Causing a Stir

Panda Express founders Andrew and Peggy Cherng translated Chinese cuisine into a modern quick-service model. by Laura Tutor

How much does Andrew Cherng hate to lose customers? Legend in Southern California has it that when the tables were full at the family’s sit-down Chinese restaurant, Cherng would scurry out the back door to the parking lot and ask customers turned away to stay in return for a drink while they waited for a table to open up in the bustling eatery. On a recent day in Naples, Florida, he ticked off thirteen things that must happen in a restaurant every minute of every business day in order for a store to succeed. Forget the details, Cherng says, and you can forget the profits.

The Cherng story in America began in the early 1970s, but the family affair with food and restaurants started long before that in the Far East. Cherng’s father, the late Ming-Tsai Cherng, was a chef in restaurants throughout the Pacific Rim. Andrew Cherng grew up with food and learned the nuances of a restaurant kitchen and its products through the family tradition. As a student, he came to the United States from Japan, where the elder Cherng had a chef’s position, in the 1970s. The first restaurant, Panda Inn, followed in Glendale, California, about two years later.

Chance brought a family of shopping mall developers into the restaurant as regular customers, and they approached Cherng with the idea of taking the concept of the highly successful gourmet Chinese restaurant, Panda Inn, into mall food courts. The captive audience of shoppers–and the limitless possibilities of mall sites and opportunities–made Panda and its signature Szechwan and Mandarin Chinese dishes readily remembered brand names. It’s now grown to 460 stores, with eighty expected to open this year. The catchy Panda logo and bright colors have moved outside malls, ballparks, and university or hospital cafeterias, though. Free-standing stores are spreading the Panda brand without the cover and confines of a mall. They’re also helping insulate the company from what is lighter-than-normal mall traffic in the wake of a flagging economy.

Peggy Cherng on menus: You want to encourage creativity from the bottom up. If a manager creates a dish that makes it to the menu, they get a reward.

If Andrew Cherng is the food influence behind Panda, then it is Peggy Cherng and her background in computers, engineering, and mathematics that crunches the numbers. A native of Hong Kong, she and Andrew Cherng met in college at Baker University in Kansas and pursued the American dream. Their stores, through targeted but aggressive growth, have grown from one location to the chain that produces more than $300 million in annual sales.

In addition to the menu and its focus on fresh food, Panda has worked to build its image in California. Its orange flavored chicken, broccoli beef, and gourmet dishes prepared on-site became almost an overnight hit, increasing not only the Cherngs’ restaurant base, but also the profile of Chinese food from eat-every-once-in-a-while ethnic toward more of a must-have with American diners. The readily recognizable panda in the logo has become something of a fixture with California shoppers.

QSR: What drew you to the restaurant business–and the idea that Chinese cuisine could be done in a speedy, convenient format?

Andrew Cherng: My dad was a chef. He was working in Chinese restaurants all his life. We never owned our business until we came to this country, though. I had always been around the business and just grew up with it.

So you knew how hard it was to succeed in the restaurant and foodservice business. Did you always know this is what you wanted to do, following the family line?

Andrew Cherng: Not really. Not at all. I came here to go to school, and, like almost all foreign students, the easiest thing to do is work in a restaurant. I worked as a waiter in New York every summer I was here. I was in school in Kansas, then Missouri, and every summer I’d work almost three months to save some money and pay tuition. I graduated, and my cousin was emigrating to this country. He was looking for a restaurant on the West Coast–Hollywood–and needed some help with the store. I said I’d come over and try. That was in July 1972.

Peggy Cherng: I was educated in computer science and mathematics. I worked in industry five years before I went into the family business. I became president and CEO in 1996.

Andrew Cherng on preferences: As far as the overall favorite, it’s orange flavored chicken. It’s phenomenal.

Even though the cuisine is the same, there’s a huge difference in operations of a full-service restaurant and a successful quick-serve. What do you miss about the sit-down, full-service end of the business?

Andrew Cherng: We still have five sit-down outlets. As far as what I miss, I miss the day-to-day part of meeting customers. You get to know your customers personally. You converse with them. Their likes, dislikes–you can react much, much better to what they want and what they need. You get to know their families and they get to know you. You create an environment they feel safe in, and they are trusting you. And there is something comforting in the fact that you’re there running the store.

The Panda brand has gone with shopping malls all over, and that obviously affects hands-on management. How often are you in the stores to see what’s going on and confirm your touch is still on every product?

Andrew Cherng: Oh, all the time. I’m in Naples, Florida, today, Tampa yesterday. Orlando yesterday. In the last two months, I’ve been on the East Coast four times. I like to see all the stores as often as possible. I try to see them once a year, but it’s getting to be tougher to do. That’s the most important thing I do. Having knowledge of how things are actually working is the most important information you have.

Peggy Cherng: Not as often as my husband, but enough to observe the quality of the food, the ambience, and to track what is moving, what is working. We’re very careful about tracking to see what people are liking, what they aren’t liking, and what we could or should do differently.

Does the menu reflect the part of China you are from? How does menu development come about, and how often are you comfortable changing it because you’ve got such product identification on some items, especially with the orange flavored chicken?

Peggy Cherng on saturation: Chinese food is very popular, but it’s not yet as popular as it could be–or as popular as we think it will be with every everybody.

Andrew Cherng: I’m from west of Shanghai, Yangchow, which is famous for fried rice. Almost every Chinese restaurant has Yangchow fried rice. As far as the menu, a lot of it was taken from the extensive restaurant menu and put in another format. Some things sell well. Some don’t do as well, and we try other things.

When the menu is changed, how is that handled? Who decides what is the local special, or is there room left for promotions or changes? Who comes up with the recipe?

Peggy Cherng: Twenty items are core and do not change. They are things every single store must offer all the time. On top are four more; two are company-mandated, and there are two more for the local selection. They have ingredients we can’t provide from central distribution, but the recipe is already in the system. We have core and optional recipes. The managers need to know what dish they like to offer as the local selection. They can open up the recipe and cook accordingly. But you want to encourage creativity from the bottom up. They can create a dish, and if they create a dish that makes it to the menu, they get a reward. They’re encouraged to create a dish; they just have to let us know so we can try it and make sure it meets our standards.

What other things are crucial as Panda moves into other markets? How will décor and store appearance work in an area unfamiliar with Panda?

Andrew Cherng: You want to make sure the restaurant is up-to-date and almost trendy with its color and style.

Peggy Cherng: The décor of the store is tied to branding, and it has changed much over the years to keep up. All changes have to reflect the brand. Then there’s the style: colorful, trendy. Fun, with bright lighting.

QSR subscribers: get the answers to these questions and more in your February 2002 issue!! Chinese obviously isn’t a common quick-service cuisine. What made you think it would adapt to the speed and convenience of that market? And was it hard to go from a sit-down, full-service restaurant to that format? When you’re visiting those stores, what is the first thing you look for, and do you approach it from a customer’s view or the owner’s? Are there any issues or problems that come up–or any problems that are unique to the Chinese food concept? How often is the menu altered, and what does Panda do to offer variety without getting too complicated? Some quick-service brands have varied their menu so much, they’ve run into trouble. Any fears that might happen as you try to grow the brand? Was it hard to develop traffic to the street stores after starting with–and relying upon–the captive audience of the mall food courts? Or did that give you a built-in audience that now took advantage of the fact that it didn’t have to go into the mall (and mall traffic) to enjoy your product? How many employees are in the Panda system, and how to you plan to manage growth? Are you worried about growing too fast or saturating a market, or expanding too far beyond core markets? Want full coverage of every QSR interview? Subscribe now!

Photo credit: On previous pages: Original photography by Dan Snipes. Image manipulated by QSR magazine.