In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Panda Express franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Panda Express franchise, based on Item 7 of the company’s 2017 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Panda Express franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Presentation and analysis of Panda Express’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- 2016 average, high, and low net sales, restaurant contribution, and cash flow for affiliate-owned Panda Express restaurants located in airports, casinos, stadiums, theme parks, and universities, separately stated, that were open for a minimum of 52 weeks (although some were subject to seasonal closures specific to the venue, such as for universities and theme parks)
- 2016 average, high, and low sales for licensee-owned Panda Express restaurants in captive venue locations (airports, casinos, stadiums, theme parks, and universities) that were open for at least the full 52-week reporting period and reported sales for that period
Section I – Background Information
12 Things You Need to Know About the Panda Express Franchise
Unveils New Chicken Dish for Chinese New Year
1. At the beginning of January 2018, Panda Express announced that it was launching a new chicken dish to celebrate Chinese New Year; it will be available until March 27. The dish is one of the brand’s “better-for-you” WokSmart options and is called “8 Treasure Chicken Breast.” Panda Express created the dish to symbolize good fortune for the year ahead. It features eight quality ingredients: thin strips of juicy all-white-meat chicken breast, diced Chinese sausage, red and green bell peppers, celery, fermented black beans, and whole dry chili peppers with a rich, spicy, and savory sauce.
2. The brand says that the new menu item pays homage to dishes from both the Sichuan and Shanghai regions of China, incorporating traditional ingredients for distinct flavor, tailored to appeal to the tastes of American guests. Jimmy Wang, director of culinary innovation at Panda Express, said, “8 Treasure Chicken Breast brings together a celebration of our roots with nostalgic Chinese ingredients, such as sausage and fermented black beans, and presents them to our guests in a way that uniquely symbolizes both our American and Chinese cultures. Our hope is that the new dish encourages delicious moments of togetherness and optimism among family and friends this Chinese New Year.”
Opens 2,000th Location
3. In early December 2017, Panda Express opened its 2,000th location. The new restaurant is located in Manhattan’s Morningside Heights neighborhood, which is home to Columbia University. The brand opened its first New York City location in 2015 and currently has six more restaurants in the city.
4. In the past, Panda Express has typically opened locations in the western region of the country, but it has expanded its footprint east in recent years. At the time of the opening of the 2,000th location, the company said that it has opened 55 locations east of the Mississippi and that it planned to open 20 more East Coast locations by the end of 2017.
5. To celebrate the 2,000th location milestone, the first 2,000 customers to visit the Morningide Heights restaurant received a special commemorative gift. Andrew Cherng, co-founder and co-CEO of Panda Express, hosted the ribbon cutting ceremony and the location donated 20 percent of its launch day proceeds to P.S./M.S. 165, a high-performing K-8 public school that offers a variety of rigorous academic programs for all learning styles and needs.
Launches Project Fortunate Campaign
6. In mid-November, the Panda Cares Foundation (Panda Express’s philanthropic arm) launched Project Fortunate, a campaign created to recognize and thank its customers and associates for the contributions they provide to Panda Cares. The campaign ran until November 28.
7. Each Panda Express location in the U.S. has a Panda Cares in-store donation box, where customers can donate any amount of money. During the campaign, employees rang a bell and gave a loud, heartfelt “thank you” after every donation. The brand says that the gesture showed customers its appreciation and was meant to remind them that each time they donate, they give hope and inspire better lives for underserved children. The bells also symbolized the celebratory bell children ring when they’re able to go home from a stay at Children’s Miracle Network hospitals, one of Panda Cares’ main charitable partners.
8. Since Panda Cares started in 1999, Panda Express has raised more than $61 million. Peggy Cherng, co-founder and co-CEO of Panda Express, said, “We are fortunate to have such a strong network of guests and associates who have joined us in our mission to positively impact the communities in which we work and live. Every penny counts when it comes to making a difference and we’re proud to continue supporting our local Panda Express neighborhoods through our in-store donation box program.”
9. Panda Express was founded in 1983 by Andrew Cherng and his wife Peggy Cherng at the Glendale Galleria mall in Glendale, California. Before opening the first Panda Express, Andrew and his father, Master Chef Ming Tsai Cherng, opened Panda Inn in 1973. The Cherngs decided to open Panda Express after Donahue Schriber Real Estate, the manager of the Glendale Galleria, invited them to develop a fast food version of Panda Inn. Two years later, the Cherngs opened a second Panda Express location at the Westside Pavilion in West Los Angeles.
10. In 1987, Chef Andy Kao created the brand’s signature dish, Orange Chicken. While Orange Chicken is now a staple of every American Chinese restaurant, the Cherngs and Kao say that their version is the original. Initially, Panda Express restaurants were located only in mall food courts, but during the late 1980s and early 1990s, the Cherngs started opening stand-alone locations.
11. Panda Express has continued to expand across the U.S. and internationally. Today, there are over 2,000 locations around the world.
Entrepreneur’s Franchise 500
12. Panda Express has not ranked on Entrepreneur’s annual Franchise 500 list in the past 10 years.
Section II – Estimated Costs
- Please click here for detailed estimates of Panda Express franchise costs, based on Item 7 of the company’s 2017 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Panda Express’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.
Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis
Part 1 – Affiliate-Owned or Controlled Restaurants Only — Financial Performance Representations/Full Year 2016
- The chart below contains certain unaudited historical financial data for calendar year 2016 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 86 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).
- 85 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 12/31/2016, except for 3 Affiliate-operated units that were not operating the full 52-week period. Also not included are the 97 Restaurants in captive locations that are operated by independent licensees as of 12/31/2016.
- The remaining 1,712 Panda Express Restaurants operating as of 12/31/2016 are in traditional venues, such as malls, strip shopping 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 the 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 field supervision expenses; corporate costs such as 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 30 states, and with approximately 42% 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 86 units were open is 10 years, 2 months. Thirty-six 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.