Panda Express likes to call itself the largest mom-and-pop Chinese restaurant in the country, and that description is not wrong.
“Mom and pop are still here,” said CFO David Landsberg with a chuckle.
The chain has 2,374 units domestically, making it by far the largest Asian concept in the U.S. And it’s still run by the same couple that founded the brand in 1983, Andrew and Peggy Cherng, who came to the U.S. as college students (he was born in China and raised in Taiwan; she in Myanmar but raised in Hong Kong). Together they are co-CEOs of parent company Panda Restaurant Group. Their oldest daughter, Andrea Cherng, is chief brand officer.
But the little business they started 40 years ago boasted more than $5.3 billion in sales last year. It’s one of few chains that size in which all units are company operated, except for about 170 locations in nontraditional sites that are licensed.
In 2022, Panda Express skipped past chicken specialists KFC and Popeyes to reach No. 14 on the Technomic Top 500 Chain Restaurant Report. Over the past five years, the chain has achieved average yearly sales growth of more than 11% while adding 270 domestic units.
It’s a business the family believes still has plenty of runway ahead.
“We see ourselves in the not-too-distant future as a $10 billion brand,” said Landsberg.
Post-pandemic design
That’s not to say Panda Express doesn’t face challenges. The chain’s dine-in business has not yet fully recovered to pre-pandemic levels, Landsberg said.
But Panda is making investments to better adapt to the post-pandemic consumer: guests who are looking for convenience and frictionless ordering. Dine-in is less of a priority.
This week, for example, the company is opening a new prototype drive-thru restaurant design, dubbed “Panda Home,” in Dripping Springs, Texas, that shrinks the dining room seating by about 15% and expands the back-of-the-house to speed throughput and optimize digital ordering.
Panda has long been primarily an off-premise concept, but most orders have traditionally come from guests in restaurants choosing their wok-tossed dishes and sides to build a plate or family meal to go. About 20% of orders are now digital—and roughly half of that from third-party delivery—but Landsberg said the company is looking to grow that capacity.
With the push to build digital sales, Panda Express is rolling out new kitchen display systems, and adding screens to digital pickup areas so guests can track their orders.
Changes in the kitchen are also coming, in the ongoing effort to boost speed and throughput. The chain is adding automated woks to relieve the burden of what can be a very physical job of large-batch cooking, and new faster-cooking clamshell grills will replace the traditional flat tops.
“The changing guest has changed the way the business works in the kitchen,” said Landsberg.
From mall to standalone
Re-invention is not a new idea for Panda Express.
The brand was born in a mall as a variation of the lunch menu at the full-service concept Panda Inn, a restaurant Andrew Cherng and his father Ming-Tsai Cherng first opened in 1973 in Pasadena, Calif. Panda Inn remains a one-off within Panda Restaurant Group.
The first Panda Express opened in the Glendale Galleria mall in Glendale, Calif. Peggy Cherng, who was working as an engineer at the time, joined her husband to help design operating systems for the fledgling brand, which soon became a food court staple. Later, Panda expanded into other nontraditional sites, including grocery stores, military bases and college campuses. UCLA was the first university location, for example, and that was store #100.
Panda Express’ best seller has long been the famous Orange Chicken, a dish created by Taiwan-born chef Andy Kao, who first developed the dish in a unit in Hawaii. It’s often described as a variation of the classic Chinese-American dish General Tso’s Chicken, but the company says it was inspired by an appetizer called chenpi niurou, or tangerine peel beef, in which slices of meat are marinated, deep fried and then wok-cooked with dried chilies, pepper and tangerine peel.
It’s an Americanized dish, to be sure, but at Panda Express, that’s the point. The menu is not marketed as authentically Chinese. Rather, Panda Express describes its cuisine as authentically “American-Chinese”— the company very deliberately puts the “American” first.
Around 1997, the chain made a transformative move: opening a standalone drive-thru unit on the street. That heralded a new era.
“One of the things we learned about being in malls was that leases were shorter term, and we didn’t necessarily control our own destiny,” said Landsberg. “When we moved to the street, we could depend on ourselves to stimulate demand, not depend on the malls.”
Now only about 170 locations are in malls, and less than 10% of sales is attributed to those locations.
And over the past decade, 75% of new unit growth has included drive-thrus, and that move alone was a key element in helping the chain survive the pandemic, said Landsberg.
People power
The CFO also credits the company’s investment in its workforce.
Hourly wages over the past three years have risen by $4, an almost 30% increase, he said. Now almost half of the chain’s managers make more than $100,000 in base salary and bonuses combined. The highest-earning manager earned $277,000 last year.
Over the past decade, average unit volumes have almost doubled to nearly $2.5 million, though one restaurant in Southern California brings in more than $7 million. Landsberg declined to say where. “It’s a location that gets a lot of traffic,” he said.
Parent Panda Restaurant Group also includes sister brand Hibachi-San, a Japanese-inspired concept with 10 units in malls and university settings. The group also operates a high-end Japanese steakhouse called Yakiya in the Los Angeles area.
The Cherng family also has investments in other brands. Panda Restaurant Group is the U.S. franchise operator of Uncle Tetsu, a Japan-based dessert concept known for cheesecake.
The group operates 12 Raising Cane’s units as a franchisee in Hawaii, Alaska and Guam, and it has an investment in the 25-unit fast-casual sandwich chain Urbane Café, along with the pizza concept Pieology.
When asked if Panda Express would ever go public, Landsberg responded with a swift, “No.”
“We are a family business that will remain within the Cherng family for generations to come,” he said.
And how Panda gets to $10 billion will likely be the result of continually making incremental improvements, day by day, he said.
“The buzzword around here that you can’t go more than an hour or two without hearing is the phrase ‘No best. Only better.’ We have a continuous-improvement mindset,” said Landsberg. “So we’re going to continue to make incremental changes, whether it’s to store design, our equipment, our people practices. And we think that’s going to continue to position us to continue to grow at least as fast as we have.”
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