Panda Express On Growth Track

Panda Express, a the largest division of privately held Panda Restaurant Group, began in 1983 when founder Andrew Cherng, who had been operating a fine-dining restaurant called the Panda Inn for 10 years, decided to adapt the upscale restaurant's menu for the quick-service industry. The chain has grown steadily since then, with Cherng remaining as chairman and with the company branching into other, related arenas as well. It has established the 10-location Hibachi-San Japanese fast-food restaurant chain, for example, and owns a 40% stake in FoodBrand LLC, a wholly owned subsidiary of shopping center owner and operator Mills Corp. In 2004 the company, which is now in 36 states, continued expansion in recently entered markets like Atlanta, Chicago and Dallas. In 2005, it projects growth throughout the country but with a particular focus on all major markets within Florida, North Carolina and Texas.

But Panda Express, although it calls itself "the fastest growing Chinese quick service restaurant chain in the world," has been ramping up in recent months for even faster growth. Its ambitions were underscored by its hiring in August of Tom Davin, a longtime retail, restaurant and finance executive who was COO during the development of the Pizza Hut/Taco Bell multi-brand concept. Davin's resume includes experience as one of 11 founding partners who led the creation of Tricon Global Restaurants, now YUM! Brands, and as director of mergers and acquisitions for PepsiCo Inc. Immediately before joining Panda, he was operating partner of Brentwood Associates, a private equity firm that manages more than $700 million of institutional capital, and was also chairman of Spectrum Clubs Inc., a fitness club chain, as well as director of Exhale Enterprises, a day spa chain in New York City.

In announcing the hiring of Davin, Andrew Cherng and Panda Express CEO Peggy Cherng handed Davin responsibilities in all aspects operations at the company, including restaurant procedures, purchasing, financial objectives and personnel. Cherng said the addition of Davin would "enable us to accelerate our momentum" in reaching its expansion goals. Chicago-based Technomic Information Services, which has tracked restaurant industry performance for more than 35 years, now sees Panda Express as one of the fastest growing chains in the country, along with names like Panera Bread, Starbucks Coffee and Jamba Juice that were recently listed in a Technomic report on projected growth in the restaurant industry in 2005.

One of the avenues that Panda Express says will help it reach its goal of 10,000 restaurants is its flexibility in choosing locations. It was one of the first fast-food chains to open in a supermarket when, in 1989, it opened its first Vons/Pavilions location. Today, about half of the company's restaurant locations are street stores, but the it also has locations in malls, retail stores, college campuses, casinos, airports, theme parks and stadiums. With its plans for expansion, it is focusing on buildings that offer high visibility and it publishes a detailed set of requirements for types of locations, square footage, population, income and other factors that determine where it places new stores.

Industry reports suggest the time could be ripe for Panda's recipes. According to National Restaurant Association surveys, Chinese food is one of three ethnic cuisines (the others are Italian and Mexican) that have "joined the mainstream." It says those three cuisines "have become so ingrained in American culture" more than nine out of 10 consumers are familiar with and have tried these foods, and about half report eating them frequently.