For Panda Express Owners, It’s About Family

Written by Kerry Hannon for the New York Times | published 22 March 2018

At the entrance to the Rosemead, Calif., headquarters of Panda Restaurant Group, the parent company of Panda Express, Panda Inn and Hibachi-San, the artist Robert Indiana’s “LOVE” sculpture was recently unveiled.

The 12-foot-high multi-million-dollar installation, with those four bright red letters made of aluminium, perches atop a fountain of flowing water. It was a private donation by the company’s co-founders and co-chief executive officers, Andrew and Peggy Cherng.

The sculpture’s message resonates with the Cherngs, who have spent the last 45 years building a Chinese restaurant empire that produced sales in excess of $3 billion last year, with over 2,000 Panda Express restaurants in the United States, Canada, Mexico, Japan, South Korea, Saudi Arabia, UAE, Guatemala, and Aruba. Those restaurants each average about 480 guests on a given day, and the Cherngs employ more than 35,000 associates.

“We are building a culture on trust, and the aim of trust is love,” said Ms. Cherng, 70. “Love is the verb we emphasize with our Panda family. We must respect and care for each other. We must push and stretch each other.”

Associates who work in Panda Express restaurants wear uniforms with the Chinese proverb: “Make happy those who are near and those who are far will come.”

Robert Indiana’s “LOVE” sculpture at the Panda Restaurant Group, Inc.’s company headquarters in Rosemead, Calif. Credit Panda Restaurant Group/2018 Morgan Art Foundation, Artists Rights Society (ARS), New York

“When I saw the ‘LOVE’ sculpture, it made me think life is tough, life is difficult,” said Mr. Cherng, 70. “Life is something you really have to face squarely on. It is about overcoming the difficulty. Continuously working on improvement — that to me is the happiness, love is about that.”

Although the road to success has not always been a smooth one — there have been some legal disputes with employees — the Cherng’s overall approach seems to have worked. Since 2005, the chain has more than doubled in size, with roughly 150 stores opening each year, Mr. Cherng said. And the company has had consecutive same-store-sales growth for 21 of the last 22 years.

Its best-selling dish: orange chicken. This year, customers will buy an estimated 90 million pounds of the lightly sweetened fried chicken. And last year, Panda Express purchased 22 million pounds of broccoli.

The Cherngs have routinely shunned opportunities to grow even faster by franchising locations, or to reap the reward for their achievement by selling shares of their company to the public. They choose to own and operate all their restaurants with the exception of a few select locations.

“The motivation of going public is really a financial play,” Mr. Cherng said. “Maybe you need to raise money to open more stores, or sometimes people go public because they want to have a little bit more money. We have always been able to grow anyway.”

The family-owned and operated company has richly provided for the Cherngs, who have a net worth of $3.3 billion, according to Forbes.

Employees serve customers at the Panda Express located next to the Panda Restaurant Group, Inc. corporate office. Credit Emily Berl for The New York Times

“The beauty of not being franchised, or not being public is you have control,” said Bonnie Riggs, a restaurant industry analyst for The NPD Group’s food-service division. “You have consistency. When you have a franchise operation, even though rules are put in place, the franchisees don’t always play along. And if you are public, then you are constantly having to answer to Wall Street, and it’s a challenge.”

And holding on to what you’ve built over decades has a psychological appeal. “It is a business, but it is also tied to their personal identity,” said Rob Lachenauer, a partner and chief executive officer at BanyanGlobal Family Business Advisors in Boston, Mass. “One, you are not going to sell your identity. Two, it is hard to step away from the business because you are stepping away from who you are.”

Many family-owned businesses are creating a multigenerational business, Mr. Lachenauer said. “They are not a Silicon Valley start-up trying to pop something in five years and then go to the beach. That speaks to trust because of the stability of a long-term investment that most families have in their businesses. It builds loyalty with their employees.”

Another upside: “When you’re a satisfied employee, you’re going to provide your customers good service,” Ms. Riggs said. “If you enjoy what you are doing, and you like management, and you are not a disgruntled employee, that is going to come across in spades to the consumer. In our industry, today, it is sorely lacking.”

The Cherngs repay that trust to their employees by allowing them to run the individual restaurants, even if they do not have the full responsibility that a franchisee would have, and to hold prominent roles on the top management team.

One of their three daughters, Andrea, 40, is the chief marketing officer, but there are nonfamily members in the senior ranks of the company, including the general counsel and senior vice president for international development, and the senior vice president of operations and licensing.

Panda Express, located next to the Panda Restaurant Group, Inc.’s corporate office. Credit Emily Berl for The New York Times.

Even with their command and control approach, however, the Cherngs’ have encountered some rough spots in employee relations.

In recent years, a number of lawsuits have been filed. One, for example, was on behalf of a group of general managers who claimed that their positions were wrongfully classified as exempt from overtime; a settlement was reached in that case. In another, the United States Equal Employment Opportunity Commission charged that the company was treating its Latino employees differently from Asian workers at one restaurant. In California, a suit claimed cashiers and workers did not have seating while they were on duty. And last June, Panda Express settled a claim that it discriminated against workers who weren’t American citizens.

The company did not comment directly on the suits.

In a statement, Ms. Cherng said, “People are the foundation for what we do and what we believe in. We practice continuous learning to understand how we can be an employer of choice, which includes additional training and systems to reinforce our core values. Our hope is to foster a relationship of mutual trust and love with our associates.”

Typically the Cherngs pay their managers well to compensate for what are typically 50-plus hour weeks, according to employee reviews on Store associates are eligible for bonuses. General managers can make $100,000 or more with bonuses. The firm also offers a stock option program that includes dividends. The company provides subsidized health care coverage to all its employees, including part-time workers who work over 30 hours, after six months.

The Cherngs attribute much of their success to their core beliefs. “Life is more than just for yourself,” Mr. Cherng said. “You want to do well for family, to take care of other people, other causes — that is where happinesses are.”

That leads to another aspect of the Cherngs’ business strategy: philanthropy. The Cherngs giving over the years between all their philanthropic efforts is in excess of $83 million.

Customers eat lunch at the original Panda Inn. The sit-down restaurant was founded in 1973, the first restaurant opened by Andrew Cherng. Credit Emily Berl for The New York Times.

Through their giving organizations — Panda Cares, the philanthropic arm of the Panda Restaurant Group, and Panda Charitable Foundation — the Cherngs give chiefly within the areas of education, youth leadership development, and health.

The motivation for giving is part of their backstory. “We are first generation immigrants here, and we were educated in the United States,” Ms. Cherng said. “The giving back and paying forward is very important to us.”

The Cherngs came to the United States from China in the mid-1960s to attend Baker University in Baldwin City, Kan., where they met as freshmen. Mr. Cherng then earned a master’s degree in applied mathematics at the University of Missouri, and Ms. Cherng received a master’s degree in computer science and a doctorate in electrical engineering.

The restaurant business, though, was in Mr. Cherng’s blood. In 1973, with the help of his father, Ming-Tsai Cherng, a chef, he opened his first restaurant, The Panda Inn in Pasadena, Calif.

“For me, my biggest business challenge was going from zero to one store and surviving that,” Mr. Cherng said. “When you don’t have any money, and you aren’t making any money, whether I was going to survive or not to me was the challenge.”

In 1983, when the real estate developer of the Glendale Galleria, a customer of the Panda Inn, proposed opening a quick-serve location in his mall, the Cherngs leapt on the chance. And Ms. Cherng — who had worked on the software development team for organizations such as McDonnell Douglas and Comtal-3M — went to work for the family business.

“The ‘LOVE’ sculpture makes me remember my personal change,” Mr. Cherng said. “When I was younger, I was probably much more task-oriented, much more demanding. As I get older, I connect with people. I am more patient. We are in the business of developing people, we just happen to be in the restaurant business and serve Chinese food.”