WEBVTT - P.F. Chang's CEO Says Dining Is Rebounding

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<v Speaker 1>This is Bloomberg Business Week with Carol Masser and Bloomberg

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<v Speaker 1>Quick Takes. Tim Stinovic from Bloomberg Radio. I want to

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<v Speaker 1>talk a bit about the restaurant industry. Hits so hard

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<v Speaker 1>by the pandemic. You know that many had to pivot

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<v Speaker 1>and they did that, and that included p F Changs,

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<v Speaker 1>which opened its first three p F Changs to Go

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<v Speaker 1>locations in New York City last fault. It's a smaller

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<v Speaker 1>format offering takeout delivery and catering, and they're doing the

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<v Speaker 1>same in some other major cities. Let's get more on

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<v Speaker 1>the strategy, how the industry is doing overall and changing

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<v Speaker 1>as a result of the pandemic. Demola Adam A. Laken.

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<v Speaker 1>He is CEO of p F Changs. He's on the

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<v Speaker 1>phone in Scottsdale, Arizona. He's also a partner at Paulson

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<v Speaker 1>and Company, of course, the firm of the former Treasury

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<v Speaker 1>Secretary Hank Paulson, and he's also at Triortists and Capital Advisers. Demas,

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<v Speaker 1>so nice to have you here with us. How are you.

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<v Speaker 1>I'm doing well. Thank you guys for having me. Well,

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<v Speaker 1>it's great to have you here. First of all, this

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<v Speaker 1>past year tell me what it's been like for you all. Yeah,

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<v Speaker 1>it's been a it's been a bit of a role

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<v Speaker 1>in as you can imagine. So, you know, we ramped

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<v Speaker 1>down our dining business, you know, last year in conjunction

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<v Speaker 1>with the government mandates. Uh, you know, we worked through that.

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<v Speaker 1>We drove our off premise business. We've gone through the

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<v Speaker 1>worst of it. We're on the rebound now, um, and

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<v Speaker 1>so excited to be in a position where we've we've

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<v Speaker 1>gone through the storm and we're coming on on the

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<v Speaker 1>other side. Well, storms and moments of crisis sometimes teach

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<v Speaker 1>us an awful lot of things or figure out strategies

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<v Speaker 1>that we were maybe thinking about mulling over and then

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<v Speaker 1>all of a sudden, we're like, we gotta do them.

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<v Speaker 1>How did the pandemic impact you're thinking about what your

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<v Speaker 1>business needs to be going forward? Absolutely, So you know,

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<v Speaker 1>we we we we identified off premise dining as a

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<v Speaker 1>key area of focus for us prior to the pandemic,

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<v Speaker 1>and so we opened our first to go actually in

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<v Speaker 1>February of last year, which coincidentally was about a month

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<v Speaker 1>before to Go became the only way you could eat

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<v Speaker 1>was that Chicago that you did that correct, I was

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<v Speaker 1>in Chicago, the River North Chicago. UM. And so you know,

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<v Speaker 1>we've seen that growth and consumers worth shifting towards off

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<v Speaker 1>premise prior to Prior to COVID, it accelerated dramatically obviously

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<v Speaker 1>with with you know, first of all, being forced to

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<v Speaker 1>use it. But now even as dining has come back,

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<v Speaker 1>we've seen that off premise continues to grow. So people

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<v Speaker 1>have really changed their behavior in a much more permanent

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<v Speaker 1>way than just temporarily is induced by COVID. UM ye,

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<v Speaker 1>go ahead, Well I want to ask you keep saying

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<v Speaker 1>off premise, So you're talking about takeout right? Yeah? Sorry,

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<v Speaker 1>So off premise means takeout, but it also means delivery,

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<v Speaker 1>so you don't actually come to the restaurant. You maybe

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<v Speaker 1>order on our PF Chang's app or website or on

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<v Speaker 1>one of the third party apps. And it also means catering,

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<v Speaker 1>so you know, a big event that you get catered,

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<v Speaker 1>whether you call that in order, on the website, on

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<v Speaker 1>the app. UM. So it's it's takeout, delivery and catering

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<v Speaker 1>is what we call off premise. So what's doing the

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<v Speaker 1>strongest is it takeout in just in general or delivery

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<v Speaker 1>takeout the biggest of the biggest business out of those,

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<v Speaker 1>but the most growth has come through delivery UH and

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<v Speaker 1>specifically delivery through our channels, so through our website and

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<v Speaker 1>through our app um and and part of that is purposeful.

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<v Speaker 1>That's where we we focused on oning the most. You know,

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<v Speaker 1>it allows us to interact directly with the consumer. It

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<v Speaker 1>gets them the best experience um and and it creates

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<v Speaker 1>that one on one relationship that that we cherish. UM.

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<v Speaker 1>So we focused on growing that people have enjoyed, you know,

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<v Speaker 1>coming directly to us UH. And that's been the highest

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<v Speaker 1>growth theory, even though take out is the biggest business

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<v Speaker 1>of the three. Well, it's interesting you talking about delivery

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<v Speaker 1>because there's all those services, right, and that has definitely

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<v Speaker 1>been a pandemic play as everybody was delivering take out.

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<v Speaker 1>But when you use those services, right, you lose a

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<v Speaker 1>piece of your business. So if you can keep it

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<v Speaker 1>in house on your own platforms UH. First of all,

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<v Speaker 1>as you said, you're directly involved with the consumer. But

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<v Speaker 1>it's also then you get a bigger piece of the pie.

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<v Speaker 1>That's correct, That's correct. You don't pay the fees, right,

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<v Speaker 1>we now we have to deliver or or you know,

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<v Speaker 1>solve for delivery, whether we pay somebody to do it

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<v Speaker 1>on our behalf like nationally with ourselves. But it's still

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<v Speaker 1>it's still more cost effective overall, you know, absolutely, um.

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<v Speaker 1>But you know, in addition to that, there's the question

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<v Speaker 1>of being able to know who our guest is and

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<v Speaker 1>know what they order and and be able to identify

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<v Speaker 1>them when they into a restaurant if they ordered from

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<v Speaker 1>us on delivery a week ago. So there's an important

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<v Speaker 1>data and consumer loyalty and analytics piece of it, um

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<v Speaker 1>that we get by working directly with the guests. Um.

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<v Speaker 1>And then finally we can we can give them a

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<v Speaker 1>better price overall. Because the third parties have to charge

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<v Speaker 1>certain amount of delivery fees to kind of make their

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<v Speaker 1>model work, we're able to do a lot better frankly

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<v Speaker 1>because um, there's there's no middleman to to deal with.

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<v Speaker 1>So you know, for a number of reasons, it's a

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<v Speaker 1>better experience for the guests, it's in a better situation

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<v Speaker 1>for us. And so that's where we've kind of focused

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<v Speaker 1>our attention in terms of growth, what kind of activity

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<v Speaker 1>are seeing here in New York, Because we're trying to

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<v Speaker 1>assess what's going on in terms of people coming back

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<v Speaker 1>to work here in New York City. We've got about

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<v Speaker 1>forty seconds. We'll do some news and then come back.

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<v Speaker 1>But just initially, what kind of demand are you seeing,

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<v Speaker 1>especially for lunch. Yeah, we're seeing it start to rebound.

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<v Speaker 1>You know. I'm starting to see more catering orders come,

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<v Speaker 1>which is a wonderful sign. And uh, starting to see

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<v Speaker 1>more lunch traffic pick up. Uh. You know, office was

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<v Speaker 1>about five to ten percent occupied through the first core

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<v Speaker 1>of this year. That's starting to pick up. Um. You know.

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<v Speaker 1>Our feeling is that Labor Day is kind of a flag,

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<v Speaker 1>a marker that's been planted in terms of when folks

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<v Speaker 1>will really start to come back into the office post

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<v Speaker 1>summer holidays, etcetera. So we're seeing improvement, but really I

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<v Speaker 1>think the step function improvement will occur likely around Labor

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<v Speaker 1>Day and that that should be a wonderful time for

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<v Speaker 1>for all of us and who you know who live

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<v Speaker 1>in or visit New York City. Yeah. I feel like

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<v Speaker 1>in so many ways, we're all just going to put

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<v Speaker 1>a big red circle around Labor Day, uh, in terms

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<v Speaker 1>of what it means for the reopening of our economy

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<v Speaker 1>and kind of going back to quote unquote more normal

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<v Speaker 1>I want to get back to our guests. We're talking

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<v Speaker 1>to the CEO of PF Change, Demola Adam A. Laken.

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<v Speaker 1>He is still with us on the phone in Scottsdale, Arizona.

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<v Speaker 1>So where do you go from here? How much do

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<v Speaker 1>you expand this smaller model that you folks are doing

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<v Speaker 1>at p F changs this to go locations, uh, you know,

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<v Speaker 1>around the country. Sure, so you know, we're gonna ramp

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<v Speaker 1>up the openings for for that concept. It's been met

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<v Speaker 1>with a lot of great enthusiasm in the markets where

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<v Speaker 1>we've opened it. Um. So we're intending to have twenty

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<v Speaker 1>open by the end of this year. We have eight

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<v Speaker 1>eight at present, so we have um, you know, we

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<v Speaker 1>have about twelve that that we're gonna open you know

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<v Speaker 1>for the rest of the year. Uh. And that's going

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<v Speaker 1>to be mostly concentrated in the Dallas and the Florida markets.

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<v Speaker 1>We have one actually opening next week in last Collinas

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<v Speaker 1>in Dallas. Um and uh and so that's that's the plan.

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<v Speaker 1>And then going forward from for next year, will open

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<v Speaker 1>about thirty and and ramp up this concept, uh, you know,

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<v Speaker 1>fairly quickly here um and to be able to reach

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<v Speaker 1>more custom consumers. And more parts of the country a

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<v Speaker 1>lot more quickly. All right, so it sound like it

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<v Speaker 1>sounds like you're trying to reach out to consumers in

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<v Speaker 1>a big way. Is the endgame also the ultimately spinning

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<v Speaker 1>this puppy off and go in public. No, not to

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<v Speaker 1>spit enough. So we managed this. Uh, you know, the

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<v Speaker 1>secret sauce here is that it's the same exact p

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<v Speaker 1>F Chang's food. It's the same kitchen staff by the

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<v Speaker 1>same people. You know, you can move a chef from

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<v Speaker 1>a traditional b strore to it to go and buy versa,

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<v Speaker 1>and it's the same recipes. Um. You know, we we

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<v Speaker 1>share technology, they're managed by the same multi unit managers,

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<v Speaker 1>which makes the model really work, right. Um, you can

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<v Speaker 1>you can guarantee quality and you can guarantee consistency. H

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<v Speaker 1>So separating the business would would kind of go against

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<v Speaker 1>what's making it work. So it's not in the plans.

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<v Speaker 1>It's gonna it's gonna remain co managed and code cohabitated

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<v Speaker 1>here in Scottsdale. Um. In terms of you know, going

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<v Speaker 1>public or capital plans, you know that's still under under

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<v Speaker 1>you know conversation. You know, PF Change once upon a

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<v Speaker 1>time was public and UM, so it has a history

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<v Speaker 1>in the public markets. It's kept a lot of the

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<v Speaker 1>infrastructure in terms of um, you know, the reporting standards, etcetera.

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<v Speaker 1>So it's something that's a viable alternative. But you know,

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<v Speaker 1>we'll we'll watch and we'll see and we'll continue to

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<v Speaker 1>manage the business and and and see what comes going forward.

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<v Speaker 1>What's the biggest change in the real estate space as

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<v Speaker 1>a result of the pandemic that stays with us. Is

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<v Speaker 1>it just that real big jump onto digital platforms. And

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<v Speaker 1>it was interesting during the pandemic that were upscale restaurants

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<v Speaker 1>that would never do take out that all of a sudden,

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<v Speaker 1>we're doing take out. Sure. Yeah, a lot of folks

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<v Speaker 1>are forced to learn. You know againfortunately something we knew

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<v Speaker 1>how to do coming into the pandemic has been an

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<v Speaker 1>area of focus for us. You know, you mentioned I

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<v Speaker 1>used to work a partners Paulson, So as part of

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<v Speaker 1>the you know, I led the transaction to acquired p

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<v Speaker 1>F Changs and so, you know, that was part of

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<v Speaker 1>our thesis when we bought the company was that off

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<v Speaker 1>premise was going to be a key part of the future.

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<v Speaker 1>It was going to drive growth. So we spent a

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<v Speaker 1>year kind of building out the infrastructure. So it's been

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<v Speaker 1>part of our core thesis prior to COVID, and that's

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<v Speaker 1>really worked out obviously, even though nobody saw COVID coming,

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<v Speaker 1>but we did have the infrastructure in place, uh to

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<v Speaker 1>to allow us to transition guests to off premise pretty seamlessly.

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<v Speaker 1>Did you look at did you look at a lot

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<v Speaker 1>of realists? Did you look at a lot of different restaurants?

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<v Speaker 1>And if so, why did you choose this model or

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<v Speaker 1>this company or this brand. It's it's an incredible brand.

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<v Speaker 1>So you know, first of all, it's it's uh, it's

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<v Speaker 1>there's a couple of things that are very difficult to replicate.

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<v Speaker 1>Number one is the strength of a brand. And you

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<v Speaker 1>mentioned Nike and there for Formans today. But that's an

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<v Speaker 1>incredible brand that's going to keep growing because it's got

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<v Speaker 1>so it's got a it's got a meaning to consumers

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<v Speaker 1>that it's hard to to recreate or duplicate or or

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<v Speaker 1>or break as long as they're smart about their product

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<v Speaker 1>and their position in which which they are um and

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<v Speaker 1>so that's something that PF. Chang's has right is is

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<v Speaker 1>the brand name the residents, it means something, uh, you know,

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<v Speaker 1>it really pioneered Asian American cuisine here in the United States. Um,

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<v Speaker 1>it's got a history. Uh so you know we love that. Um,

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<v Speaker 1>you know, we we thought there were things we could

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<v Speaker 1>do in terms of the experience and the restaurants to

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<v Speaker 1>to make that to improve that. Right. So the food

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<v Speaker 1>was great, it scored really well. We thought we could

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<v Speaker 1>make the restaurants a lot more fun to be to

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<v Speaker 1>be frank right. Um, So we spent a lot of time,

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<v Speaker 1>you know, remodeling the restaurants, investing in the guest experience,

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<v Speaker 1>theater at the table we call it, but making dishes

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<v Speaker 1>exciting fun um, and you know, things like birthday celebration sparklers.

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<v Speaker 1>So we've done a lot of things to kind of

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<v Speaker 1>bring the life enthusiasm back into the into the restaurant,

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<v Speaker 1>maintain the super high quality of food and that's resonated

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<v Speaker 1>really strongly with the guests in the restaurant. And then

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<v Speaker 1>in addition to that, we we observed you know, off

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<v Speaker 1>premise and the growth that was happening in that channel,

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<v Speaker 1>and we thought this was a perfect you know type

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<v Speaker 1>of food for off premise. You know, Chinese takeout cuisine

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<v Speaker 1>is something that has been part of you know American

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<v Speaker 1>culture again for a long time. Um, and there was

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<v Speaker 1>work to do in terms of the technology, in terms

0:10:21.400 --> 0:10:23.760
<v Speaker 1>of the infrastructure, building an app which you know we

0:10:23.800 --> 0:10:26.120
<v Speaker 1>didn't have when we bought the business, um you know,

0:10:26.160 --> 0:10:28.280
<v Speaker 1>the website, etcetera. But we we did all that work,

0:10:28.440 --> 0:10:31.400
<v Speaker 1>you know, fortunately prior to covid um, which has allowed

0:10:31.480 --> 0:10:33.800
<v Speaker 1>us to not only improve the experience in the restaurants,

0:10:33.800 --> 0:10:36.880
<v Speaker 1>but also improve our off premise business. And then launched

0:10:36.880 --> 0:10:39.120
<v Speaker 1>this new concept p F Chang to Go, which again

0:10:39.160 --> 0:10:41.120
<v Speaker 1>has been met with with a great deal of enthusiasm

0:10:41.200 --> 0:10:43.240
<v Speaker 1>everywhere that we've opened it. And what happens to the

0:10:43.240 --> 0:10:46.240
<v Speaker 1>bistro model, we we're gonn we're gonna keep opening those

0:10:46.240 --> 0:10:48.400
<v Speaker 1>as well, you know. So so those have done really well.

0:10:48.640 --> 0:10:51.400
<v Speaker 1>Uh you know during covid we do off premise out

0:10:51.400 --> 0:10:53.839
<v Speaker 1>of the bistro restaurants and we do dine in so

0:10:53.840 --> 0:10:56.800
<v Speaker 1>so um, you know, there's there's gonna be a future

0:10:56.840 --> 0:10:58.720
<v Speaker 1>for opening more of those who actually have one opening

0:10:58.800 --> 0:11:00.560
<v Speaker 1>in Houston in a couple of months, we have one

0:11:00.559 --> 0:11:03.280
<v Speaker 1>opening in Hawaii and Honolulu. So the plan will be

0:11:03.320 --> 0:11:05.839
<v Speaker 1>too open b strows, open to goes and and you know,

0:11:05.920 --> 0:11:08.079
<v Speaker 1>let the guests choose how they want to interact with us, right,

0:11:08.160 --> 0:11:10.360
<v Speaker 1>they want to come in uh and have a meal

0:11:10.400 --> 0:11:12.120
<v Speaker 1>in the restaurant, we're there for them. And if they

0:11:12.120 --> 0:11:14.280
<v Speaker 1>want to order to go from our restaurant or from

0:11:14.280 --> 0:11:15.760
<v Speaker 1>our one of our PF chains to go, you know

0:11:15.800 --> 0:11:18.439
<v Speaker 1>we're we're available for them as well. Does the to

0:11:18.640 --> 0:11:22.360
<v Speaker 1>go model for people to like ordering for home or

0:11:22.400 --> 0:11:25.320
<v Speaker 1>for takeout? Does that help you see a clear line?

0:11:25.400 --> 0:11:27.400
<v Speaker 1>Did you guys are tracking what's going on with your

0:11:27.679 --> 0:11:34.240
<v Speaker 1>customers directly? Do you see that helping fuel the bistro model? Well? Together?

0:11:34.320 --> 0:11:37.400
<v Speaker 1>Absolutely so we will have mortkets that own that have both.

0:11:37.880 --> 0:11:40.560
<v Speaker 1>And the thing is is it's all about brand residents

0:11:40.600 --> 0:11:43.079
<v Speaker 1>and people seeing PF chains and having to be more

0:11:43.080 --> 0:11:45.720
<v Speaker 1>top of mind. So having more units, having more cars

0:11:45.760 --> 0:11:48.559
<v Speaker 1>with the p F chain's um, you know car toppers,

0:11:49.200 --> 0:11:52.079
<v Speaker 1>being a being more available and more ubiquitous in the market,

0:11:52.120 --> 0:11:54.200
<v Speaker 1>is a good thing for for the strength of the brand.

0:11:54.760 --> 0:11:56.920
<v Speaker 1>Right And and so you know I mentioned Dallas, that's

0:11:56.920 --> 0:11:58.319
<v Speaker 1>what we're opening it to go next week. But we'll

0:11:58.320 --> 0:12:00.320
<v Speaker 1>have restaurants, will have two goes, and we'll be just

0:12:01.000 --> 0:12:04.240
<v Speaker 1>more present and more available from more places. You know,

0:12:04.280 --> 0:12:05.720
<v Speaker 1>you might have a guest who could have ordered at

0:12:05.760 --> 0:12:08.280
<v Speaker 1>home but couldn't from work because where their office is located.

0:12:08.520 --> 0:12:10.160
<v Speaker 1>But now they can because it is to go in

0:12:10.200 --> 0:12:12.719
<v Speaker 1>that market. Um, so they're they're able to interact with

0:12:12.800 --> 0:12:15.040
<v Speaker 1>us more often and as much as as they like,

0:12:15.200 --> 0:12:18.360
<v Speaker 1>and they'll think about us more because we'll be more present.

0:12:18.440 --> 0:12:20.240
<v Speaker 1>All right, So what keeps up at night? The restaurant

0:12:20.280 --> 0:12:21.880
<v Speaker 1>space is a tough one, as you know. I mean,

0:12:21.880 --> 0:12:23.840
<v Speaker 1>are you guys profitable in what you're doing? And just

0:12:23.880 --> 0:12:27.160
<v Speaker 1>got about forty seconds left. Yeah, yeah, no, we we're

0:12:27.160 --> 0:12:29.600
<v Speaker 1>doing very well from a from a profitability standpoint. Um.

0:12:29.640 --> 0:12:32.160
<v Speaker 1>You know, we got a lot smarter operationally during the crisis.

0:12:32.800 --> 0:12:35.480
<v Speaker 1>You mentioned something to the effect, I've never waste a crisis,

0:12:35.520 --> 0:12:38.680
<v Speaker 1>but but we did get a lot smarter and a

0:12:38.679 --> 0:12:41.040
<v Speaker 1>lot more efficient, and that's paying off now because a

0:12:41.120 --> 0:12:45.520
<v Speaker 1>sales rebound. We're more profitable than we were pre covid Um.

0:12:45.920 --> 0:12:47.640
<v Speaker 1>In terms of what's been a struggle, you know, staffing

0:12:47.679 --> 0:12:49.640
<v Speaker 1>has been a challenge throughout the industry. I think that's

0:12:49.679 --> 0:12:51.760
<v Speaker 1>something I'm sure you've heard from from other folks in

0:12:51.800 --> 0:12:55.720
<v Speaker 1>the space. We're working through it. And then that's that's

0:12:55.760 --> 0:12:57.760
<v Speaker 1>something where you have to be as good an employer

0:12:57.760 --> 0:12:59.599
<v Speaker 1>as you can. But something we're working through. But but

0:12:59.640 --> 0:13:01.840
<v Speaker 1>certainly a challenge just quickly ten seconds. Are you having

0:13:01.880 --> 0:13:04.320
<v Speaker 1>to pay workers more to get them in? You know,

0:13:04.360 --> 0:13:06.520
<v Speaker 1>we've we've always been at the higher end because our

0:13:06.559 --> 0:13:09.120
<v Speaker 1>food is more complicated and it's it's it's it's more

0:13:09.160 --> 0:13:10.720
<v Speaker 1>more work frankly to work at up one of our

0:13:10.720 --> 0:13:13.520
<v Speaker 1>restaurants in some other places. So we've always been competitive.

0:13:14.040 --> 0:13:17.280
<v Speaker 1>What we're doing is focusing on making the job, um,

0:13:17.320 --> 0:13:19.560
<v Speaker 1>you know, as easy for them as possible, giving them

0:13:19.600 --> 0:13:22.560
<v Speaker 1>technology and tools, uh, and making sure they have time

0:13:22.600 --> 0:13:24.679
<v Speaker 1>to spend with their families. Were given them fourth or

0:13:24.840 --> 0:13:26.559
<v Speaker 1>lie off this year? Is that? Yes? Or no? Though?

0:13:26.559 --> 0:13:30.160
<v Speaker 1>Are you paying more? Just quickly? Wages have gone up? Absolutely?

0:13:30.240 --> 0:13:32.319
<v Speaker 1>All right, Gonna leave it there, a great conversation. Come

0:13:32.360 --> 0:13:33.959
<v Speaker 1>back and talk more and let us know how it's going.

0:13:34.200 --> 0:13:36.880
<v Speaker 1>We're talking with and I'm like in the CEO p

0:13:36.960 --> 0:13:39.080
<v Speaker 1>F changs. Have a great weekend. Everyone a safe one.

0:13:39.200 --> 0:13:40.000
<v Speaker 1>This is Bloomberg