Saturday, November 7, 2015

Triangular Predicament

I have several family members and family friends that are franchisees of the AFC Sushi Corporation, a company which covers a niche of selling fresh sushi in supermarkets across the United States. They are normally the agents of many principals: supermarket management, the health department, and a regional manager of the AFC Franchise. For the most part, supermarket management and the AFC Franchise have their views aligned, so I will mostly focus on the tensions that arise from being an agent to the franchise and the health department.

The franchise rates good performance by the profitability of a store. If sales are satisfactory and the procedures are followed, the franchise has no reason to step in. The health department, on the other hand, rates good performance by how well the franchisees adhere to the health guidelines laid out by the state.

The two principals see eye to eye on several things, such as the need for sushi to be made fresh daily, but a problem arises from the fact that the agents shoulder a large amount of risk from the franchise principal: franchisees buy both contracts with certain supermarkets and supplies from the AFC Sushi Corporation and then must maintain the profitability of the location.

In order to maintain sales and overcome stereotypes of all sushi being raw fish and the cultural stigmas associated with such, franchisees put a particular emphasis on sales and satisfying customers. Due to the nature of supermarkets, many customers prefer grabbing a package and checking out, as opposed to ordering and waiting. Thus, a majority of the sushi must be prepared beforehand. However, the health department mandates that sushi must be chilled to a specific temperature before it can be put onto the cooling display. In order to maintain both sales and obey health guidelines, sushi must be prepared well in advance before it may be sold.

In practice, sushi is usually put into the cooling display right after being packaged. Sushi is a relatively elastic product, as it is luxurious and shrouded by social stigmas. From the eyes of the agent, maintaining sales involves capturing as much potential customers as possible, and hoping some will become regulars. But as supermarket customers, these potential customers are different from those that might visit a sushi restaurant, having higher degrees of fickleness and impatience. This means decorative sushi that is put out to display immediately, to cater to those unique circumstances.

A simple answer to satisfying both principals could be to have the agents come in earlier. But coming in early is not a practical answer for the agent, as the people I know begin their daily commute to their respective supermarkets between the hours of 3-6am. Changing the order in which certain types of sushi is made is likely to have no positive effect, as over the years, agents have been guided to an efficient order of preparing sushi, such that regulars are able to pick up their favorite sushi as they come through.

In the end, the agent usually chooses to satisfy the franchise principal and ignore a specific few demands of the other principal, the health department. The scenario is reversed during routine health inspections, as agents will slightly curtail sales to avoid being fined or compromising their contract.


  1. Admittedly I only know this business from the perspective of a customer. But it seems to me a different possible solution is to get the sushi on display in the store somewhat later in the day and assume that the early supermarket customers aren't there to buy sushi. Indeed, I would guess that most of the demand is in the late afternoon early evening, as people are shopping for dinner later that same day.

    It is a little strange to me to think of the health department as a principal in the way I set this up, because they are an absolute authority. If you clearly violate the rules they will shut you down. That it is a constraint to go by the rules is understood. You have to consider, however, what would happen in the absence of the health department. The demand would evaporate. People wouldn't trust the food to be safe. If that is correct, the constraints are minor in comparison.

    Not all regulation should be viewed this way and perhaps people do compromise with the regulator as a principal just like they compromise with other principals. I may have done that in our class with regard to privacy regulation (FERPA) by encouraging you to use Blogger for the class rather than use Moodle. But I hope you don't see your privacy compromised this way. It is the measure of risk that matters here. That is why on food safety, I would not want to mess around even if that is not the practice outside the U.S.

  2. The busiest time of day tends to be the lunch rush hours. By that time, the day's "base stock" of sushi are all finished. Agents, based on their knowledge of the locals, make a certain number of packages to begin the day, which I dubbed the "base stock." Franchisees then spend the rest of the day responding to daily fluctuations in demand, filling orders and making sure that at least several packages of each type of sushi remain on display, adding more sushi to this base stock.

    What I described in the blog post is a somewhat particular situation. As I mentioned earlier, most sushi have been cooling in the display for 2-4 hours before lunch hours. While the practice isn't something to be approved of, in reality, most customers are shielded by the practice. The only customers that are affected are those who order in store (I am actually unsure how the health department governs this, as customers simply cannot care to wait the 30-60 minutes it takes to chill sushi) or those that come in before 11am. Nonetheless, I hope my blog post hasn't turned you away from enjoying sushi, if you had an appetite for it before.

    Since the Progressive Era in the states, demand for all food services has been anchored to sanitation and the health department. But outside of that specific corner cutting, the friends I know take the health department extremely seriously. They would never think to violate clear protocols that would shut them down, and are (with the one exception) careful with even the most minor rules, and this is because they sell sushi. While a deli may lose a significant amount of customers if word gets out that it has been cutting many corners, the demand for deli meats will eventually earn the forgiveness of the locals, once certain reforms take place. The same thing cannot be said about sushi, as any damage to the sanitary reputation of the exotic food cannot be recovered from, and will likely forever stain the product in that community. Perhaps I am biased, but I sincerely think my friends look out for their customers, and would be otherwise mortified at the thought of crossing the health department.