Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes. Tim Stinovic from Bloomberg Radio. I want to
Speaker 1: talk a bit about the restaurant industry. Hits so hard
Speaker 1: by the pandemic. You know that many had to pivot
Speaker 1: and they did that, and that included p F Changs,
Speaker 1: which opened its first three p F Changs to Go
Speaker 1: locations in New York City last fault. It's a smaller
Speaker 1: format offering takeout delivery and catering, and they're doing the
Speaker 1: same in some other major cities. Let's get more on
Speaker 1: the strategy, how the industry is doing overall and changing
Speaker 1: as a result of the pandemic. Demola Adam A. Laken.
Speaker 1: He is CEO of p F Changs. He's on the
Speaker 1: phone in Scottsdale, Arizona. He's also a partner at Paulson
Speaker 1: and Company, of course, the firm of the former Treasury
Speaker 1: Secretary Hank Paulson, and he's also at Triortists and Capital Advisers. Demas,
Speaker 1: so nice to have you here with us. How are you.
Speaker 1: I'm doing well. Thank you guys for having me. Well,
Speaker 1: it's great to have you here. First of all, this
Speaker 1: past year tell me what it's been like for you all. Yeah,
Speaker 1: it's been a it's been a bit of a role
Speaker 1: in as you can imagine. So, you know, we ramped
Speaker 1: down our dining business, you know, last year in conjunction
Speaker 1: with the government mandates. Uh, you know, we worked through that.
Speaker 1: We drove our off premise business. We've gone through the
Speaker 1: worst of it. We're on the rebound now, um, and
Speaker 1: so excited to be in a position where we've we've
Speaker 1: gone through the storm and we're coming on on the
Speaker 1: other side. Well, storms and moments of crisis sometimes teach
Speaker 1: us an awful lot of things or figure out strategies
Speaker 1: that we were maybe thinking about mulling over and then
Speaker 1: all of a sudden, we're like, we gotta do them.
Speaker 1: How did the pandemic impact you're thinking about what your
Speaker 1: business needs to be going forward? Absolutely, So you know,
Speaker 1: we we we we identified off premise dining as a
Speaker 1: key area of focus for us prior to the pandemic,
Speaker 1: and so we opened our first to go actually in
Speaker 1: February of last year, which coincidentally was about a month
Speaker 1: before to Go became the only way you could eat
Speaker 1: was that Chicago that you did that correct, I was
Speaker 1: in Chicago, the River North Chicago. UM. And so you know,
Speaker 1: we've seen that growth and consumers worth shifting towards off
Speaker 1: premise prior to Prior to COVID, it accelerated dramatically obviously
Speaker 1: with with you know, first of all, being forced to
Speaker 1: use it. But now even as dining has come back,
Speaker 1: we've seen that off premise continues to grow. So people
Speaker 1: have really changed their behavior in a much more permanent
Speaker 1: way than just temporarily is induced by COVID. UM ye,
Speaker 1: go ahead, Well I want to ask you keep saying
Speaker 1: off premise, So you're talking about takeout right? Yeah? Sorry,
Speaker 1: So off premise means takeout, but it also means delivery,
Speaker 1: so you don't actually come to the restaurant. You maybe
Speaker 1: order on our PF Chang's app or website or on
Speaker 1: one of the third party apps. And it also means catering,
Speaker 1: so you know, a big event that you get catered,
Speaker 1: whether you call that in order, on the website, on
Speaker 1: the app. UM. So it's it's takeout, delivery and catering
Speaker 1: is what we call off premise. So what's doing the
Speaker 1: strongest is it takeout in just in general or delivery
Speaker 1: takeout the biggest of the biggest business out of those,
Speaker 1: but the most growth has come through delivery UH and
Speaker 1: specifically delivery through our channels, so through our website and
Speaker 1: through our app um and and part of that is purposeful.
Speaker 1: That's where we we focused on oning the most. You know,
Speaker 1: it allows us to interact directly with the consumer. It
Speaker 1: gets them the best experience um and and it creates
Speaker 1: that one on one relationship that that we cherish. UM.
Speaker 1: So we focused on growing that people have enjoyed, you know,
Speaker 1: coming directly to us UH. And that's been the highest
Speaker 1: growth theory, even though take out is the biggest business
Speaker 1: of the three. Well, it's interesting you talking about delivery
Speaker 1: because there's all those services, right, and that has definitely
Speaker 1: been a pandemic play as everybody was delivering take out.
Speaker 1: But when you use those services, right, you lose a
Speaker 1: piece of your business. So if you can keep it
Speaker 1: in house on your own platforms UH. First of all,
Speaker 1: as you said, you're directly involved with the consumer. But
Speaker 1: it's also then you get a bigger piece of the pie.
Speaker 1: That's correct, That's correct. You don't pay the fees, right,
Speaker 1: we now we have to deliver or or you know,
Speaker 1: solve for delivery, whether we pay somebody to do it
Speaker 1: on our behalf like nationally with ourselves. But it's still
Speaker 1: it's still more cost effective overall, you know, absolutely, um.
Speaker 1: But you know, in addition to that, there's the question
Speaker 1: of being able to know who our guest is and
Speaker 1: know what they order and and be able to identify
Speaker 1: them when they into a restaurant if they ordered from
Speaker 1: us on delivery a week ago. So there's an important
Speaker 1: data and consumer loyalty and analytics piece of it, um
Speaker 1: that we get by working directly with the guests. Um.
Speaker 1: And then finally we can we can give them a
Speaker 1: better price overall. Because the third parties have to charge
Speaker 1: certain amount of delivery fees to kind of make their
Speaker 1: model work, we're able to do a lot better frankly
Speaker 1: because um, there's there's no middleman to to deal with.
Speaker 1: So you know, for a number of reasons, it's a
Speaker 1: better experience for the guests, it's in a better situation
Speaker 1: for us. And so that's where we've kind of focused
Speaker 1: our attention in terms of growth, what kind of activity
Speaker 1: are seeing here in New York, Because we're trying to
Speaker 1: assess what's going on in terms of people coming back
Speaker 1: to work here in New York City. We've got about
Speaker 1: forty seconds. We'll do some news and then come back.
Speaker 1: But just initially, what kind of demand are you seeing,
Speaker 1: especially for lunch. Yeah, we're seeing it start to rebound.
Speaker 1: You know. I'm starting to see more catering orders come,
Speaker 1: which is a wonderful sign. And uh, starting to see
Speaker 1: more lunch traffic pick up. Uh. You know, office was
Speaker 1: about five to ten percent occupied through the first core
Speaker 1: of this year. That's starting to pick up. Um. You know.
Speaker 1: Our feeling is that Labor Day is kind of a flag,
Speaker 1: a marker that's been planted in terms of when folks
Speaker 1: will really start to come back into the office post
Speaker 1: summer holidays, etcetera. So we're seeing improvement, but really I
Speaker 1: think the step function improvement will occur likely around Labor
Speaker 1: Day and that that should be a wonderful time for
Speaker 1: for all of us and who you know who live
Speaker 1: in or visit New York City. Yeah. I feel like
Speaker 1: in so many ways, we're all just going to put
Speaker 1: a big red circle around Labor Day, uh, in terms
Speaker 1: of what it means for the reopening of our economy
Speaker 1: and kind of going back to quote unquote more normal
Speaker 1: I want to get back to our guests. We're talking
Speaker 1: to the CEO of PF Change, Demola Adam A. Laken.
Speaker 1: He is still with us on the phone in Scottsdale, Arizona.
Speaker 1: So where do you go from here? How much do
Speaker 1: you expand this smaller model that you folks are doing
Speaker 1: at p F changs this to go locations, uh, you know,
Speaker 1: around the country. Sure, so you know, we're gonna ramp
Speaker 1: up the openings for for that concept. It's been met
Speaker 1: with a lot of great enthusiasm in the markets where
Speaker 1: we've opened it. Um. So we're intending to have twenty
Speaker 1: open by the end of this year. We have eight
Speaker 1: eight at present, so we have um, you know, we
Speaker 1: have about twelve that that we're gonna open you know
Speaker 1: for the rest of the year. Uh. And that's going
Speaker 1: to be mostly concentrated in the Dallas and the Florida markets.
Speaker 1: We have one actually opening next week in last Collinas
Speaker 1: in Dallas. Um and uh and so that's that's the plan.
Speaker 1: And then going forward from for next year, will open
Speaker 1: about thirty and and ramp up this concept, uh, you know,
Speaker 1: fairly quickly here um and to be able to reach
Speaker 1: more custom consumers. And more parts of the country a
Speaker 1: lot more quickly. All right, so it sound like it
Speaker 1: sounds like you're trying to reach out to consumers in
Speaker 1: a big way. Is the endgame also the ultimately spinning
Speaker 1: this puppy off and go in public. No, not to
Speaker 1: spit enough. So we managed this. Uh, you know, the
Speaker 1: secret sauce here is that it's the same exact p
Speaker 1: F Chang's food. It's the same kitchen staff by the
Speaker 1: same people. You know, you can move a chef from
Speaker 1: a traditional b strore to it to go and buy versa,
Speaker 1: and it's the same recipes. Um. You know, we we
Speaker 1: share technology, they're managed by the same multi unit managers,
Speaker 1: which makes the model really work, right. Um, you can
Speaker 1: you can guarantee quality and you can guarantee consistency. H
Speaker 1: So separating the business would would kind of go against
Speaker 1: what's making it work. So it's not in the plans.
Speaker 1: It's gonna it's gonna remain co managed and code cohabitated
Speaker 1: here in Scottsdale. Um. In terms of you know, going
Speaker 1: public or capital plans, you know that's still under under
Speaker 1: you know conversation. You know, PF Change once upon a
Speaker 1: time was public and UM, so it has a history
Speaker 1: in the public markets. It's kept a lot of the
Speaker 1: infrastructure in terms of um, you know, the reporting standards, etcetera.
Speaker 1: So it's something that's a viable alternative. But you know,
Speaker 1: we'll we'll watch and we'll see and we'll continue to
Speaker 1: manage the business and and and see what comes going forward.
Speaker 1: What's the biggest change in the real estate space as
Speaker 1: a result of the pandemic that stays with us. Is
Speaker 1: it just that real big jump onto digital platforms. And
Speaker 1: it was interesting during the pandemic that were upscale restaurants
Speaker 1: that would never do take out that all of a sudden,
Speaker 1: we're doing take out. Sure. Yeah, a lot of folks
Speaker 1: are forced to learn. You know againfortunately something we knew
Speaker 1: how to do coming into the pandemic has been an
Speaker 1: area of focus for us. You know, you mentioned I
Speaker 1: used to work a partners Paulson, So as part of
Speaker 1: the you know, I led the transaction to acquired p
Speaker 1: F Changs and so, you know, that was part of
Speaker 1: our thesis when we bought the company was that off
Speaker 1: premise was going to be a key part of the future.
Speaker 1: It was going to drive growth. So we spent a
Speaker 1: year kind of building out the infrastructure. So it's been
Speaker 1: part of our core thesis prior to COVID, and that's
Speaker 1: really worked out obviously, even though nobody saw COVID coming,
Speaker 1: but we did have the infrastructure in place, uh to
Speaker 1: to allow us to transition guests to off premise pretty seamlessly.
Speaker 1: Did you look at did you look at a lot
Speaker 1: of realists? Did you look at a lot of different restaurants?
Speaker 1: And if so, why did you choose this model or
Speaker 1: this company or this brand. It's it's an incredible brand.
Speaker 1: So you know, first of all, it's it's uh, it's
Speaker 1: there's a couple of things that are very difficult to replicate.
Speaker 1: Number one is the strength of a brand. And you
Speaker 1: mentioned Nike and there for Formans today. But that's an
Speaker 1: incredible brand that's going to keep growing because it's got
Speaker 1: so it's got a it's got a meaning to consumers
Speaker 1: that it's hard to to recreate or duplicate or or
Speaker 1: or break as long as they're smart about their product
Speaker 1: and their position in which which they are um and
Speaker 1: so that's something that PF. Chang's has right is is
Speaker 1: the brand name the residents, it means something, uh, you know,
Speaker 1: it really pioneered Asian American cuisine here in the United States. Um,
Speaker 1: it's got a history. Uh so you know we love that. Um,
Speaker 1: you know, we we thought there were things we could
Speaker 1: do in terms of the experience and the restaurants to
Speaker 1: to make that to improve that. Right. So the food
Speaker 1: was great, it scored really well. We thought we could
Speaker 1: make the restaurants a lot more fun to be to
Speaker 1: be frank right. Um, So we spent a lot of time,
Speaker 1: you know, remodeling the restaurants, investing in the guest experience,
Speaker 1: theater at the table we call it, but making dishes
Speaker 1: exciting fun um, and you know, things like birthday celebration sparklers.
Speaker 1: So we've done a lot of things to kind of
Speaker 1: bring the life enthusiasm back into the into the restaurant,
Speaker 1: maintain the super high quality of food and that's resonated
Speaker 1: really strongly with the guests in the restaurant. And then
Speaker 1: in addition to that, we we observed you know, off
Speaker 1: premise and the growth that was happening in that channel,
Speaker 1: and we thought this was a perfect you know type
Speaker 1: of food for off premise. You know, Chinese takeout cuisine
Speaker 1: is something that has been part of you know American
Speaker 1: culture again for a long time. Um, and there was
Speaker 1: work to do in terms of the technology, in terms
Speaker 1: of the infrastructure, building an app which you know we
Speaker 1: didn't have when we bought the business, um you know,
Speaker 1: the website, etcetera. But we we did all that work,
Speaker 1: you know, fortunately prior to covid um, which has allowed
Speaker 1: us to not only improve the experience in the restaurants,
Speaker 1: but also improve our off premise business. And then launched
Speaker 1: this new concept p F Chang to Go, which again
Speaker 1: has been met with with a great deal of enthusiasm
Speaker 1: everywhere that we've opened it. And what happens to the
Speaker 1: bistro model, we we're gonn we're gonna keep opening those
Speaker 1: as well, you know. So so those have done really well.
Speaker 1: Uh you know during covid we do off premise out
Speaker 1: of the bistro restaurants and we do dine in so
Speaker 1: so um, you know, there's there's gonna be a future
Speaker 1: for opening more of those who actually have one opening
Speaker 1: in Houston in a couple of months, we have one
Speaker 1: opening in Hawaii and Honolulu. So the plan will be
Speaker 1: too open b strows, open to goes and and you know,
Speaker 1: let the guests choose how they want to interact with us, right,
Speaker 1: they want to come in uh and have a meal
Speaker 1: in the restaurant, we're there for them. And if they
Speaker 1: want to order to go from our restaurant or from
Speaker 1: our one of our PF chains to go, you know
Speaker 1: we're we're available for them as well. Does the to
Speaker 1: go model for people to like ordering for home or
Speaker 1: for takeout? Does that help you see a clear line?
Speaker 1: Did you guys are tracking what's going on with your
Speaker 1: customers directly? Do you see that helping fuel the bistro model? Well? Together?
Speaker 1: Absolutely so we will have mortkets that own that have both.
Speaker 1: And the thing is is it's all about brand residents
Speaker 1: and people seeing PF chains and having to be more
Speaker 1: top of mind. So having more units, having more cars
Speaker 1: with the p F chain's um, you know car toppers,
Speaker 1: being a being more available and more ubiquitous in the market,
Speaker 1: is a good thing for for the strength of the brand.
Speaker 1: Right And and so you know I mentioned Dallas, that's
Speaker 1: what we're opening it to go next week. But we'll
Speaker 1: have restaurants, will have two goes, and we'll be just
Speaker 1: more present and more available from more places. You know,
Speaker 1: you might have a guest who could have ordered at
Speaker 1: home but couldn't from work because where their office is located.
Speaker 1: But now they can because it is to go in
Speaker 1: that market. Um, so they're they're able to interact with
Speaker 1: us more often and as much as as they like,
Speaker 1: and they'll think about us more because we'll be more present.
Speaker 1: All right, So what keeps up at night? The restaurant
Speaker 1: space is a tough one, as you know. I mean,
Speaker 1: are you guys profitable in what you're doing? And just
Speaker 1: got about forty seconds left. Yeah, yeah, no, we we're
Speaker 1: doing very well from a from a profitability standpoint. Um.
Speaker 1: You know, we got a lot smarter operationally during the crisis.
Speaker 1: You mentioned something to the effect, I've never waste a crisis,
Speaker 1: but but we did get a lot smarter and a
Speaker 1: lot more efficient, and that's paying off now because a
Speaker 1: sales rebound. We're more profitable than we were pre covid Um.
Speaker 1: In terms of what's been a struggle, you know, staffing
Speaker 1: has been a challenge throughout the industry. I think that's
Speaker 1: something I'm sure you've heard from from other folks in
Speaker 1: the space. We're working through it. And then that's that's
Speaker 1: something where you have to be as good an employer
Speaker 1: as you can. But something we're working through. But but
Speaker 1: certainly a challenge just quickly ten seconds. Are you having
Speaker 1: to pay workers more to get them in? You know,
Speaker 1: we've we've always been at the higher end because our
Speaker 1: food is more complicated and it's it's it's it's more
Speaker 1: more work frankly to work at up one of our
Speaker 1: restaurants in some other places. So we've always been competitive.
Speaker 1: What we're doing is focusing on making the job, um,
Speaker 1: you know, as easy for them as possible, giving them
Speaker 1: technology and tools, uh, and making sure they have time
Speaker 1: to spend with their families. Were given them fourth or
Speaker 1: lie off this year? Is that? Yes? Or no? Though?
Speaker 1: Are you paying more? Just quickly? Wages have gone up? Absolutely?
Speaker 1: All right, Gonna leave it there, a great conversation. Come
Speaker 1: back and talk more and let us know how it's going.
Speaker 1: We're talking with and I'm like in the CEO p
Speaker 1: F changs. Have a great weekend. Everyone a safe one.
Speaker 1: This is Bloomberg