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Feature Article, May 2005 Panda Mania
Panda Restaurant Group has been opening many new locations in new and existing markets. Over the next 2 years, the company will open more than 330 units, most of which will be non-mall locations.
Randall Shearin
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About half of all Panda Express locations are street stores. This location in Burbank, California, has a drive-thru.
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Panda Restaurant Group (PRG) started out more than 30 years ago as a single, full-service Chinese restaurant called Panda Inn that was located in Pasadena, California. It has come a long way since. Anyone active in the mall business knows PRG through its Panda Express units. But Panda Restaurant Group goes a lot further than the mall. The company's most active business these days is the development of freestanding locations and shopping center locations in new and emerging markets. Shopping Center Business recently met with John Mitchell, senior vice president of restaurant development, and Frank Miller, vice president of real estate, for Rosemead, California-based Panda Restaurant Group, at the magazine's offices in Atlanta.
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Panda Express got its start as a mall concept, and still operates in many food courts nationwide. This food court is located at Forest City's Victoria Gardens in Rancho Cucamonga, California.
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PRG is one of those companies that grew up with the malls. Its expansion came at a time in the U.S. when new malls were springing up monthly. The company's first mall unit was a concept called Panda Express at Glendale Galleria in Glendale, California, in 1983. The company grew steadily with the malls in its first 10 years in business; by 1993 the company had 100 locations. About 10 years ago, the company launched a development program for street stores, freestanding stores and outdoor shopping centers. Two years ago, Panda started to aggressively pursue freestanding stores with drive-thrus as its preferred location in existing markets. Today, the company has more than 700 stores from California to North Carolina. It also has more on-street stores than it does mall locations. In 2005, the company will open at least 138 units and in 2006, it is heading toward an additional 200 units.
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A shopping center end cap location in South Gate, California.
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PRG's concepts include Panda Express, Panda Inn and Hibachi-San Japanese Grill. The expansion vehicle for the company, and the unit that most shopping center owners and developers, as well as consumers know, though, is Panda Express. There are currently are only a handful of Panda Inns and Hibachi-San locations. Approximately 65 percent of the Panda Express out-of-mall stores currently in the development pipeline for 2005 are freestanding with a drive-thru. PRG has divided its store development into core markets, emerging markets and new markets. Core markets are areas like Los Angeles, Las Vegas and Phoenix, where it has a number of locations of each store type. In Arizona, for example, Panda opened its 50th location last summer and celebrated the same landmark in Nevada in January. Emerging markets are areas like Dallas, Chicago and Washington, D.C., which PRG has entered over the last 3 to 4 years and has a stable foothold, but is still looking to expand the number of stores in the market. There are seven emerging markets that PRG has entered over the last 18 months. These include areas like Tampa, Orlando and Miami in Florida; Greensboro, High Point, Winston-Salem, Charlotte and Raleigh in North Carolina; and Houston, Austin and San Antonio in Texas. Toward the end of this year, the company is expected to announce two to three new markets it will enter during 2006.
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Panda Express restaurants are marked by bright colors and light, airy interiors. This is the interior of the company's store in Walnut, California.
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“In terms of trade area criteria, we would like to be where you would find traditional quick service restaurants and daily needs generators like Wal-Mart or Target,” says Mitchell. “We like high-traffic locations in areas with a dense population. Our trade areas are normally defined with 5-minute to 10-minute drive times.” So far, there haven't been any geographic areas of the country that Panda has entered where its food hasn't been successful. The company does well in areas with a high concentration of Hispanic and African-American populations, as well as those with an ethnically diverse population.
Today, says Mitchell, the malls are a mature business for Panda Express. The company is only adding about two to four units per year in malls. It has closed units in some malls that are under redevelopment or whose sales continue to decline. More than 90 percent of the company's new stores are in open-air shopping centers and freestanding locations. Panda is also pursuing a lot of non-traditional venues like theme parks, college campuses, train stations and airports.
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A shopping center end cap location in Carlsbad, California.
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“Panda can go into almost any type of venue or facility,” says Mitchell. “Freestanding with drive-thru, end cap with drive-thru, end cap alone, urban areas, in-line locations, malls and non-traditional venues — you name it, we like it.” Panda Express units that are located on the end cap of a shopping center vary from 2,000 to 2,200 square feet. End cap units with drive-thrus require about 2,400 square feet. The company's freestanding prototype is about 2,500 square feet. Mall food court units are between 700 to 1,000 square feet. PRG has construction project managers in different regions that oversee and manage the development of each restaurant from design to permitting to construction. Construction itself is handled by an outside general contractor in the area.
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Andrew & Peggy Cherng. Andrew Cherng is the founder and chairman of the board of Panda Restaurant Group. His wife – Peggy Cherng, Ph.D — is the company's co-chair and CEO. Together they have made Panda Express the world's largest Chinese restaurant chain.
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“We like sites that have high visibility, prominence and good access,” says Mitchell. “We like plentiful parking, especially in our open-air shopping center locations.” In Woodstock, Georgia, for example, Panda located a freestanding store with a drive-thru in an old Donato's Pizza location. The store allows Panda ample parking, excellent signage opportunities and great visibility from the main road. It is also located in a highly populated, but still growing, area.
“That is a store that is not only doing well now, but its sales will continue to grow in the future as the population fills in,” says Miller.
When Panda enters a market, it develops many different types of stores in many different sub-markets. For example, in Atlanta, the company currently has six stores under development: freestanding stores in suburban Gwinnett County, Canton and Newnan; an end cap location at a new shopping center in the densely urban area of Little Five Points; and an end cap location at a new center on 14th Street in downtown Atlanta.
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Tom Davin is president and COO of Panda Restaurant Group. He was appointed to the position in August 2004 to continue the company's accelerated growth plan.
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For its new stores, PRG has developed a truly sensual experience. It wants the consumer to be attracted to the sights, sounds and smells of its dining experience. For instance, the kitchen is open so that customers can see the food being prepared in the wok, and then placed on a steam table. They can even view ingredients, like fresh vegetables, as they sit in the cooler. “Our new stores are very bright, colorful and airy,” says Miller. “This really creates an atmosphere for enjoyment.”
And PRG doesn't skimp on construction costs for its restaurants. Table tops are granite, floors and finishes are top quality and the décor is upgraded.
“Our stores give a positive feeling about our food as quality food,” says Miller. “Our atmosphere is trying to convey that freshness and quality. And that's how the consumer views our restaurant. We are trying to fill a consumer need for high quality, inexpensive everyday Chinese cuisine. It really doesn't exist in many markets.”
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John Mitchell joined Panda Restaurant Group as senior vice president of restaurant development in 2003.
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Panda's consumer research shows that diners enjoy the company's open layout. The steam table, which holds the food after it is wok-prepared, allows customers to see the food before they buy and consume it. The tables offer the consumer a lot of taste and variety, proving itself a valuable asset to the concept. Panda is constantly evolving its menu. Its chefs and marketing departments work together to create a number of promotions throughout the year. It recently developed a program called Kung Pao Kick, which features a lot of Kung Pao specialties. The company's top seller is Orange Flavored Chicken, a signature dish that is always available. Beef with Broccoli is another favorite that is always found on the steam table. “Our standard meal is the choice of two protein-based foods, like Orange Flavored Chicken with a starch like rice or noodles,” says Miller. “We gladly substitute, at no additional cost, fresh vegetables instead of the starch at the consumer's request.”
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The restaurants, like this one in Walnut, California, reflect the brand's reputation for fresh concepts and tasty flavors.
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One major feature that sets Panda apart from other QSR operators is that all of the PRG units are company owned. There are no franchisees to deal with. All real estate deals are done from the corporate office. Panda's stores are very well run. The company has a dedicated group of operators. Privately-held PRG is also very solid, financially, so when the company commits to a deal, it knows it has the resources to get it done. Company founder Andrew Cherng still serves as chairman of the company, and his wife, Peggy Cherng, Ph.D, is CEO and co-chair. Tom Davin, a former executive at Taco Bell, has recently joined PRG as president and COO, bringing a wealth of experience to the table.
“Developers and owners of real estate love Panda,” says Miller. “Our stores are very clean, bright and airy. We're just a good, solid tenant.”
©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.
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