FDD Talk 2013: Average Net Sales and Cash Flow Percentage for Panda Express Restaurants in “Captive Locations” (2013 FDD)

Highlights of Panda Express’s Item 19 Financial Performance Representations (2013 FDD)

• The chart below contains certain unaudited historical financial data for calendar year 2012 derived from Restaurants operated by the franchisor’s Affiliates exclusively in airports, casinos, military facilities, stadiums, theme parks, and universities (“captive locations”).

• The information relates only to 82 Restaurants operating in captive venue locations for a minimum of 52 weeks (although some were subject to seasonal closures specific to the venue, such as for universities and theme parks).

• 81 of the reporting Restaurants are owned by Affiliates of the franchisor and 1 is operated as a joint venture in which an Affiliate participates as the managing general partner (collectively, “Affiliate-operated” units).

• Only Affiliate-operated units in captive venues that were operationally active for the full 52-week reporting period (although some were subject to seasonal closures specific to the venue, such as for universities and theme parks) or longer are included here.

• The information reported is based on data for all Affiliate-operated Panda Express Restaurants operating in captive venues in the United States as of 12/29/2012, except for 5 Affiliate-operated units that were not operating the full 52-week period. Also not included are the 49 Restaurants in captive locations that are operated by independent licensees as of 12/31/2012.

• The remaining 1,431 Panda Express Restaurants operating as of 12/31/2012 are in traditional venues, such as malls, strip centers, and stand-alone units. The franchisor did not use data from any of these traditional units because the franchisor anticipates that the licenses granted under this Disclosure Document will most likely be awarded to licensees in captive venues.

• “Net Sales” means gross sales less any sales discounts, employee discounts, or discounts related to coupons. Units located in geographical areas with multiple operating Restaurants and stronger brand recognition tend to outperform units located in less developed areas.

• “Restaurant Contribution” is reported on the chart as a percentage of Net Sales and is computed as the remainder of Net Sales less any Restaurant level operating expenses.

• “Restaurant Level Operating Expenses” means expenses like cost of goods sold; labor costs, benefits, and payroll taxes; point-of-sale advertising; utilities; supplies; rents; depreciation and amortization; property taxes; and licenses/permits.

• The franchisor used the term “Contribution” as it views this as the amount that the average Affiliate-controlled Restaurant “contributes” to the Affiliate’s operations. Restaurant Contribution excludes royalties that you would pay, as well as costs the Affiliate expenses at the corporate level (including corporate costs like recruiting, training, legal and accounting fees, and income taxes). You are most likely to experience most, if not all, of these expenses, which can be significant and which are not factored into the Average Restaurant Contribution calculation.

• “Cash Flow” is reported on the chart as a percentage of Net Sales and is calculated by adding to Restaurant Contribution non-cash items, such as amortization and depreciation.

• The chart below omits a variety of material operating costs/expenses you will incur, such as income taxes, corporate management salaries, franchise fees, royalties and other franchisee-related expenses, legal and accounting expenses and other overhead costs, financing and debt service charges, investment costs and capital expenditures, any owner’s draw, and a variety of other expenses, all of which can vary significantly from market to market.

• It should be noted that Restaurants for which results are reported here have limited geographic diversity, with captive units being located in 29 states, and with approximately 45% of them established in California and Nevada. Climate, local demographics, cultural or other differences in geographical areas can significantly affect results.

• The average period all 82 units were open is 7 years, 9 months. Thirty five units were open at least that long. Most of the reporting units are located in sites ranging from 800 to 2,600 square feet, although a limited number are in larger venues (such as 3,000 square feet).

• The franchisor used information reported to it by its Affiliates to prepare this document. The franchisor assumes the information as supplied by them and their respective operations and Restaurant managers to be accurate. The information has not been audited  and is not presented according to generally accepted accounting principles.

Affiliate-Owned or Controlled Restaurants Only — Financial Performance Representations/Full Year 2012