In 1972, Andrew Cherng’s father had the Panda Inn. It was Andrew that started Panda Express and it now has over 2,500 locations.
Dave Young:
Welcome to The Empire Builders Podcast, teaching business owners the not so secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.
[AirVangtage Heating & Cooling Ad]
Dave Young:
Welcome back to The Empire Builders Podcast. Dave Young here, Stephen Semple is here as well and he just whispered the name of today’s subject into my ear as the countdown timer was going down and I’m stalling because all I got is orange chicken.
Stephen Semple:
Hold that thought. We are going to come-
Dave Young:
Orange chicken.
Stephen Semple:
We are going to come back to orange chicken. Yeah, absolutely. Hold that thought.
Dave Young:
So we’re talking about Panda Express today and really all I know about it is I don’t mind eating there. It’s like, oh shoot, there’s a Panda Express. Maybe that’s where we should go. Or you’re in the mall and hey, there’s the Panda… It’s like, yeah, it’s an innocuous, nice middle ground choice.
Stephen Semple:
Yeah. That’s-
Dave Young:
And it’s been a really good choice, like even during not just pandemic, but now everybody does a lot more Uber Eats and that kind of stuff.
Stephen Semple:
Yeah.
Dave Young:
It’s a good one for that. There’s nothing as bad as a burger and fries after riding in some stranger’s car for 15 minutes, so. But Panda Express, that comes in nice.
Stephen Semple:
Some foods don’t travel as well. Yeah.
Dave Young:
So that’s all I know. I have no idea how they started. I have no idea how big they are.
Stephen Semple:
And that’s an interesting observation and there’ll be, a reason why it travels well-
Dave Young:
Okay.
Stephen Semple:
Will actually come up as part of its history. And I didn’t put those two… As usual, Dave, you’ve put together a couple of things that I hadn’t contemplated. So-
Dave Young:
Take out. Yeah.
Stephen Semple:
Yeah. So basically 1972.
Dave Young:
Wow, ’72.
Stephen Semple:
But it didn’t start as Panda Express. It was a sit down restaurant called Panda Inn that was started by Andrew Cherng’s father and it was Andrew who started Panda Express. Now, Panda Express does great. Today it does over $6 billion in sales. It’s got 2,500 locations, 48,000 employees. And here’s the thing you’re going to love, Dave, still privately owned by the family.
Dave Young:
Yes. Good for them.
Stephen Semple:
I knew-
Dave Young:
Good for them.
Stephen Semple:
You would like that. Yeah. And it’s the largest Asian dining chain in the United States. And here’s the other part that I found quite amazing. The average store does two and a half million in sales, some locations are over nine million, making it one of the highest performing fast food chain in its category.
Dave Young:
Amazing. And I think the cool thing is, I mean, it’s fast food, but it’s also, it always seems pretty fresh, right?
Stephen Semple:
Yeah.
Dave Young:
You’re watching them cook it.
Stephen Semple:
Yeah.
Dave Young:
So…
Stephen Semple:
Now here’s the interesting thing, is the birth of the Panda Express is tied to the birth of food courts. The history of these two kind of go together. So the mall era started on October 8th, 1956 with the opening of the Southdale Center in Minneapolis.
Dave Young:
Okay.
Stephen Semple:
That was kind of the-
Dave Young:
Southdale Center.
Stephen Semple:
Yeah, that was kind of the first mall. And before the mall, shoppers visited individual stores outside and the indoor mall consolidated all of this into one giant room. Now, thing I find funny is we went from everything being outdoors to a covered mall where everything’s indoors and then now all these new malls are a collection-
Dave Young:
Outdoors.
Stephen Semple:
Of stores, outdoors.
Dave Young:
Yeah. What comes around comes around again. We went from downtown central business district walking around in the streets to malls to back out to fake looking downtown walking around.
Stephen Semple:
Yeah, fake looking downtowns. Yeah. Oh my God.
Dave Young:
Yeah.
Stephen Semple:
It’s just-
Dave Young:
With no pedestrians, just scorching areas of heat or cold.
Stephen Semple:
Yeah, that’s it. Anyway.
Dave Young:
And a week in the fall and a week in the spring and it’s just lovely to be there.
Stephen Semple:
I know, but they seem to do well. What do I know? So essentially the whole mall thing started in 56 and over the next 20 years, like 11,000 malls opened in the United States, like just a massive explosive growth. But the early malls did not have food courts.
Dave Young:
I remember going to malls that didn’t have food courts.
Stephen Semple:
Yeah. So enter James Rouse. It’s early 1970s and James Rouse is looking for ways to keep shoppers in his malls longer.
Dave Young:
Sure.
Stephen Semple:
And it’s 1974 and he introduced an idea to a mall in New Jersey, this communal dining concept with multiple food vendors around a central court of tables. So that was first introduced in ’74 in New Jersey. And the early food courts kind of mirrored fairgrounds and stadium concession models, hotdogs, ice cream, grab and go staples, offering calorie dense, but kind of unremarkable fare.
Dave Young:
Yeah, that makes sense.
Stephen Semple:
But that’s what they modeled.
Dave Young:
Yeah.
Stephen Semple:
That’s what they modeled. National food, they had been approaching national food like McDonald’s, and Wendy’s, and Burger King. They declined to participate because they believed that their value depended upon exterior facing, high visibility, roadside locations, and they fear, they didn’t feel that the foot traffic in the mall could sustain them.
Dave Young:
Well, they’ve come around. I mean-
Stephen Semple:
A little bit.
Dave Young:
A little bit. I can’t think of an airport that doesn’t have a McDonald’s in it.
Stephen Semple:
Right.
Dave Young:
Right. Yeah.
Stephen Semple:
Yeah. But their early thinking was that won’t work.
Dave Young:
We’re a drive through place. Yeah.
Stephen Semple:
Oh, mind you, ’70s, yeah, I guess drive throughs would have been just even starting.
Dave Young:
Getting there. Yeah.
Stephen Semple:
But it was the whole idea of the high visibility location-
Dave Young:
Sure.
Stephen Semple:
And a thoroughfare, right? So now Andrew Cherng’s vision was to separate himself from the existing Chinese American restaurants and he wanted to go more towards authentic Chinese cuisine from the north. But in the early ’80s, this was kind of a bit of a tough sell as we’ve seen with other companies we’ve talked about to get people to try that authentic Chinese food. So one day there’s two loyal customers of his comes in, Dan Donahue and Terry Donahue and Terry happens to be a UCLA football coach and Dan is a real estate developer and they’re talking about how they were planning on opening a food court in a mall nearby. And Andrew Cherng overhears that one of the vendors had bailed on them, like they were complaining about this vendor-
Dave Young:
Sure.
Stephen Semple:
Had bailed them.
Dave Young:
But he’s got a full service Chinese restaurant.
Stephen Semple:
He has a full service sit down Chinese restaurant.
Dave Young:
Gotcha.
Stephen Semple:
He starts thinking maybe he can bring some of the great food from Panda Inn to the masses.
Dave Young:
Yeah.
Stephen Semple:
But his idea was this. If he could get people to try it in the food court-
Dave Young:
They’d come.
Stephen Semple:
Then they would come to the restaurant.
Dave Young:
Sure.
Stephen Semple:
So he was looking at it as the gateway to selling to the restaurant. So it was originally to drive business to the restaurant was his thinking. And he said to Dan and Terry, “Can I do that?” And given someone had just bailed, they’re like, “What the heck? Why not?”
Dave Young:
Easier than going out and selling to somebody else, right?
Stephen Semple:
Right.
Dave Young:
Yeah.
Stephen Semple:
Right. Now there was a risk because this type of food had never been done in the mall before. Andrew signs a lease. Now here’s what he knew. Andrew was a smart guy. He recognized a couple of things. First of all, he knew that success in the mall would rely on speed. There was a limit to how long people would wait.
Dave Young:
Sure.
Stephen Semple:
And speed proved to be the defining operational constraint. So while wok cooking is fast, seven minutes per order lag behind what he needed to do-
Dave Young:
Yeah. Yeah.
Stephen Semple:
Risking people walking away. So after trying prepackaged ingredients and spice blends to speed up cooking time, he realized he didn’t need to cook orders faster. What he needed to do is cook in large batches and hold them.
Dave Young:
Just batches. Yeah, yeah.
Stephen Semple:
Right? So he just-
Dave Young:
Yeah, it’s basically a buffet that you don’t get to serve yourself.
Stephen Semple:
Basically. Yeah. So he deployed steam tables, which were then uncommon in food courts to keep the dishes warm and revamped the entire menu to perform well under steam. They specifically picked foods that would do well on that. So on October 8th, 1983, he unveiled this new food line up to the Glendale Galleria and some of the things included like sweet and sour pork, fried rice, lo mein, and other recognizable Chinese American staples. Food’s new, it’s different, has different names. And he struggled to get people to try them. And what he figured out was what he needed to do because the food was unfamiliar, he took an inspiration from retail store windows. And instead of the food being in the back, like almost-
Dave Young:
Oh, yeah. Yeah. Yeah.
Stephen Semple:
Every food place, he moved the food up front and put it under the glass, right?
Dave Young:
And then you look at it and you go, “Oh, I might like to try that.”
Stephen Semple:
Not only that, I don’t have to embarrass myself with not knowing the name. You can just point. I’ll have some of that.
Dave Young:
Exactly.
Stephen Semple:
I’ll have some of that. I’ll have some of that, right? So now he’s serving a faster version of Panda Inn, but he also realizes he needs to convey to people its speed.
Dave Young:
Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.
[Using Stories To Sell]
Dave Young:
Let’s pick up our story where we left off and trust me you haven’t missed a thing.
Stephen Semple:
So now he’s serving a faster version of Panda Inn, but he also realizes he needs to convey to people its speed. So he changes the name.
Dave Young:
Express.
Stephen Semple:
Panda Express.
Dave Young:
Yeah. No, it’s a beautiful story.
Stephen Semple:
Yeah.
Dave Young:
Makes perfect sense.
Stephen Semple:
Yeah.
Dave Young:
He made smart decisions.
Stephen Semple:
Yeah.
Dave Young:
And limited menu obviously, right? You can’t order the-
Stephen Semple:
Right.
Dave Young:
Number 73.
Stephen Semple:
Right. You just point. Point, point, point.
Dave Young:
Yeah. Yeah. Point at the six or eight different dishes that they have, right?
Stephen Semple:
Correct. Now he still found there was some hesitation to try this unfamiliar food. So he did some free sampling. Typical thing for anybody introducing a new food. And around this time, he has a bit of a lucky break because around this time there’s also a cultural shift in America to embracing Asian culture.
Dave Young:
Okay.
Stephen Semple:
Karate Kid was a big hit. Teenage Mutant Ninja Turtles is out. So there is a little bit of a wave that’s helping him here.
Dave Young:
You’re growing tired and bored with La Choi-
Stephen Semple:
Right.
Dave Young:
As you would.
Stephen Semple:
Yeah.
Dave Young:
A can of something and some crispy noodles.
Stephen Semple:
Yeah, very old.
Dave Young:
I mean, growing up, that’s all I knew from Chinese food was-
Stephen Semple:
Right.
Dave Young:
Cans of La Choi.
Stephen Semple:
Right.
Dave Young:
You want to make it extra special, mom will open up an extra can of water chestnuts.
Stephen Semple:
I always forget our childhood experience being a little different because I grew up in Toronto. Right.
Dave Young:
Yeah. There’s actually Asian restaurants there. Western Nebraska-
Stephen Semple:
Actually, there is.
Dave Young:
There actually was one by the ’90s we had a Chinese restaurant.
Stephen Semple:
Oh, wow. Okay.
Dave Young:
I think they were mass-producing them and just planting them in small towns because it seemed like every town had one that was the same menu.
Stephen Semple:
Well, the thing that-
Dave Young:
That’s another story sometime though, right?
Stephen Semple:
Well, except the thing I always laugh about is in Ontario, every small town, it does not matter how small the town is. Every small town has a Canadian Chinese restaurant.
Dave Young:
Yes. Yeah.
Stephen Semple:
Every one. Every single-
Dave Young:
I think that’s true in the US. It was starting to be-
Stephen Semple:
Oh, same thing?
Dave Young:
Even in Nebraska.
Stephen Semple:
Okay.
Dave Young:
Town of 6,000 people in the ’90s. We had a Chinese restaurant and it was all Chinese people and I don’t know where they lived. I have no idea. They were the only ones in town.
Stephen Semple:
Right.
Dave Young:
So he figures out that it’s got to be fast.
Stephen Semple:
He’s figures out it got to be fast.
Dave Young:
[inaudible 00:13:56] Panda Inn.
Stephen Semple:
Yes, got to be fast. It’s got to be food that can be held with the steam. Think about the innovations. So then there’s the menu part. Then he realizes I’ve got to put the food up front under glass so that people can see it. And then, even then I still got to do a little bit of sampling.
Dave Young:
Yeah. And they still do, right? I mean-
Stephen Semple:
Right.
Dave Young:
This is great.
Stephen Semple:
Oh, absolutely. Here’s the interesting thing, is it all started as being, the purpose of it was all to drive things to the restaurant.
Dave Young:
Yeah. Yeah.
Stephen Semple:
Well, that idea got kind of abandoned because in 1984 he opens the second store.
Dave Young:
Yeah. I bet they blew past the restaurant in sales pretty quick.
Stephen Semple:
And they had an edge here in the early days that really, really helped them with their growth because think about it. McDonald’s, Burger King, KFC, all of these were reluctant to go into malls. So it was much easier for them to get into malls, like just-
Dave Young:
Yeah, we’ll do it.
Stephen Semple:
Absolutely. And then even when they got there, you’re not competing with McDonald’s.
Dave Young:
I mean, there’s no other, especially that time. I can’t think of one now. There’s no other Chinese food, fast food. It’s a category of one at that time, basically.
Stephen Semple:
At that time, yes. Yes. There’s more now, but certainly at that time. So here’s the other thing where Andrew’s really brilliant. Very observant guy. So as they’re opening stores, he started noticing that there was regional varieties. Some dishes excelled while others fell flat. And Cherng adapted by crafting market specific offerings. He worked a lot with his chef to start creating things. Now what they also wanted to do is start creating some unique dishes.
Dave Young:
Yeah. Yeah.
Stephen Semple:
Remember what you talked about early on?
Dave Young:
Yeah, sure, sure. Yeah, orange.
Stephen Semple:
And they started drawing on this whole idea of a tangerine chicken and they iterated like 20 or 30 times. Also, ultimately replacing the bone in, the skin cut off and using these bite-sized boneless deep-fried pieces. Really, when you think about it-
Dave Young:
Yeah, nuggets.
Stephen Semple:
It’s actually closer to a chicken nugget.
Dave Young:
Yeah, exactly.
Stephen Semple:
Right. And then tune the sauce to local taste.
Dave Young:
Yeah, I can tell you-
Stephen Semple:
So in 1987-
Dave Young:
I can tell you what the local taste is. Coat it in sugary sweetness and-
Stephen Semple:
There you go.
Dave Young:
Americans will buy it up.
Stephen Semple:
So in 1987, they introduced orange chicken, a crunchy, zesty, slightly spicy, sweet dish that felt exotic-
Dave Young:
Oh, yeah.
Stephen Semple:
Yet familiar. And it soon became a staple nationwide. Even though it lacks ties to traditional Chinese cuisine, was now being copied-
Dave Young:
Nobody cares.
Stephen Semple:
By everybody has orange chicken.
Dave Young:
Yeah. Nobody cares about that. I love this. I love this.
Stephen Semple:
Yeah.
Dave Young:
This is somebody that they’re going where the people are. They’re sticking to the knitting, right? We talked about that in the Top Golf episode where they lost track of what business they’re in. But this guy was in fast food business in mall courts.
Stephen Semple:
Yes.
Dave Young:
And once you’ve got the lease, man, you sell people what they want to eat. So he figured out-
Stephen Semple:
Yes.
Dave Young:
What they want to eat and he quit serving stuff they don’t want to eat.
Stephen Semple:
Right. And you can still do things that are unique.
Dave Young:
And you don’t stick to the like, oh, my grandparents and my ancestors would be disappointed in me by feeding them. No, you’re not in that business. That’s a different thing.
Stephen Semple:
Well, and you can be unique, but you be unique by going to the edge of the Venn diagram. You don’t go outside of the Venn diagram.
Dave Young:
Sure.
Stephen Semple:
Right? No, but that was what he did. He expanded the cuisine but didn’t expand it too far. And even when he did expand, it still made it safe and familiar. You could see the food, you could point at the food. It was like this whole idea of expanding the diagram rather than stepping outside of it.
Dave Young:
Yeah, yeah. Makes sense.
Stephen Semple:
Yeah. So today, you think about the success they’ve had and what I love, still owned by the family, 2000 locations, $3 billion in sales, huge success. And it all started with a conversation in his restaurant where two guys are going, “Man, it’s really too bad that Jim bailed. What are we going to do?” And he’s like-
Dave Young:
Right. Yeah.
Stephen Semple:
“I could do that.”
Dave Young:
Then the guys that would open the mall court, they had to be happy. Now I’m guessing. How many billions in sales every year?
Stephen Semple:
Three.
Dave Young:
I’ll bet you that there’s no member of that family still sweating away at the old Panda Inn.
Stephen Semple:
I didn’t look to see whether the Panda Inn was still open, but I’m kind of with you.
Dave Young:
I bet they all got on board.
Stephen Semple:
Probably not. Probably, probably.
Dave Young:
Running a restaurant is hard, but this, it’s not that it’s easy. It’s that it’s scalable, right?
Stephen Semple:
Yep. Yes.
Dave Young:
You can go into all the malls, not just one like-
Stephen Semple:
And they have.
Dave Young:
Gosh, opening a second restaurant can be daunting, but figuring out a formula and then cookie cuttering it into all the food courts a little easier, right? I mean- it’s not that it’s easy, but you don’t have to reinvent it. You don’t have to figure it out all over again.
Stephen Semple:
There’s a restaurateur here in Toronto that I would love to try to interview. If I ever could, I would because they are massively successful and no two restaurants are the same. No two are the same cuisine.
Dave Young:
Oh, wow.
Stephen Semple:
And I think to myself, how has he managed to do it?
Dave Young:
They’re like these, well, I knew some people in Tucson that do that. Right. They’ll have six or eight restaurants that are all really popular. In fact, in Austin, you’ve eaten near the Wizard Academy campus. There’s a place called The League-
Stephen Semple:
Yes.
Dave Young:
And those guys own five or six different concepts. I don’t know what their game plan is, but it feels like sometimes they’re looking for one that they can then build all over the place, but maybe not. Maybe they just like trying something new.
Stephen Semple:
But I think what an amazing restaurant mind, to be able to open up these things that are all different cuisine and all successful and all great in their own right. But anyway, back to Panda Express, fantastic success story. And I just really love how he just was really methodical in terms of the direction he went and really observant and just drove forward and have built this huge family success.
Dave Young:
I’ll give him credit too for letting us all experiment with chopsticks.
Stephen Semple:
There you go.
Dave Young:
Right. Because they did both, right?
Stephen Semple:
They did. They did.
Dave Young:
They’re like, “Okay, well here’s chopsticks, but if you want, here’s a fork.”
Stephen Semple:
Yes.
Dave Young:
I always thought that was nice of them because I always-
Stephen Semple:
Yeah, that’s kind of fun.
Dave Young:
Try to make a little effort. It’s fun to play with chopsticks and then, all right, it’s time to eat. I can’t eat one piece of rice at a time because that’s about all I could do with the chopsticks. Bring me a fork or a shovel. Yeah. All right. Panda Express. I got to check out my DoorDash app. What’s for lunch?
Stephen Semple:
Right. There you go.
Dave Young:
Thanks for bringing up the story of Panda Express, Stephen.
Stephen Semple:
All right. Thanks, David.
Dave Young:
Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big, fat, juicy five star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.
