Pei Wei Asian Market Format Opens in April, Blends Increased Value, Convenience with Smaller Footprint

Photo 1: Pei Wei Asian Diner; 2: Pei Wei Teriyaki Bowl

Pei Wei Asian Market Format Opens in April, Blends Increased Value, Convenience

On an investor conference call earlier this year, P.F. Chang's, parent of the P.F. Chang's Bistro and Pei Wei Asian Diner concepts, announced plans for the testing and build-out of a more express format known as the Pei Wei Asian Market. The smaller fast casual will use a footprint of about 2,500 square feet to deliver many of the Asian-style items the Diner concept offers.

In the smaller footprint, the new format, to be tested over the next year, will provide a speedier service system and deliver added value through menu items that have a lower cost entry point for guests.

On the call, execs admitted that consumer research highlighted that drivers of the experience at Pei Wei involved the freshness of its made-to-order product and speed of service, but not the partial table service (food delivered to the tables). In terms of enhancing its convenience positioning, and growing its development across the United States, the findings were revealing and opportunistic.

With the new Asian Market format for Pei Wei, the company also anticipates additional seating in the stores, while focusing on value. The Pei Wei Market opening is just a few days away on April 2nd. Phoenix was to be the first market with a Pei Wei Asian Diner-to-Market retrofit, according to the recent investor call.

During the fourth quarter, Pei Wei tested lower-priced menu items, including the Pei Wei Asian Diner Selects for $6.25 ─ its version of combos that include rice and a choice of an egg roll, soup or Asian Slaw. The chain also tested smaller-portion plates at a starting price of $3.95.

"What will not change is the availability of the top selling items in our existing Diners and our commitment to serving high quality, made-to-order food from five countries of Asia." Terry Haley, Pei Wei.

It's clear that its recent lessons in focusing on value and freshness, key components of its new Pei Wei marketing campaigns, will be rolled into the test of the Pei Wei Asian Market format.

The new Asian Market concept appears well timed, as Asian-style chains are expanding their market potential. In 2011, the Sarku Japan and Panda Express chains expanded internationally and announced aggressive growth plans. Both moved south into Latin America for the first time and are now poised to capitalize on the growing economies and experimental palates of South American and Caribbean consumers.

For Sarku Japan, its entry into Colombia was its first international move. The top 500 U.S. chains in the Asian LSR (limited-service restaurants) and FSR (full-service restaurants) segments grew their total sales by a hefty 9.3 percent in 2010.¹

The Pei Wei Asian Diner is also growing. Last year, Pei Wei secured two three-unit international agreements with its international partners, Alcea and Alshaya, to grow in Mexico and the Middle East, respectively.

Both agreements carry options, based on performance, for a potential long-term contract of 50 stores in Mexico, and 55 in the Middle East. Haley notes the Pei Wei Asian Diner will be the preferred format to continue to grow with its international franchise partners, so it's unlikely we'll see the Asian Market format abroad very soon.

Domestically, it opened two airport locations through a Global Brands licensing agreement in the Q4 2011. Additionally, it built a total of five new Pei Wei company-owned Asian Diners in 2011. According to its estimate at the time of its earnings release, it will open a total of 12-16 new Pei Wei units in 2012, including the Asian Diner and Asian Market formats.

Pei Wei Asian Diner VP of Marketing, Terry Haley, says that the Market will offer smaller portion sizes. Balancing the menu with items that are more conducive to frequent dining and more convenience, Pei Wei will also feature its guests’ Diner favorites.

Pei Wei Teriyaki Bowl"What will not change is the availability of the top selling items in our existing Diners and our commitment to serving high quality, made-to-order food from five countries of Asia," says Haley. With smaller portions will come lower prices, giving the Market concept an added value proposition.

By leveraging a smaller footprint, Pei Wei would find it easier to expand into non-traditional locations, transportation centers, dense urban B&I (business & industry), and other higher rent channels. "Pei Wei Asian Market’s flexible format does provide greater real estate site opportunities that provide the opportunity to increase potential number of units, particularly in urban, densely populated areas," says Pei Wei's Haley.

Haley tells Quick Serve Leader that the company will have a preference for building out existing markets this year, rather than entering new markets, although the chain keeps its options open. "That opportunity would certainly apply to the markets we have opened in the East such as Washington DC, New Jersey, and Philadelphia, as well as having potential in the Southeast," he said.

With its new Asian Market format, Pei Wei will be able to fast track its development and establish a greater presence in the Mid-Atlantic and Southeast regions, and strengthen pipeline initiatives across the United States, should it move forward with the Market after its test.

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¹ Data from Chicago-based Technomic, Inc.

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Photos: courtesy of P.F. Chang's

Copyright: Kandessa Media. All rights reserved.

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