FDD Talk: Panda Express Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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 2018 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 2018 FDD

• Section IV – Number of franchised and company-owned Panda Express outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of Panda Express’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• 2017 total, average, median, maximum, and minimum gross sales; and average and median age of units in years for licensed Panda Express restaurants located in airports, casinos, hospitals, military facilities, 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)

Section I – Background Information

23 Things You Need to Know About the Panda Express Franchise

Had Plans to Hire 4,000 Employees at Career Event

1.  In July 2018, Panda Express hosted its second annual Panda Career Event at 400 locations across the United States. The week-long initiative was focused on expanding the Panda family of talented and dedicated employees.

2.  Celebrating its 35th anniversary in 2018, Panda Express announced that it will continue its mission of inspiring better lives – in particular, for its employees who have committed to delivering exceptional dining experiences to Panda’s valued customers across the globe.

3.  Expanding by over 100 locations each year, the restaurant chain consistently produces significant advancement opportunities for its devoted team members. In fact, all senior operations leaders at Panda Express have grown through the ranks, starting as general managers or other in-store positions.

4.  Leonard Yip, chief people officer at Panda Restaurant Group, said, “Our hope is that the Panda Career Event is not only a catalyst to welcome new associates into the Panda Family, but also shines a light on the lucrative career growth the restaurant industry has to offer. We look forward to discovering candidates who have the unwavering qualities of grit, grace, giving and humility – they’re the values we prize and see every day at our Panda Express restaurants.”

5.  What began as a single restaurant, Panda Express has become the largest family-owned Asian restaurant concept in America. Led by Chinese immigrants Andrew and Peggy Cherng, the restaurant continues to be inspired by a “people-first” vision and family values upon which the company was founded, including its promise to uplift and support its Panda family members.

6.  With an annual investment of more than $200 million in its people last year alone, Panda Express associates are offered comprehensive benefits and perks to help them succeed in all facets of life:

• Sustained Growth Opportunities – Panda Express continuously promotes from within, with the internal promotion rate from hourly to management positions being 70 percent; multi-unit managers and above are 100 percent internally promoted.
• Competitive Base Pay, Bonuses, and Paid Time Off – In addition to paid time off and bonuses for all associates, Panda pays above the minimum wage rate nationwide by at least $0.50.
• Health and Wellness Benefits – Medical insurance with 80 percent of the premium covered by Panda and 50 percent for qualified dependents.
• Stock Options and Savings – Stock options and 401(k) savings accounts for eligible associates, with a 401(k) contribution match of up to four percent by Panda.
• Continuous Learning – Panda earmarks nearly $3 million in annual financial assistance to eligible associates in their journey to become high performing and inspirational leaders. Stipends for continuing education opportunities are provided for qualified associates, as well as scholarships with up to 60 percent of tuition coverage, up to a maximum of $2,000 per year per qualified associate.
• Associate Perks – Discounts to theme parks, movie tickets, mobile phones and service plans, gym memberships, Panda Restaurant Group restaurants, and more.

7.  A world leader in people development and an employer of choice, Panda Express is pleased to have more than doubled the number of stores that participated in its nationwide Panda Career Event since its inaugural year. The restaurant held interviews for new positions at over 400 Panda Express locations across the U.S. and Canada. With openings at all levels, including general managers and cooks, Panda Express welcomed interested candidates to register for an interview during the career event.

Announces 2nd Annual Project Fortunate Campaign

8.  In late November 2018, Panda Express and its philanthropic arm, Panda Cares Foundation, announced the second annual Project Fortunate campaign, developed to thank customers and employees for supporting the company’s charitable efforts over the years.

9.  As Panda Express celebrated its 35th anniversary and embarked on the season of giving, Project Fortunate served as a reminder of the smiles given back to underserved children and families through Panda Express’s in-store donation program, which has raised more than $95 million in charitable contributions since the restaurant was established in 1983.

10.  Peggy Cherng, co-chair and co-CEO of Panda Restaurant Group, said, “Project Fortunate is an opportunity for us to highlight the remarkable generosity our guests and associates display every time they contribute to Panda Cares. Through the ringing of our bell in-stores, we are able to illustrate how thankful we are for the chance to help those in need and to bring hope to the communities that we operate in.”

11.  As a gentle reminder to customers that their kindness has a large impact, once a donation has been made, employees ring the bell and express acknowledgment by giving customers a loud and genuine “Thank you.” The in-store bells are a symbol of the celebratory bell children ring when they’re able to go home from a stay at a Children’s Miracle Network hospital, one of Panda Cares’ primary charitable partners.

12.  As a result of in-store donations and the Associate Giving Program, Panda Cares raised more than $32 million in 2017.

13.  In addition to the Children’s Miracle Network partnership, the millions donated each year by customers and employees give Panda Cares the ability to provide funding to Panda’s Education Programs benefitting over 780,000 students, and enabled the donation of 110,159 meals in 2017.

14.  Dr. Cherng added, “During this important time of giving, we feel extremely fortunate for our guests and members of the Panda family who are able to uplift their communities. As an organization, our hope is to create an environment that nurtures the spirit of selflessness through our core values which are grounded in gratitude and generosity.”

Brings Back Favorite Honey Sesame Chicken for a Limited Time

15.  In mid-August 2018, Panda Express announced the return of a fan-favorite dish, Honey Sesame Chicken Breast, to restaurants nationwide. The dish was available for a limited time and featured the same beloved crispy chicken breast strips, string beans, and yellow bell peppers tossed in a sweet sesame sauce – for the first time crafted with organic honey.

16.  Since its first appearance on the menu in 2013, Honey Sesame Chicken Breast has grown a devoted following of fans who await its reappearance each year. According to Panda Express, the newly-added organic honey enriches the original recipe.

17.  Chef Jimmy Wang, director of culinary innovation for Panda Express, said, “The wait is over for Honey Sesame Chicken Breast, which offers the bold Chinese flavors one can expect at Panda Express. As one of our most popular limited time offers, Honey Sesame Chicken Breast brings families together at the table – an important moment in life that we hope all of our guests have more time to enjoy with their loved ones.”

18.  In anticipation of Honey Sesame Chicken Breast’s return, Panda Express introduced a new mobile app that is designed to save customers time and serve up quality dishes in a faster, simpler way. The main features include an interactive step-by-step ordering process; group ordering, allowing multiple customers to input their menu selections from different phones; catering function to plan for large gatherings; access to past orders; a nutrition calculator; and a location finder. Panda Express’s mobile app is available for download from the Apple App Store and Google Play Store.

Company History

19.  Panda Express was started in 1983 by Andrew Cherng and his wife Peggy in Glendale, California. Cherng had already been in the restaurant business since 1973 when he opened Panda Inn with his father, Master Chef Ming Tsai Cherng. While Cherng was running Panda Inn, he met then-UCLA head football coach Terry Donahue, as well as Terry’s brother Dan of Donahue Schriber Real Estate. In 1983, Donahue Schriber Real Estate, which owned Glendale Galleria mall, asked if Cherng could develop a fast-food version of Panda Inn for its food court and Panda Express was born.

20.  Two years later, a second Panda Express was opened at the Westside Pavillion mall in West Los Angeles. In 1987, Panda Express’s signature Orange Chicken was developed by head chef Andy Kao. The flavors Kao used were inspired by dishes from Hunan Province and adjusted for American customers. Over the next decade, Panda Express continued to expand across the United States, primarily in malls. By the early 1990s, there were over 100 Panda Express restaurants in operation.

21.  At the end of the 1990s, Panda Express opened its first stand-alone restaurants. In 2007, Panda Express celebrated another milestone as it opened its 1,000th location. A year later, Panda Express introduced another menu staple, Beijing Beef, to celebrate the brand’s 25th anniversary. Over the next few years, Panda Express added additional new permanent menu items, including Honey Walnut Shrimp and Wok Smart selections.

22.  In 2011, Panda Express opened its first international location in Mexico and in 2017, the chain opened its 2,000th restaurant, located in New York City.

Entrepreneur’s Franchise 500

23.  Panda Express did not rank on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Panda Express franchise costs, based on Item 7 of the company’s 2018 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 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  75
• Outlets at the End of the Year:  85
• Net Change:  +10

2016

• Outlets at the Start of the Year:  85
• Outlets at the End of the Year:  95
• Net Change:  +10

2017

• Outlets at the Start of the Year:  95
• Outlets at the End of the Year:  108
• Net Change:  +13

Company-Owned

2015

• Outlets at the Start of the Year:  1,640
• Outlets at the End of the Year:  1,720
• Net Change:  +80

2016

• Outlets at the Start of the Year:  1,720
• Outlets at the End of the Year:  1,798
• Net Change:  +78

2017

• Outlets at the Start of the Year:  1,798
• Outlets at the End of the Year:  1,897
• Net Change:  +99

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

Captive Venues – Licensed Restaurants Only – Financial Performance Representations/Full Year 2017

• The chart below contains unaudited historical gross sales data for calendar year 2017 reported by Restaurants operated by Licensees and located exclusively in airports, casinos, military facilities, hospitals, and universities (“captive venues”).

• 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).

• 25 of these Restaurants are licensed as joint ventures in which an Affiliate of the franchisor is a minority owner.

• Excluded from this chart is data for 19 licensed Restaurants that were open less than a year, and for 4 licensed Restaurants that closed in 2017 and which had been operating more than a year before closing.

• The franchisor also excluded data for 3 Restaurants located in a theme park, a corporate campus, and a stadium, respectively, due to privacy considerations because they are the only licensed units in these kinds of venues and their data could not be cumulated with other similarly situated Licensees.

• “Gross Sales” is defined as all charges and/or revenues that are received or earned by you (and/or any Affiliate of yours):

• a. by, at, or in connection with any Panda Express Restaurant operated by you including beverage sales, whether they are (i) part of a Panda Express combination plate offering, or (ii) being purchased through a Panda Express register and sold under Panda Express Marks or Trade Dress;
• b. from sales of Panda Express Products in contravention of the Franchise Agreement at locations outside a Restaurant;
• c. from proceeds of any business interruption insurance, less the deductible amount;
• d. from mail, fax, and telephone orders and/or any orders received through other electronic or other means and filled on or from a Restaurant;
• e. from all deposits not refunded to purchasers;
• f. from orders sold under Panda Express Marks or Trade Dress though filled outside a Restaurant;
• g. in connection with any Similar Business operated in violation of this Agreement.

• All sales and/or billings, whether collected or not, will be included in Gross Sales, with no deduction for credit card or other charges.

• Gross Sales does not include sales tax collected and paid when due to the appropriate taxing authority and actual customer refunds, adjustments, credits, and employee discounts actually given.

• Restaurants located in geographical areas with multiple operating Restaurants and stronger brand recognition tend to outperform units located in less developed areas.

• Restaurants for which results are reported here have limited geographic diversity, with captive venue units being located in 27 states and with approximately 31% of them established in California and Texas. Climate, local demographics, cultural and other differences in geographical areas can significantly affect results.

• A new Licensee’s results may be materially different from those described here due to factors such as operating experience.

• The financial performance figures shown do not reflect costs of sales, operating expenses, or other costs or expenses that must be deducted from the gross revenue or gross sales figures to obtain your net income or profit.

• The franchisor used information reported to it by its Licensees 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. The information presented is not presented in accordance with generally accepted accounting principles.

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