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Chinese Chain: Steaming with Success

When Paul Fleming, a Ruth's Chris Steak House franchisee, couldn't find Chinese food to his liking in his hometown of Phoenix, he decided to start his own restaurant. For help, Fleming turned to the operator of his favorite Oriental eatery, The Mandarin in Beverly Hills, Calif.

With Philip Chiang's guidance, Fleming opened his first P.F. Chang's China Bistro in 1993 in the Fashion Square shopping center in Scottsdale, Ariz. No fortune cookie could have foretold Fleming's future: That single restaurant would mushroom into a national chain and publicly traded company.

With 39 restaurants in 19 states, Phoenix-based P.F. Chang's will have 50 restaurants by the end of this year. In a growth mode, expansion plans call for 13 to 15 new restaurants each year, according to Rick Federico, president and CEO of P.F. Chang's.

The perception in the industry had been that there were no national chains of Chinese restaurants because it was difficult to achieve consistent quality with wok cooking, Federico says. But Fleming proved the theory wrong by installing a culinary partner - who is a professionally trained chef - at each location, and using consultants such as Chiang and Barbara Tropp, author of The Modern Art of Chinese Cooking and winner of the prestigious Julia Child Award for Best International Cookbook.

"We looked at the restaurant universe and Chinese wasn't represented," Federico says. "There were only independent operators. The whole country was available for the concept."

Expansion began in 1996 with the opening of stores in Denver, Las Vegas and Houston. P.F. Chang's opened 10 restaurants in 1998, the year it became a public company, and 13 in 1999. In the first quarter of 2000, new restaurants opened in Chicago, Atlanta and Tucson.

The niche P.F. Chang's has carved out for itself is upper-end Chinese cuisine served in an elegant, yet comfortable, environment. "We've tried to contemporize a familiar cuisine," Federico says.

The menu reflects the five major culinary regions of China: Canton, Hunan, Mongolia, Shanghai and Szechwan. Most entrees and appetizers are prepared in high-temperature woks. Dipping sauces are created tableside, and an extensive wine list offers up to 60 kinds of wine by the glass.

Unlike other chains, Fleming chose not to take a cookie-cutter approach. Instead, each restaurant reflects the character of its environment, whether it's a downtown warehouse district or an upscale suburban shopping area.

Similar elements in each restaurant include custom hand-painted murals depicting ancient Chinese scenes and other touches, such as sculptures, representing the Ming and T'ang dynasties. All restaurants use rich tones (though different color palettes), hard wood and stone to complement the contemporary bistro setting.

"We try to take what's interesting about every market and incorporate it into the design of the restaurant," Federico says.

The P.F. Chang's at Park Meadows mall in suburban Denver has almost a lodge feel, created by large windows overlooking the Rocky Mountains. The P.F. Chang's just 10 miles away in downtown Denver has a totally different look. Created out of a 100-year-old building in the LoDo area, that restaurant maintains the look of the surrounding warehouse district.

A cookie-cutter approach also limits choice of location sites, notes Federico, who formerly oversaw development for Macaroni Grill. "Having flexible design criteria allows us to take advantage of interesting and high-quality real estate," he says.

P.F. Chang's philosophy was to "attack the major markets first," Federico says. The Chinese bistro has multiple restaurants in many of its 26 markets, and recently entered Indianapolis, Ind.; Memphis, Tenn.; and Kansas City. All P.F. Chang's are company-owned.

While 85% of the restaurants are in suburban areas, P.F. Chang's also scouts out urban locations with a high residential concentration, such as Boston and Chicago. Though most of the new suburban restaurants are freestanding structures, a few, including the first P.F. Chang's, are located inside malls. A surrounding retail component is a plus, but not a requirement, Federico says. "We look for the best demographics and other high-traffic generators such as retail or a theater."

Though each restaurant has a different exterior and interior look, the kitchen is always standardized, he says. "We're not having to go in and figure out how to operate. All functions are identical."

Restaurants range in size from 4,500 sq. ft. to 8,000 sq. ft. and accommodate inside seating for 210 to 225 customers; some locations offer patio dining. Menu items range from $5 to $14, with lunch comprising 30% of business.

While other chains move operating partners from restaurant to restaurant, P.F. Chang's keeps the same one at each restaurant, Federico says. "With consistent leadership, you can operate more like an independent restaurant."

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