new menu items, in fact they had a lobster sandwich, but rather, they must have the same look, feel, and operation as other Subway stores. My guess is that Kurt does have to manage his suppliers carefully, as any short shipment or poor quality foods that are shipped to him directly affect his brand image. It must be very important to him. Most likely, contracts are negotiated and kept together with good guan xi and proper incentives, but even after this meeting, I still do not know what these incentives would be. Possibly, these incentives could mean anything like kickbacks, favors for family, or other corruptions that I would rather not get into.. These kinds of prejudices were the kinds I wanted to dispel through this trip. However, the companies were just interested in showing us the basics of their operations, not how they negotiated contracts. So, just follow Subway’s steps to be successful in the franchise business: start with a good location, fresh ingredients, and operate efficiently. Today, we leave for India. We will see what the differences are there.