Opening a Panda Express Franchise

Panda_Express_logo.svgPanda Express is a wildly successful chain of restaurants, easily the most dominant chain of Chinese-food restaurants in the U.S. The brand is so big, they were in serious discussions about purchasing P.F. Changs. They’ve been around longer than you remember, too — they were actually one of the first major chains to use the computer-based POS system (that is now ubiquitous in quick-service restaurants worldwide) way back in 1983.

Startup Costs

According to their 2014 financial disclosures, the average Panda Express startup costs break down as follows:

  • License Fee: Unknown (see below.)
  • Lease (first 3 months): Varies widely; as little as $12k for a small food court location or as much as $425k for a larger walk-in branch.
  • Leasehold Improvements: Varies widely again; as little as $80k for a small space that requires no locally-regulated improvements or a much as $500k for a massive (2,500 sqft.) space that requires complex or elaborate improvements such as a specialized exhaust system.
  • Furniture/Fixtures/Equipment/Supplies: $90k to $210k, based on expected daily volume, but even moreso on the financing terms you’re able to negotiate.
  • Initial Inventory: $2,200 to $3,600 based on expected daily volume.
  • Computers: $14,000 to $18,000 depending on financing terms.
  • Insurance (annually): $21,000 to $65,000 depending on local regulations and the likelihood of specific natural disasters.
  • Initial Training Expenses: $13k to $30k, depending on how far you and your management have to travel to get to the initial training program.
  • Architecture and Construction Costs: $32k to $85k depending on size of structure and local price variations.
  • Taxes: $4.5k to 10k for sales tax deposits, depending on expected daily volume.
  • Licenses and Permits: $1.5k to $30k depending on local ordinances.
  • Telephone/Internet/Fax and Related Expenses: $.5k to $1k.
  • Necessary Capital: Used to support the business until it starts to turn a profit — $60k to $120k depending on expected daily volume and recurring costs.

TOTAL: $380k – $1.6 million

Profitability

According to the owners — Peggy and Andrew Cherng — the profit margin of a typical Panda Express is a little lower than industry leaders, clocking in around 10%. (Compare to 25% at Chipotle for example). This is, according to the Cherngs, because Panda focuses so much on creating great food and offering its employees strong opportunities for personal growth. The owners are satisfied with their profit margin, and don’t plan on doing anything to meaningfully move it anytime soon.

Qualifications Required of a Franchisee

There’s only one qualification Panda Express asks of a franchisee — that you become an employee. Yep, Panda Express doesn’t offer franchises. They almost went public in the’90s, but are glad they decided against it and intend to continue with no franchises for the foreseeable future.

Alternatives

If you’re interested in running a Panda Express franchise, don’t let that news get you down — there are dozens of Chinese food franchises and several hundreds of food franchises out there for you to choose from. Get in touch with a skilled franchise broker who can help match you with the franchisor that best fits your passion, skills and budget.

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