Restaurant analyst gives P.F. Chang’s high marks - East Valley Tribune: Business

Restaurant analyst gives P.F. Chang’s high marks

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Posted: Wednesday, May 18, 2005 11:15 am | Updated: 9:26 am, Fri Oct 7, 2011.

Scottsdale-based P.F. Chang’s China Bistro is the third most profitable U.S. restaurant chain, an industry watcher said Tuesday.

And the East Valley company’s faster, cheaper offspring PeiWei Asian Diner is poised to be even more successful than the full-serve China Bistro, said Sharon Zackfia, restaurant analyst for William Blair & Co.

Speaking to industry leaders at the National Restaurant Association Show in Chicago, Zackfia said the Scottsdale eatery chain exemplifies one of the important trends of the booming dining-out industry — the increased importance of ethnic food.

"Over the past five years, the restaurant chains have become more diverse, more complex, catering to more sophisticated palates." she said. P.F. Chang’s has an advantage over the proliferation of other ethnic chains such as those that serve Mexican food, partly because lemon chicken lovers are unlikely to fire up their own woks, she said.

"Asian cuisine has a perceived difficulty for cooking at home," she said. "It has more complex flavors."

P.F. Chang’s average annual sales per square foot of restaurant space top $800, Zackfia said. "A good casual dining restaurant does $500," she said.

Top of the heap The Cheesecake Factory averages $900 to $1,000 per square foot, and Cheesecake Factory’s newly launched sibling Grandma’s Cafe, has been averaging $840 at its five open locations, she said.

The casual dining segment of the industry, which includes P.F. Chang’s, The Cheesecake Factory, Applebee’s and other similar chains, is the fastest growing segment of the fast-growing $290 billion dining out market, Zackfia said.

"The U.S. restaurant industry makes up 8 percent of all retail sales," she said. "It is the biggest employer in the United States, and has had positive sales growth for 24 years."

Analysts estimate that by 2010, half the U.S. food dollars will be spent in restaurants rather than grocery stores, Zackfia said.

Fast-paced, two-income families place a premium on their free time and restaurants are becoming more affordable, she said.

Teens and Generation Xers are fueling the growth of the fast fooderies, Zackfia said, and the big-spending baby boomers are spurring the rise of the casual dining segment.

Zackfia said the emerging fast-casual segment that bridges the gulf between those two is too new to predict how it will fare for the long run. Fast-food chains like McDonald’s are adding more healthy and diverse choices and could squeeze dollars out of the fast-casual segment, she said.

But Zackfia likes PeiWei and thinks it will eventually surpass the China Bistro in growth. "It’s hard to find Asian cuisine in Wichita, Kan. There is a lack of meaningful competition for Pei-Wei," she said.

"PeiWei’s cost economies will be better than (P.F. Chang’s China) Bistro. And 30 percent to 40 percent of its sales are ‘to go.’ That means there is no ceiling on sales volume."

Zackfia said the U.S. restaurant industry has survived down economic times better than most retail businesses. But April eatery sales were softer than expected. Gas prices taking a bigger bite of consumers’s budgets could be a factor since the fastest way to cut expenses is to ditch dinners out, she said.

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