The Yin and Yang of Panda Express: Peggy and Andrew Cherng.

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OR a short time a few years ago, visitors to some Panda Express restaurants might have noticed something unusual on the menu: a firm, fruity cup of gelatin for sale.

Unbeknown to customers, the simple dessert encompassed the passion, friction and, ultimately, compromise that has propelled Panda Restaurant Group into the nation's largest chain of Chinese fast-food restaurants.

Husband and wife entrepreneurs Andrew and Peggy Cherng had a fundamental disagreement: Andrew liked the gelatin but Peggy didn't believe it was worthy to take a place alongside orange chicken, chow mein and other favorites on the limited menu.

They compromised; the couple decided to test the gelatin at limited outlets. It was a dud.

"It wasn't that good," remembered Alan Huang, the company's vice president of operations, who has known the couple for more than 20 years.

Peggy was right, and Andrew agreed to take ifoffthe menu. But at other times, Andrew has been right and gotten his way.

It wasn't the smallest disagreement the Chinese emigrants have had in their

35-year rise to the top in the U.S. food business, nor was it the largest--but it was an example of the way they let each other innovate.

"They are like yin and yang," said Senior Vice President of Field Operations Eugene Lain, who has worked with the couple since they opened their first restaurant in Pasadena in 1973. "One balances the other out. When they combine together they create almost a perfect company."

It's strong praise, but it's hard to deny the numbers.

Over the last decade the Rosemead-based chain has seen explosive growth under the couple's guidance, and is currently expanding at a rate of three outlets a week. Last year, sales topped $1.1 billion and there are now more than 1,000 restaurants in the U.S., Puerto Rico and Japan.

Moreover, the company has retained a spot on the Los Angeles Business Journal's list of fastest growing private companies for the past seven years, and has made frequent appearances on other lists, including best employer and largest minority-owned companies.

It's this kind of performance that has led the Business Journal to choose the couple as the latest inductees into its Business Hall of Fame. Past honorees include Alfred Mann and Richard Riordan.

And the Cherngs--highly educated immigrants who rose from modest roots while raising a family--show no sign of slowing. While they have loosened the reins a bit in recent years--three years ago Peggy gave up the chief executive slot--they are still in the office nearly every day and are the sole directors. They have their eyes set on almost doubling the company's revenues to $2 billion by 2010.

They also have expanded their outside interests, including charitable work. The Panda Charitable Foundation last year gave away about $1.4 million to organizations like Children's Hospital Los Angeles and Methodist Hospital in Arcadia.

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"Our main focus is really children in need," Peggy said.

Something hasn't changed, though: how they do their work in the company's 178,000-square-foot Rosemead headquarters.

"We have offices on opposite sides of the building," said Andrew, 60, who is more outspoken than his spouse. "If you marry someone and you work with the same person, you'd know why," he added with a laugh.

Constant thought

It doesn't take very long to get a feel for just how involved the couple is in the business. At the company's headquarters, where the layout, furniture and decorations are dictated by the Chinese practice of feng shui (which seeks harmony in the environment), Andrew spends much of his time interacting with the 500 employees in a quest constantly to improve the workplace.

He even goes so far as to interview each potential employee before they are hired into the corporate office--from mailroom clerk to "chief people officer," Cherng-speak for human resources officer. He speaks as if in constant thought, asking questions and offering up aphorisms like a fortune cookie. "The way you do anything is the way you do everything" is one of his favorites.

"Every day at our support center (headquarters), one of my main focuses is, how do we grow people? How do we make them more successful, humble, a student in life?" asked Andrew, who created a course for employees based on the popular book "The Seven Habits of Highly Successful People."

The couple is proud that the company's 18,000 employees are about 90 percent minority, with a turnover rate of about half of its competitors. And the company is structured so employees can move up from dishwasher to manager and into corporate offices.

That concern for employee growth, however, is not book learned. The couple lived it firsthand.

Andrew was born in the province of Jiangsu along the eastern edge of China in 1947 after Mao Tse Tung led the communists to victory. He escaped to Taiwan with his family when he was 5 years old by way of Macau and Hong Kong; he lived there for eight years before completing his high school education in Japan.

In 1966, he came to the United States to attend a small Methodist school called Baker University in Baldwin, Kan., "because it was the only school that accepted me," he said.

That's where he met Peggy. Both were studying mathematics at the time. Peggy doesn't remember how they first came to know each other but they quickly became involved, not entirely surprising given her similar immigrant background.

Peggy was born in Burma, now Myanmar, to Chinese parents and was raised there and in Hong Kong before coming to the United States for college.

Later they pursued graduate degrees at the University of Missouri--Andrew a master's degree in computer engineering and Peggy a doctorate in electrical engineering--with neither having a thought about opening a restaurant. Indeed, after college when the couple had moved to Los Angeles, Peggy first worked at McDonnell Douglas in a technical capacity.

However, the Cherngs' future changed in 1973 when Andrew's father, Ming Tsai Cherng, got permanent residency in the U.S. The senior Cherng has been a practicing chef in Taiwan and Japan, and desired to open a restaurant in California.

"It was the only thing we could afford," Andrew said. And it was something they all could do together. (The couple would not marry until two years later.)

With $60,000 he got from family, friends and bank loans, Andrew took over the lease of a closed coffee shop in Pasadena called the Pie King. He opened a sit-down restaurant called the Panda Inn, his first entrepreneurial venture. A friend of Andrew's dad came up with the name, shortly after the Chinese government sent two Pandas to the United States following President Nixon's historic visit in 1972.

It was the first time he began to think of himself as entrepreneurial. He knew very little about business, but he said he felt comfortable with the responsibility, perhaps naively so. "You try to prepare yourself, but in retrospect, I probably underestimated starting out a business."

At the start, Andrew would chase down customers in the parking lot when they were scared off by long lines and offer to buy them a drink while they waited for a table. "I don't know if you ever think about more than survival," he said.

Raising a family

At first, Peggy didn't work in the restaurant consistently. She had a day job then as an electrical engineer at Comtal-3M, where she became a software development manager.

But in her spare time, she developed some of the systems for the restaurant from home and would only go in to help on the weekends. She had no particular expertise in food.

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"The best thing I could do was be a hostess," she said. "I don't think they allowed me to go into the kitchen."

But that eventually changed, Andrew and his father continued to expand their Panda Inn concept, adding a store every few years around Southern California. Starting in the early 1980s, the company began to change significantly.

Andrew's father died in 1981. "It was difficult, but you learn to overcome it," he said. "My father was a man of few words but he was very well respected. If he didn't have good things to say about people, he didn't say it. He probably had a lot of calluses on his tongue."

In early 1982, Peggy joined Andrew when the opportunity to branch out their Panda Inn concept into fast food presented itself. The Donahue family--including former UCLA football coach Terry Donahue and his brother- invited Andrew to open a restaurant in the Glendale Galleria, which their company owned. Panda Express was born and quickly began to proliferate in mall food courts around the country.

Andrew, who describes himself as being stubborn, very determined and impatient, started relying on Peggy more heavily for the day-to-day operations of the company; she eventually became chief executive in 1998.

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Andrew has a strong vision for the company and where it should go. Peggy was detail and administratively minded, and was able to put Andrew's ideas into action.

"Andrew is innovative and at the time I was more systems oriented," Peggy said. "We didn't discuss who would be CEO; we just assumed it."

Still, Peggy didn't take on the challenge of chief executive of the company until the couple's three daughters--Michelle, Nicole and Andrea--left home for college. Before, she would drive her children to school and make sure she was home when they were to make time for them.

"Working at Panda, it was kind of tough to split my time, but you need to disassociate yourself and focus on the girls," said Peggy, who called raising her three daughters the biggest challenge of her professional career.

All of the girls went through Panda's seven-day management training program, but none decided to pursue the business or work at the stores while growing up. Today, Andrea, the oldest, is a lawyer. Nicole is a graduate student at Fuller Theological Seminary, studying family counseling. Michelle is a third-grade teacher in public school.

If the fact that none of their children wants to follow in their footsteps bothers them, the couple doesn't let on. Nowadays, the Cherngs have dinner with their daughters on a fairly regular basis. Since neither, ironically, are good cooks, they have a Chinese housekeeper who prepares meals for them.

Some regrets

Andrew, who has consistently worked long hours during his career, admits that he has not always been able to be attentive to family issues. He regrets not spending more time with his daughters as they were growing up.

"I came from a middle-lower-class family and we never owned a business before this, so I wanted to be successful," he said. "I had to be successful. That was the most important thing. I put all of my energy into the business and probably cheated family as a distant second. So that was something that if I were to redo it again, I definitely would do it differently."

Finding family balance was what caused Andrew to approach his wife in 2004 about hiring a restaurant industry veteran from outside the company to lead the company's day-to-day operations.

"It is incredibly difficult to work with your spouse for as many years as we have," Andrew said. "It does cut into your personal life. Because of that, I came to the conclusion that business, or whatever you are doing, should be fun."

That difference in personality is noticeable to colleagues, friends and family. Alan Huang, the senior vice president of operations for Panda who has known the couple for more than 20 years, said Peggy is "the more serious person."

"She doesn't really like to joke with you. She is business," Huang continued. "Andrew sometimes jokes with you. Sometimes you can tease him and it won't matter because he can tease you back."

The choice for the new chief executive was Tom Davin, whom Andrew had met in 1993. At the time, Davin was working for PepsiCo on a study about restaurant chains in the Chinese category.

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Davin went on to lead Taco Bell and during that time lost touch with Andrew. But several years ago, while working at a private equity firm, Davin contacted Andrew about investment opportunities in Panda Restaurant Group.

"He turned the tables on me," Davin said. "He said, 'We aren't looking for outside investment, but we'd love for you to come join the team.' It was really a once-in-a-lifetime opportunity."

At first Peggy didn't take well to the idea. She remembered too well another outside industry executive whom the company hired as president in 1992 and who didn't work out.

"I had hesitations because Panda has a unique culture and I wanted to make sure a manager from outside would respect the culture," Peggy said.

Panda Restaurant Group owns and operates almost all of its own locations. It only franchises at a handful of locations in Japan and Puerto Rico, and has licensing agreements at locations like Dodgers Stadium and Universal Studios.

Perhaps due to their unique model, the Cherngs have mastered chaining Chinese food like few others have been able to do.

Panda Express had 2007 sales that were well above the combined sales of the No. 2 and 3 competitors in the industry, Pei Wei, owned by P.F. Chang's China Bistro, and Pick Up Stix, respectively.

Though Chinese is one of the most common types of ethnic restaurants in the United States, most locations are mom-and-pop stores.

"Because there is such a multitude of mom-and-pop locations that are very local and have very loyal customers, it is harder to expand as a chain like Panda Express," said Bob Sandelman, president of Costa Mesa-based Sandelman & Associates. "The number of units and the revenues of Panda Express is quite a feather in their cap."

The way the Cherngs have pulled it off, Sandelman said, is by starting in food courts where mom-and-pop Chinese food restaurants don't have a footing. From there, the company was able to move into standalone outlets outside malls.

Overseas expansion

Meanwhile, the Cherngs have their eyes on more markets. They see the company one day reaching all 50 states. They have about 15 more to go. And they see the Panda Express concept as one that will translate well overseas.

The company is currently in the midst of opening a number of stores that will have a new design that provides a more authentic decor. In March, the company plans to launch its first television ad. To this point, surprisingly, the only advertising the company has done is through discount newspaper coupons.

Amid all this, the couple has been ratcheting up its outside interest. Peggy founded the Panda Charitable Foundation in 1996 to open a school in Andrew's hometown in memory of his father. In 1999, Peggy launched another organization called Panda Cares, which provides assistance for the health care and education of children. It has donated on a regular basis to United Way, the Children's Miracle Network and local hospitals.

Meanwhile, in his free time, Andrew likes to golf, exercise and hike. He is also actively involved in politics. Andrew has been a longtime supporter of Mayor Antonio Villaraigosa. The two met in 1999 when Villaraigosa was in the state Assembly.

In the past seven years, employees from Panda Restaurant Group, including Andrew and Peggy, have donated nearly $30,000 to the mayor's campaign and Andrew has helped Villaraigosa in several interests including a failed initiative to make Los Angeles the host city for the 2016 Olympic Summer Games.

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Last year, Panda Restaurant Group donated $50,000 to the mayor's Partnership for Better Schools.

"I supported our mayor because he has a strong desire to help the community," Andrew said. "I mean the guy works hard."

Villaraigosa returns the compliment.

"The success of his restaurant franchise is a realization of the dream that all immigrants carry to these shores," the mayor said in an email statement.

However, for all their other interests, the couple is still in the office nearly every day taking part in the daily operations of the company.

"I spend a lot of time with Andrew in real estate," said Davin. "I spend time with Peggy on strategy and on the overall culture of the company. They are active and up to date on the business, which I see as an advantage."

And the couple does not have their eyes set on retirement, at least any time soon.

"Peggy and I have strong opinions about how things should be done and as long as we are adding value or helping others add value, I don't see the reason to leave," Andrew said. "Frankly, I don't know what I'd do either if I retired."

Andrew and Peggy Cherng Accept Award

Restaurant owners Andrew and Peggy Cherng accepted the 2007 Businesspersons of the Year award Feb. 7 from the Business Journal.

Publisher Matt Toledo presented the award at the Biltmore Hotel in downtown Los Angeles. The luncheon event drew nearly 500 of the couple's family members, friends and associates.

Toledo congratulated the minority business owners, who immigrated to the United States from Asia to get their higher education and opened their first restaurant in 1973 in Pasadena.

"They are a model of the American dream." Toledo said. "They are emblematic of the entrepreneurs who come to Los Angeles to make their dreams a reality."

The Cherng's own Panda Restaurant Group, which operates more than 1,000 Panda Express outlets in the United States, Puerto Rico and Japan. Sales hit $1.1 billion last year.

Andrew Cherng expressed gratitude for the recognition.

"We are truly blown away," he said. 'To have our pictures among previous Hall of Famers is just unbelievable."

Previous inductees of the honor are Kent Kresa, former chairman and chief executive of Northrop Grumman Corp.; biotech entrepreneur Alfred Mann; businessman John Anderson; billionaire Eli Broad; venture capitalist and former L.A. Mayor Richard Riordan; and Ed Roski Jr., chairman and chief executive of Majestic Realty Co.

Andrew Cherng said that Panda's mission to "deliver exceptional Asian dining experiences" is achieved first by serving the company's employees and inspiring them to do their best.

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He stressed the family atmosphere that the company promotes among employees, but maintained he has more to learn about improving himself as he continues to lead the company.

"We are learning that there is a lot that we don't know how to do," Andrew said. "I want to be humble, stay curious and be real in all I do. It is never too late to re-look at what I can do for my family and community at large."

The event also honored 72 other businesses and organizations throughout Los Angeles that are industry leaders.

Some of the other honorees included Viewsonic Corp. as the number one minority-owned business, O'Melveny & Myers LLP as the top law firm and the Westin Bonaventure Hotel & Suites as the top hotel.