Andrew Cherng remembers pacing through his Chinese restaurant in Pasadena, Calif., wondering whether any customers would show. It was a difficult...
Andrew Cherng remembers pacing through his Chinese restaurant in Pasadena, Calif., wondering whether any customers would show. It was a difficult time. He had borrowed from family members and the Small Business Administration to open the eatery and had debts to pay.
“People would stick their heads in and leave,” Cherng recalled.
His mother went out and sprinkled the sidewalk with salt, a Chinese custom to expel negative energy. It worked.
Thirty-five years later, Cherng, 61, and his wife, Peggy, control one of the largest family-owned fast-food empires in America.
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Their 1,100 Panda Express restaurants dominate Chinese fast food and are ubiquitous residents of shopping-mall food courts, airports and sports stadiums across America.
Cherng’s Rosemead, Calif.-based Panda Restaurant Group, which also includes the Panda Inn sit-down restaurants and the small Hibachi-San Japanese fast-food chain, will top $1.2 billion in revenue this year.
The company is profitable, Cherng says, and has achieved 12 consecutive years of same-store-sales growth.
As it celebrates its 25th anniversary this year, Panda Express has proved itself to be an effective competitor against larger corporate fast-food chains such as McDonald’s, KFC and Taco Bell and thousands of independent rivals.
“There are so many full-service Chinese restaurant that do takeout. That’s just an incredible amount of competition for Panda Express,” said Darren Tristano, a restaurant-industry analyst at Technomic in Chicago.
It is an empire largely built on the thighs of chickens — the dark meat.
When other fast-food chains started to offer white-meat chicken nuggets and sandwiches in the late 1980s, Panda Express figured out what to with the rest of the chicken. And it has paid off.
The chain started using boneless and skinless dark meat cooked in a light-flour batter to hold the moisture. Then it drizzled on top an orange sauce that Panda executive chef Andy Kao described as “a little sweet, a little sour and a little spicy.”
By 1991, it had become the chain’s biggest seller. Now, 4 out of 10 people who walk into Panda Express include orange chicken in their order. Panda Express sells 45 million pounds of orange chicken annually.
“Orange chicken has a huge following. Using lower-cost thigh meat is a tremendous advantage for them at a time when a lot of quick-serve chains are going to more expensive breast meat,” Tristano said.
Cherng said early days in the business taught him why customers are king, a lesson he has kept close.
“I became very attentive to customers because I was desperate not to have people leave and never come back,” Cherng said.
More than three decades later, Cherng’s challenge is how to instill that desperate fear that there will be no customers in the more than 17,000 workers dishing out food at stores in 36 states.
Going from store to store
Like an itinerant preacher, he travels from store to store teaching his managers a customer-service gospel built on three principles: Be proactive, be respectful and do a job well. Employees start at least 50 cents above the minimum wage, and 70 percent of all management positions go to workers already at the company. The results are unmistakable, said Bob Sandelman, a restaurant-industry consultant in San Clemente, Calif.
Panda Express scores well in the brand studies conducted by his consulting company. More than 90 percent of fast-food consumers in the Los Angeles area are aware of Panda Express and 70 percent have eaten there, Sandelman said.
Variety at decent price
The chain provides a good variety of Asian food at a decent price, Sandelman said. Consumers have a perception that the food is healthy and fresh, he added.
But like other fast-food chains, Panda Express has its share of salt- and fat-laden entrees. The 5.5-ounce serving of its orange chicken, for example, has 500 calories, 27 grams of fat and 810 milligrams of sodium. A McDonald’s Big Mac, by comparison, has 540 calories, 29 grams of fat and 1,040 milligrams of sodium.
Kristy Marrow, a sales representative for a tool company, eats at a Panda Express about once a week.
“It is always fresh, and it is healthy. There are lots of vegetables that are good for you,” Marrow said, after ordering lunch at the Azusa, Calif., store.
Cherng has resisted the temptation to cash out on his success by selling shares in his company to the public or signing franchise deals. Although a public offering might reap him hundreds of millions of dollars, he’s not sure what the purpose would be.
“What would I do with the money? Would I open more stores? I don’t have money issues, so why do it?” Cherng said, adding that he didn’t want the expense or headache of dealing with shareholders.
Similarly, he sees no advantage to speeding growth by selling franchise rights like most other fast-food chains. “I think we can run our stores better than someone else,” he said.
A native of Jiangsu province in China, Cherng came to America in 1966 to study mathematics at Baker University in Baldwin, Kan. He lives in Southern California’s San Gabriel Valley and has three adult daughters.
Cherng is a supporter of children’s organizations and disaster-relief efforts. This year Panda matched employee contributions and tossed in additional funds from a three-item-combo promotion to raise $1.3 million for Chinese earthquake relief.
The idea for a fast-food restaurant came when the developer of the Glendale Galleria near downtown Los Angeles had eaten at the Panda Inn and invited Cherng to consider opening a quick-serve restaurant in the mall.
Cherng at the time wasn’t even aware of food courts in malls. But he thought a version of his Panda Inn, using a steam table to offer a narrow selection of Chinese dishes that were popular lunch items, might work. The first Panda Express opened in 1983.
A second store opened at the Westside Pavilion in Los Angeles in 1985, and Cherng was impressed with the profits. “I became addicted to malls.”