The Beginnings of a Dynasty
The story of Panda Express, America’s favorite fast Chinese cuisine QSR, is an impressive one. The Panda Express dynasty began with Panda Inn, an upscale table service Chinese restaurant opened by the Cherng family in Pasadena, California, in 1973. While the restaurant started out with little success, it slowly began amassing a loyal customer base during the first five years after its opening. About a decade later, that customer base had grown to the point that the Cherng family decided to expand their operation to include a fast food version of their table service restaurant–a chain they dubbed Panda Express. And it has been growing ever since.
Today, Panda Express has more than 1,900 locations across the United States and internationally. The chain employs more than 25,000 people, and as of 2014 pulled in roughly $2 billion in revenue. Clearly these are impressive numbers, but just how successful is Panda Express as compared to the biggest players on the national QSR market? According to insights firm Sense360, which utilizes a panel of more than 2 million smartphone users across the nation to compile real time data on consumer habits and trends, the answer might surprise you.
Over the last two months, Panda Express barely cracks the top 20 list for the national QSR market in terms of visits, landing in 18th place just behind Panera Bread and ahead of Steak ’n Shake. It has held under 1 percent of the national QSR market. As a point of comparison, the industry leader, McDonald’s, pulled in 17.26 percent of the entire American QSR market, and the second place Starbucks held 10.72 percent.
To be sure, Panda Express dominates the competition when it comes to the QSR market for Asian cuisine. Over the last two months, Panda Express has maintained 85 percent of the Asian QSR market, ahead of Pei Wei Asian Diner, with nearly 11 percent, and Pick Up Stix, with just under 4 percent. But when it comes to the QSR market as a whole, Panda faces fierce competition. A whopping thirteen national QSR chains hold more than double Panda Express’s national market share, from McDonald’s all the way down to Carl’s Jr./Hardee’s, with 2.05 percent. That’s a lot of big competition.
Even more troubling for Panda Express is the chain’s weak loyalty rate. Loyalty Rate is Sense360’s relative metric designed to indicate consumer loyalty to any given restaurant chain. While Panda ranks 18th on national QSR market share, it doesn’t even crack the top 100 list with respect to loyalty rate, landing all the way down in 106th place, with under 23.5 percent. By comparison, the industry leader in loyalty, Saladworks, has a rate of 39.38 percent. Even worse, Panda’s loyalty rate is below that of its two primary asian cuisine competitors: Pei Wei Asian Diner lands in 75th place, with 25.13 percent, and Pick Up Stix is at 100th place, with 23.91 percent.
Taking a deeper dive into Panda Express’s national data, some interesting trends emerge. First, Panda’s success is highly variable depending on its location across the country. In the western United States, for example, Panda Express thrives, holding more than 2.26 percent of the total QSR market (which is more than double its national average). That is good enough to land it 12th place on the overall charts, six places better than it fares on the national scale. In the South, however, things aren’t so good. Panda holds only 0.70 percent of the QSR market, a measly 26th place overall. And in the Northeast, Panda Express has significantly fewer locations, thus rendering its numbers so low as to be non-comparable.
Another interesting trend that emerges for Panda Express is revealed by the following graph, which plots daily visits to Panda Express over the last two months:
The apparent dips you see reflect weekends–the Chinese Chain is losing substantial business to the competition on Saturdays and Sundays. Panda Express is generally open on the weekends, typically with even longer business hours than it posts during the week. So why the relative weekend lows? The answer is perhaps partially explained by the following graph, which plots the share of visits to Panda Express by hour:
As you can see, Panda peaks during lunch hours, with a definite spike occurring at noon. While Panda does enjoy a second surge of foot traffic during early dinner hours, its primary foot traffic occurs during traditional business lunch time. So perhaps Panda is primarily hitting the work week lunch crowd, and suffers on the weekends because its customers are less inclined to venture to Panda Express when they’re not coming from work. This hypothesis is at least partially corroborated by the following graph, which plots Panda’s share of visits by the day of the week:
Sunday is clearly Panda’s weakest day, while Wednesday, Thursday, and Friday are its strongest. Whatever is plaguing Panda Express on the weekends, the chain would be wise to attempt to bolster its weekend traffic. Chick-fil-A, the chicken QSR giant, is closed on Sundays, which presents a prime opportunity for other QSR restaurants to steal some chicken-loving traffic, as Sense360 has previously explained (link to “Game of Chicken” article here). Panda Express should consider pushing its already beloved Orange Chicken entree on Sundays through special promotions or advertising to this end.
Panda would also be wise to work toward bolstering its loyalty rate. Perhaps customers are less inclined to eat Asian cuisine on as routine a basis as, say, hamburgers, but even still its numbers ought to be much higher. The chain should consider introducing loyalty programs, perhaps through its existing mobile app platform (https://itunes.apple.com/us/app/panda-express-chinese-kitchen/id903990394?mt=8). In the end, while Panda Express has undoubtedly established a successful and impressive QSR dynasty, the data reveals that the chain has significant room to improve especially when it comes to Loyalty and making Panda Express a more consistent stop in it’s customer diet.
Sense360 is an insights firm with a panel of over 2 million anonymous consumers and data on more than 150 million consumer trips a month. By understanding the visits and journeys of millions of people in the real-world, we are able to provide restaurants and retailers with detailed competitive and consumer insights.