Growth | September 2013 | By Daniel P. Smith

Translating the American Dream

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Peggy and Andrew Cherng helped build Panda Express into an Asian food giant.
Peggy and Andrew Cherng have built Panda Express into the largest Asian cuisine chain in the U.S.—by a huge margin. Frank Ishman
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“In the malls, we were limited by mall traffic and development,” Peggy Cherng says. “By moving to the street, our growth opportunities expanded, and we had a better opportunity to penetrate a given market.”

Miller says Panda Express’s aggressive development strategy has resulted in a concept that’s easier than ever to find. From 1,000-square-foot mall counters to freestanding, fast-casual units with drive-thru lanes, Panda Express operates its own stores across a variety of venues, which has cemented its position as an industry heavyweight.

“Panda units are flexible and adaptable, and they have a tendency to be in convenient spaces on restaurant rows, where they continue to compete for the same A locations that many of the other big restaurant players desire,” Miller says.

What Starbucks has done for quick-service coffee—delivered a centuries-old product to the masses—Panda Express continues to accomplish with quick-service Asian food.

As American diners’ interest in high-quality ethnic foods rises, Panda Express stands to benefit from that swelling desire for global tastes, says June Jo Lee, vice president of strategic insights with The Hartman Group, a Bellevue, Washington–based consumer research and consulting firm.

“Consumers want variety and are looking for different tastes. What Panda does so well is that they’re familiar, yet different,” Lee says. “Panda Express is not the place you go for a far-out Asian experience, but it’s also not a hamburger or a chicken sandwich. They hit that balance of comforting and challenging
just right.”

With its exhibition kitchens and vegetables on display, Panda Express also highlights freshness and quality, two characteristics Chinese food has sometimes struggled to secure in the U.S. marketplace. “There’s a health halo Panda Express has been able to create, and they’re brilliant at fresh fast food,” Lee says. “People see the brown rice and the broccoli and think of Panda Express as a little healthier than other options.”

In recent years, the chain has intensified those health-focused efforts, led by the launch of more than a dozen Wok Smart dishes containing less than 250 calories per serving. Panda Express is also exploring the idea of reducing sodium in its food.

“This is a key part to being able to offer our guests variety,” Ho says. She adds that Panda Express continues leveraging the culinary innovation of its full-service sibling, the six-unit Panda Inn chain, to drive menu development at Panda Express and reinforce the quick serve’s commitment to premium ingredients.

The ongoing efforts at self-advancement continue to drive positive results for the Cherngs and Panda Express. According to Sandelman reports, Panda Express reached an all-time high in total trial in 2012, which was also the company’s 12th consecutive year of positive same-store sales growth. Panda has accomplished these gains even with growing competition from a number of fast-casual Asian outlets, such as Tin Drum Asiacafé, ShopHouse Southeast Asian Kitchen, and Asian Box.

“For my buck, that’s a clear indication that they have a runway and plenty of room to reach more of the population, even in their core markets,” Miller says.

With Panda Express’s past success and bright potential, it’s no surprise that others have looked to leap onto the company’s fast-traveling bandwagon. To date, however, the Cherngs have resisted the thought of aggressive franchising, largely out of concern that the quality of their restaurants’ food, service, and environment would become too unwieldy. Only about 50 Panda Express units operate outside of the Panda Restaurant Group, which also oversees Hibachi-San, a quick-service eatery with Japanese grill favorites that now has more than two-dozen units across the country.

“By staying [company owned], we’re able to push our philosophy into every associate personally rather than relying on franchisees,” Peggy Cherng says, adding that, as a practical matter, Panda possesses reliable bank support that limits the need to grow on the backs of franchisees.

The Cherngs have also declined overtures to go public, content to maintain their leadership roles and carry out their vision.

“Our philosophy is to keep things private and to run our stores and business the best we can,” Andrew Cherng says.

The private ownership and unified purpose bodes well for Panda’s continued evolution and development, particularly as it chases its long-term goal to build a worldwide concept. While the brand remains best known on the U.S. coasts, the Cherngs see ample opportunity to grow in the nation’s center. After opening 108 new units in 2012, Panda Express is on pace to debut more than 100 units this calendar year. And though Panda’s international presence is slim—two units in Japan and four in Mexico—the Cherngs are excited about the potential to expand abroad.

“There’s great opportunity for us to grow and show who Panda is,” Peggy Cherng says. To modernize “who Panda is” in the U.S., the company last year began testing its new “Bright and Fresh” restaurant prototype. The eco-friendly, contemporary design uses bold color accents, natural bamboo products, and integrated landscaping. After test units showed a 9 percent jump in sales, Panda Express started rolling out the “Bright and Fresh” model system-wide earlier this year. By the end of 2013, 75 remodeled units and 85 new Panda Express stores will sport the look.

The company has also unveiled the 2020 Vision—a two-pronged visionary statement that asserts Panda’s ambitions to be a world leader in people development and to be beloved by guests—as well as its “Make Life Delicious” brand promise. While Peggy Cherng says the “Make Life Delicious” tagline is an internal mantra to motivate staff performance, it is just as much a calling for staff and guests to pursue a better life.

“We think of Panda Express as one part of a joyful life,” she says.

The classic American story, indeed.

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