Can you finally open a panda express franchise? (cost + analysis)

Panda Express: a brief introduction

Panda Express is an American fast-food restaurant chain best known for its American Chinese cuisine. With stores in more than 42 states in the US, it’s the largest Asian-segment restaurant chain.

The chain store was founded by Andrew Cherng, Peggy Cherng, and Master Chef Ming Tsai Cherng, Andrew’s dad, in 1983. Its first store was in Glendale, California.

Panda Express serves Chinese-cuisine-inspired dishes such as Kung Pao chicken, orange chicken, sweet fire chicken breast, teriyaki chicken, and Beijing beef. In addition, it also offers honey walnut shrimp, black pepper Angus steak, mushroom chicken, and eggplant tofu.

Its franchising journey began in 2011 with the first international restaurant in Mexico. However, Panda Express states in its FDD that franchisees will operate in “captive” venues like airports, campuses, hospitals, and universities. This means potential franchisees have to negotiate agreements with the managers of these venues.

Today, the chain has over 2,200 stores in the US and 12 countries globally. It is the leading casual fast food chain store specializing in American Chinese cuisine.

Challenges of a Panda Express Franchise

Every business including Panda Express has its challenges. I view these as the key challenges of franchising a Panda Express.

Long Lines

Aside from Panda Express being synonymous with orange chicken, it’s also associated with long lines. Whenever you’re at the food court or drive-thru, you’re bound to see a long line of people queuing to order at any given time.

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Though the high traffic is good for business, it can also drive potential customers away. They’ll see the long line and think, “Oh, let’s find someplace else.” Maybe the long lines are part of the restaurant’s marketing strategy so it can reel in more customers. But sometimes, long lines can be a disadvantage and have people opt for some other place that can accommodate them at once.

Employee Lawsuits

Panda Restaurant Group Inc. has faced numerous lawsuits before. These lawsuits involved hiring discrimination, overtime pay, and harassment. Though the company has settled these lawsuits, it has damaged Panda Express’s name. You should be aware of these as a possible franchise owner in the future.

How profitable is a Panda Express franchise?

As per our calculations, the average Panda Express franchisee makes $184,872 profits per year. This corresponds to a 30% adjusted EBITDA margin.

Note that this isn’t the take-home pay of a franchisee. Instead, this adjusted EBITDA is a profit margin that includes only all the costs described in the table below, namely: COGS, labor costs, rent and royalty fees.

Even though the 30% margin is on the higher-end of similar franchises, the Franchise Disclosure Document of Panda Express doesn’t give much details on how much you should spend in marketing. Indeed, there is no such percentage fee for marketing unlike the vast majority of franchises.

Profit-and-loss	Amount ($)	As % of sales
Sales	$616,240	100%
COGS	$(154,060)	25%*
Labor	$(178,710)	29%*
Rent	$(49,299)	8%*
Royalty fees	$(49,299)	8% as per FDD
Adjusted EBITDA	$184,872	30%

* industry average

Panda Express Franchise Facts

Total Units	2,200+
Incorporated Name	Panda Express
Franchising Since	Does Not Allow Franchising
Industry	Fast-Casual Restaurant
Subsector	Food and Beverage

Panda Express’s roots started in the 1970s when Andrew Cherng along with his father opened the Panda Inn in Pasadena, Calif. Panda Inn was an upscale restaurant where Mandarin and Sichuan dishes were served. In , together with Peggy Cherng, they opened Panda Express which was positioned as a fast-food version of Panda Inn. The first Panda Express was located in Glendale Galleria in Glendale, Calif.

Peggy Cherng has a Ph.D. in Electrical Engineering and an M.S. in Computer Sciences was the person behind Panda Express’s efficient operating system. Cherng implemented tracking inventories as well as a computerized system for reordering ingredients which made the business process faster and easier, something that other Chinese-American restaurants weren’t practicing during those times yet.

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Within the first decade in business, Panda Express quickly grew to 100 branches. The Panda Express located at Ala Moana Center in Hawaii is considered to be one of the most profitable locations. This location alone rakes in a reported $4 million a year. Panda Express also started testing drive-thrus back in 1997.

A wok at Panda Express.

In the beginning, the restaurant chains were mostly found in food courts in malls. Panda Express has always had a strategy of opening in locations where there is a captive audience. As a result, the company has targeted opening on university campuses, airports, amusement parks, and even casinos.

The company’s first location outside the United States was in Mexico City in 2011. Other places where Panda Express can be found include Dubai, Canada, Philippines, Japan, Puerto Rico, Guam, and South Korea.

Panda Express’s most popular item is orange chicken. These are chicken bites with a sweet and spicy orange sauce. According to their website, they’ve sold over 80 million pounds of orange chicken since 2016. In 2017, they’ve also bought 22 million pounds of broccoli. Other popular dishes on the menu are Beijing Beef and Honey Walnut Shrimp. The restaurant also gives away fortune cookies with uplifting notes on inscribed on them. Panda Express hands out a staggering 282 million fortune cookies annually.

The Asian restaurant chain won the 2021 Excellence in Food Safety Award for their efforts in ensuring food safety. In spite of massive growth, Panda Express is still considered a family business with couple Andrew and Peggy Cherng at the helm. 838 in Forbes’ Billionaires List of the richest people in the world with a combined net worth of $3 billion.

They couple has three children and two of them work for Panda Restaurant Group Inc., the parent company that owns Panda Express, Panda Inn, and Hibachi-san. Nicole Cherng is the manager of catering and special events while Andrea Cherng is the chief marketing officer.

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The company is known to be very charitable. Panda Cares is the organization under Panda Restaurant Group Inc. involved in all sorts of philanthropic missions. The organization was formed in 1999 with the mission of providing funding, food, and volunteer services for disaster relief efforts and underserved children. The group has raised over $50 million for charity. The headquarters for Panda Restaurant Group Inc. is located in Rosemead, California.

Panda Express franchise: pros and cons

Pros

Panda Express is a popular brand and fast-growing casual fast-food chain that offers some amazing benefits.

Fast-growing brand: The Panda Express brand has grown very fast for the last three decades. It has over 2,200 stores globally and is still growing, which is a huge milestone. New franchisees have access to a large customer pool for marketing and growth opportunities
Wide variety of menu items: Panda Express has a very rich menu. They offer food items like beef, chicken, fish, vegetables, noodles, and rice. It is the best for customers looking for diverse eating options. As a new franchise, this is a good marketing opportunity as it attracts customers from different backgrounds
Popular brand: Panda Express is a well-recognized brand among its customers. Customers looking for delicious fast food and convenient service flock to the few franchisees who qualify for its selection
Training and support: The chain restaurant offers extensive training support to its franchise partners. They train new franchisees on how to establish their restaurants and properly manage them to maximize profits
Proven business model: Panda Express has been successful in its pursuit of providing an Asian dining experience. They understand what works and what doesn’t. They also provide franchisees with a solid business strategy that can steer the growth and profitability of their businesses

Cons

Despite Panda Express being a popular and very successful brand, it has its downside.

Corporate ownership: Panda Express prefers corporate ownership for its franchises. This makes a Panda Express franchise a non-possibility. Franchisees have limited options since the franchisor leaves operations to company owners
Less freedom for franchisees The Panda Express franchise dictates how the franchisees run the business. It tightly controls its franchises. When running a Panda Express franchise, you will have limited flexibility in adapting your business idea
Expensive: Operating a Panda Express franchise is very costly. It requires a hefty initial franchise fee and ongoing royalty fees, making the business less attractive

Advantages of a Panda Express Franchise

Based on the multi-decade growth there would clearly be many advantages to franchising a Panda Express. Here are some of the biggest advantages of this restaurant.

The Orange Chicken Experience

Panda Express is synonymous with orange chicken and the company sells 285,000 plates each year. The store’s most popular item on the menu is the one sought after by many for its crispy skin but also juicy bite smothered in orange sauce. As mentioned above, they sell literally millions of pounds of the stuff every year.

Even though independent Asian restaurants serve the same items on their menu, people continue to choose Panda Express due in part to dish consistency. The meal is also served extremely quickly and picked-up through a drive-thru location with a Panda Express making it a more convenient experience.

Variety

If you’ve been to a Panda Express then you know that they have an extensive menu. Ingredients include beef, chicken, fish, vegetables, noodles, and rice with options from plain steamed rice to brown rice. The servings are generous too. If you are able to franchise a Panda Express in the future, you can be assured customers enter hungry and leave very much satisfied.

They’re Not Stopping

You’d think with over 2,200 locations, Panda Express would be struggling to find new markets to enter. But even to this day, the restaurant chain is continuing to expand. Their recent branch just opened in Owensboro. Being a part of the Panda Express franchise family means you’re in good hands knowing that the company is continuously growing.

How much does a Panda Express franchise cost?

If you are willing to begin a Panda Express franchise you must invest a total of $1,415,350 (on average).

The investment amount represents the average of both the minimum and the maximum amount you need to pay, depending on your location and other factors. According to the latest FDD, this amount is between $426,700 and $2,404,000.

The payment you would make will cover all types of expenditures that may incur during the opening of a Panda Express restaurant.

In addition to the initial franchise fee of $25,000, the investment cost covers:

Formation costs: leasehold improvements, furniture, equipment, computer hardware & software, cash register, initial training, architectural & design fees, construction supervision, and licenses & permits, etc.
Operating expenses: initial 3 months’ rent, supplies, initial inventory, insurance, sales tax deposits, telephone, fax, and other communication-related fees, and additional funds for covering the first 3 months’ losses, etc.

This summary could help you to visualize the different types of costs you need to pay:

Type of cost	Investment
Initial Franchise fee	$25,000
Formation costs	$294,500 – $1,748,000
Operating expenses	$107,200 – $ 631,000
Total	$426,700 – $2,404,000

Source: FDD 2022

О методике анализа

Выше приведен сравнительный анализ финансового положения и результатов деятельности организации.
В качестве базы для сравнения взята официальная бухгалтерская отчетность организаций Российской Федерации за 2021,
представленная в базе данных ФНС (2.2 млн. организаций).
Сравнение выполняется по 9 ключевым финансовым коэффициентам (см. таблицу выше).
Сравнение финансовых коэффициентов организации производится с медианным значением показателей всех организаций РФ и организаций в рамках отрасли,
а также с квартилями данных значений. В зависимости от попадания каждого значения в квартиль присваивается
балл от -2 до +2 (-2 – 1-й квартиль, -1 – 2-й квартиль, +1 – 3-й квартиль; +2 – 4-й квартиль;
0 – значение отклоняется от медианы не более чем на 5% разницы между медианой и квартилем, в который попало значение показателя).
Для формирования вывода по результатам анализа баллы обобщаются с равным весом каждого показателя,
в итоге также получается оценка от -2 до +2:

	значительно лучше (+1 — +2вкл)
	лучше (от 0.11 до +1вкл)
	примерно соответствует (от -0.11вкл до +0.11вкл)
	хуже (от -1вкл до -0.11)
	значительно хуже (от -2вкл до -1)

Изменение за год вычисляется путем сравнения итогового балла финансового состояния в рамках отрасли за текущий год с баллом за предыдущий год.
Результат сравнения может быть следующим:

	значительно улучшилось (положительное изменение более чем на 1 балл).
	улучшилось (положительное изменение менее чем 1 балл);
	не изменилось (балл не изменился или изменился незначительно, не более чем на 0,11);
	ухудшилось (ухудшение за год менее чем на 1 балл);
	значительно ухудшилось (ухудшение за год более чем на 1 балл);

Источник исходных данных: При анализе использованы официальные данные Росстата и ФНС,
публикуемые в соответствии с законодательством Российской Федерации. Если вам доступен оригинал бухгалтерской отчетности,
рекомендуем сверить его с отчетностью ООО «ПАНДА-КАФЕ» по данным ФНС, чтобы исключить опечатки и неточности возможные при занесении отчетности в электронную базу налогового ведомства.

Нужен официальный отчет? Если вам требуется письменное заключение по результатам сравнительного анализа,
пишите нам, мы подготовим детальный отчет аудиторской фирмы (услугу оказывают аттестованные аудиторы на платной основе).

Внимание: Представленный анализ не свидетельствует о плохом или хорошем финансовом состоянии организации,
а дает его характеристику относительно других российских предприятий. Для детального финансового анализа воспользуйтесь
программой «Ваш финансовый аналитик»
— загрузить данные в программу >>

How Much Does Panda Express Make in Profit?

Panda Express has not made their profit data known, but the restaurant chain’s net income was around $8,000,000 in the year 2020. While we don’t know exactly how profitable a Panda Express, generally speaking Chinese food is a profitable menu item. Most Chinese restaurants can markup their dishes 3 – 4 times food cost. Of course, this doesn’t take into account the cost of labor, rent, or taxes so keep that in mind.

Considering Panda Express’ commitment to running a tight ship, I bet they’ve found a way to reduce their food costs even further beyond mom-and-pop Chinese restaurants that can markup food by 3x – 4x. At this point, Panda Express enjoys economy of scale and can negotiate with vendors to reduce the cost of ingredients.

Is a Panda Express franchise a good investment?

In order for us to assess whether investing in a Panda Express franchise is a good investment, we must look at the payback period. The investment payback period is the time (in years or in months) it takes an investor (or a franchisee) to reimburse her/his original investment.

As per our calculations, it takes 15 years to recoup your original investment. This is extremely long and, from that perspective, Panda Express isn’t a good investment.

This can be explained by the high investment cost of $1,415,350 vs. rather low sales ($616,240). All in all, the investment to sales ratio is 0.4x which is mediocre.

But keep in mind this is purely an average, and the investment cost really depends on the format of restaurant and its location as we saw before. Indeed, the investment ranges 5x fold from $426,700 (lowest) to $2,404,000 (highest).

As such, you should make your decision by selecting the specific format of franchise restaurant you intend to open.

To apply for a Panda Express, download our pre-built business plan below and visualize metrics like breakeven, payback, return on investment and more.

Disclaimer: This content has been made for informational and educational purposes only. We do not make any representation or warranties with respect to the accuracy, applicability, fitness, or completeness of the information presented in the article. You should not construe any such information or other material as legal, tax, investment, financial, or other professional advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, advertisement, or offer to buy or sell any franchises, securities, or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the franchise and/or securities laws of such jurisdiction.

All content in this article is information of a general nature and does not address the detailed circumstances of any particular individual or entity. Nothing in the article constitutes professional and/or financial and/or legal advice, nor does any information in the article constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other content in this article before making any decisions based on such information or other content.

Ключевые финансовые показатели

Показатель	Сравнение показателей за 2021 год
с отраслевыми(56.10 «Деятельность ресторанов и услуги по доставке продуктов питания», 13,7 тыс. организаций с выручкой 10 — 120 млн. руб.)	с общероссийскими(558 тыс. организаций с выручкой 10 — 120 млн. руб.)
1. Финансовая устойчивость
1.1. Коэффициент автономии (финансовой независимости)	-0,71 0,46	-0,71 0,34
1.2. Коэффициент обеспеченности собственными оборотными средствами	-0,7 0,4	-0,7 0,2
1.3. Коэффициент покрытия инвестиций	-0,7 0,7	-0,7 0,5
2. Платежеспособность
2.1. Коэффициент текущей ликвидности	0,6 2,5	0,6 1,6
2.2. Коэффициент быстрой ликвидности	0,3 1,6	0,3 1,1
2.3. Коэффициент абсолютной ликвидности	0,3 0,3	0,3 0,2
3. Эффективность деятельности
3.1. Рентабельность продаж	-5,5% 7,6%	-5,5% 4,7%
3.2. Норма чистой прибыли	-6,5% 5,1%	-6,5% 2,8%
3.3. Рентабельность активов	-103,3% 17,2%	-103,3% 7%
Итоговый балл	-1,9Финансовое состояние организации значительно хуже среднего по отрасли.	-1,7Финансовое состояние организации значительно хуже среднего по РФ.

Is the Panda Express Franchise Right For You?

Panda Express is not available for franchise right now but if it does open its doors to sharing their chain in the future then this might be the right franchise for you. Panda Express has a wide variety of items on their menu and a delicious fan favorite known as the orange chicken that brings back customers again and again. If it’s an Asian-American restaurant chain you’re evaluating, Panda Express would be one of the top opportunities I’d take a look at.

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What is an alternative Panda Express franchise?

If you can’t wait for the day that Panda Express will accept franchise operator applicants, check out Teriyaki Madness. This Asian-American chain has been around since 2003 and has over 150 branches all over the United States. The restaurant serves bowls of chicken, fish, or beef, including their own version of orange chicken. They also have options like fried rice, noodles, white rice, or brown rice.

Teriyaki Madness is also open for franchisees. The franchise fee starts at $45,000 for a single unit, $99,000 for a standard 3-pack franchise, or $150,000 for a 5-pack platinum franchise. Other fees you should be aware of are weekly royalty fees of up to 6% depending on the gross sales figures you bring in.

Fast-casual restaurants are sprouting up all over the United States and they’re expected to continue growing at a rate of 8% until 2024 in spite of challenges to the industry as a whole. These types of restaurants are known to serve high-quality food in a casual setting. Many also deem them to be healthier compared to fast-food. Whatever the case, fast-casual restaurants are on the rise and one of the top players is Panda Express.