Franchise Costs: Detailed Estimates of Panda Express Franchise Costs (2018 FDD)

Updated January 18, 2019.

Detailed Estimates of Panda Express Franchise Costs Based on Item 7 (Estimated Initial Investment) of Panda Express’s 2018 Franchise Disclosure Document

• The initial investment table shows certain expenditures required to open a single Panda Express Restaurant. Note that these amounts vary widely.

• The figures provided apply to all types of Restaurants and venues. Costs depend on whether or not a building is new construction or an existing restaurant, as well as the condition of the property, the geographical location, and how big it is.

• Amounts paid to Panda Express are non-refundable unless otherwise noted. Amounts paid to suppliers/vendors are refunded according to arrangements you make with the vendor, if any.

• These figures are estimates of the range of some of your initial costs in developing a single Unit Location and in the first three months operating that location. Your actual initial costs may be more or less.

• If you acquire an operating Panda Express Restaurant from Panda Express, Inc. (PEI), the price you pay for its assets and other terms of acquisition will be negotiated between you and PEI and is not reflected in the chart below. PEI sold 3 Restaurants to licensees in the past 5 years and purchase prices ranged from $136,963 to $1,261,913.

1.  Initial License Fee:  $25,000

• This fee is non-refundable.

2.  Lease of Premises (Initial 3 Months’ Rent):  $10,000 to $425,000

• The rent estimates contemplate three months’ rent, and the range is based on various Restaurant venues throughout the country.

• Rent expense varies, and the low-high range given is based on location, square footage, age and condition of the structure, lease arrangements, and other factors and could differ materially from area to area. In particular, rent in airports may be significantly higher than in other venues, and this accounts for the high end given in the chart.

• The typical Panda Express Restaurant in a captive venue will be approximately 500 to 1,500 square feet, although a few units occupy approximately 3,000 square feet.

• Other charges may include Common Area Maintenance charges (“CAM”), utilities, taxes, and insurance, as imposed by the facility. Leases frequently specify minimum rent and percentage rent (typically 10%) applicable above a threshold sales volume.

• In a food court, CAM typically amounts to 35% to 50% of minimum rent. A pro-rated charge for taxes, insurance, and utilities also applies.

3.  Leasehold Improvements:  $80,000 to $500,000

• You must follow Panda Express’s design standards and construction process and have its approval to open. The cost of construction and leasehold improvements depends upon the size, condition, and location of the Restaurant and the local cost of labor.

• The range of figures stated for a Panda Express Restaurant is the cost of reasonable renovation or leasehold improvements and may be less if the lessor provides a construction allowance to lessee.

• Included in the estimate are construction charge backs for landlord provided work.

• Fixtures include counters, tables, chairs, wall coverings, decorations, and other fixtures. The cost of fixtures will vary depending on the seating capacity of the Restaurant, lease or finance terms available to you, the layout of the Restaurant, and other relevant factors.

• The high estimate contemplates leasehold improvements for approximately 2,500 square feet and includes an elaborate exhaust system, as is sometimes required by the lessor.

4.  Furniture, Fixtures, Equipment, and Supplies:  $90,000 to $220,000

• The equipment necessary for the operation of a Restaurant includes grills, refrigerators, steam counters, and other equipment. You will purchase or lease approved brands and models from approved, third party suppliers.

• The cost of the equipment, and the low-high range given, depends on financing terms available, the size of the facility, brands purchased, and other factors.

5.  Initial Inventory:  $2,200 to $3,600

• Your initial inventory will be purchased from designated or approved third party product suppliers. Initial inventory includes various food products, certain proprietary spice mixes, seasonings, flavorings, menu items, sauces and marinades, beverages, paper products, cleaning supplies, and miscellaneous items used in the operation of the Restaurant.

• The initial inventory expenditure will vary, and the low-high range given was factored according to varying anticipated sales volume and current market prices for supplies.

6.  Computer Hardware and Software:  $14,000 to $21,000

• The cost of the computer equipment and software, including point of sale systems, needed to operate a Unit Location varies, and the low-high range given is based on the manufacturer, the operating features, whether the equipment is already owned by you, whether the equipment is new or used, and whether you purchase or lease the equipment.

• Panda Express estimates that it will cost $2,000 to $4,000 to purchase the computer software and $12,000 to $17,000 to purchase the computer hardware.

7.  Non-resettable Cash Register(s):  $6,000 to $8,000

8.  Insurance (Annual Premium):  $30,000 to $75,000

• You must maintain in force at all times policies of insurance covering various risks and issued by carriers Panda Express approves. Policies must name Panda Express and its affiliates as additional insured and meet other coverage criteria as specified by it in the Manual or otherwise. Panda Express specifies the types and amounts of coverage required under these policies and can require commercially reasonable adjustments.

• Each such policy shall be underwritten by insurers rated “A” or better by A.M. Best Company.

9.  Initial Training Expenses:  $13,000 to $29,000

• The Initial License Fee covers an initial training program per Unit Location. All costs related to training for you and any of your personnel attending the initial training program, including any travel, living, incidental, and other expenses, are your sole responsibility. The amount expended will depend, in part, on the distance you must travel and whether lodging is required.

• Panda Express can also charge a fee for training of additional and/or subsequent personnel.

10.  Architectural and Design Fees:  $17,000 to $35,000

11.  Construction Supervision:  $17,000 to $50,000

12.  Sales Tax Deposits:  $4,500 to $10,000

13.  Telephone, Fax, and Other Communication Related Fees:  $500 to $1,000

14.  Licenses and Permits:  $1,500 to $30,000

• You are solely responsible for identifying and complying with all applicable laws, regulations, and ordinances.

15.  Miscellaneous Funds:  $0 to $10,000

• This category includes security deposits, utility costs, and other miscellaneous expenses to begin operations and other financial requirements.

• You could need more Miscellaneous Funds, because they vary with the size of the business (staff, anticipated volume of business, etc.) you operate.

16.  Additional Funds (3 Months):  $60,000 to $110,000

• You will need capital to support ongoing costs of your business, such as additional inventory, supplies, payroll and management expenses/benefits, utilities, recruitment and training costs, uniforms, donations, and discounts.

• You also need to hire some outside services, such as companies offering security, safety, maintenance, quality control/evaluation, surveys, marketing, laundry, and professional services.

• This is only an estimate. You may need additional funds during the three months of initial operation, and you will have ongoing expenses and revenue needs after the first three months.

17.  Total:  $370,700 to $1,552,600

• Panda Express has implemented a pilot program on a limited basis under which a licensee’s Unit Location may be free standing, developed with a drive-thru feature, and have a larger footprint (estimated to be approximately 2,200 square feet) than a typical licensed captive venue location.

• Panda Express estimates that the total initial investment expenses noted above for such a drive-thru location will increase by up to $1,150,000, due in part to greater construction and site development costs; as well as increased furniture, fixtures, signage, and equipment costs.

• In preparing the figures in this Item, Panda Express relied on its affiliates’ over 20 years of experience in the restaurant business.