Far East Restaurant Battle Heating Up on West Coast

Forget the burger battles and taco tussles.

The latest food fight in Southern California is between wok-wielding foes vying to dominate the market for fast, fresh and affordable Asian fare.

Pei Wei Asian Diner, Pick Up Stix and others are expanding despite the hurdles: an abundance of mom-and-pop competitors, a shortage of prime restaurant sites and the complexities behind churning out shrimp with lobster sauce, vegetarian stir-fry and three-flavored dumplings.

“It’s one of the most popular cuisines in the world and yet it’s under-penetrated from a chain basis because it’s very difficult to prepare on the scale of restaurants,” said Steve Finn, chairman of Bloomington, Minn.-based Leeann Chin Inc., which launched Chin’s Asia Fresh two years ago in the Midwest.

The Asian segment has attracted key players in the restaurant industry over the years hoping to duplicate the success of Panda Express, which peddles its fast and cheap cuisine through 638 outlets, or that of the higher-end P.F. Chang’s China Bistro, with 107 casual dining restaurants.

The latest entrants are aiming for a relatively new niche in terms of price, speed and decor -- a rapidly expanding market called “fast casual” in the restaurant business.

At Pei Wei, for example, guests place customized orders at a counter and can watch food being prepared in flaming woks on their way to grabbing a beverage. Once prepared, the food is served to the customer in reusable plates and bowls and with metal utensils, which are cleared away after the customer leaves. The average check is $8 to $9 per person at Pei Wei, compared with $18 at P.F. Chang’s.

As she waited for a teriyaki chicken bowl on a recent afternoon, Carol Cotter of Granada Hills recalled her first visit to the Pei Wei in Valencia -- a comfortable room where warm wood accents and an array of Asian tchotchkes were sandwiched between black ceilings and red lacquer-colored floors.

“It was delicious,” Cotter said. “The seasonings were good. I liked the whole feel of the place and it’s not expensive.”

Asian cuisine claimed 5% of the nearly $7-billion quick-casual market last year, according to Technomic Inc., a Chicago-based food service consulting firm.

The chance to grab a larger market share has attracted newcomers and established competitors.

Pei Wei, for example, is a cost-conscious spinoff founded in 2000 by Scottsdale, Ariz.-based P.F. Chang’s. Pick Up Stix was snagged in 2001 by Carlson Restaurants Worldwide Inc., which also operates TGI Friday’s, from Southern California businessman Charles Zhang.

“There are regional players, but there’s no chain out there with 1,000 restaurants,” said Tim Pulido, president of Pick Up Stix Inc. “It’s a dogfight.”

Pick Up Stix plans to expand its chain of 91 restaurants -- 60 of the eateries are in Southern California and the rest in Arizona and Nevada -- by opening 20 outlets this year and 40 in 2005.

Pei Wei hopes to augment its 47 restaurants, spread across California and six other states, by opening 20 outlets this year and as many as 28 in 2005. In California, where there are already diners in Pasadena, Newport Beach, Irvine, Torrance and Encinitas, the company wants to add as many as 12 locations a year.

The rash of fresh-obsessed rivals hasn’t escaped the attention of Rosemead-based Panda Restaurant Group Inc., operator of Panda Express.

At Panda Express, batches of food are prepared by wok in advance rather than made to order. In a nod to its competitors, however, the company’s new and remodeled restaurants feature exhibition-style kitchens, and have refrigerators with clear doors to showcase fresh produce.

“It’s not cooked to order, but it is freshly cooked,” said Peggy Cherng, chief executive of Panda.

The fast-casual Asian food crowd is facing mounting competition from a vast, new generation of family-owned restaurants.

“If you look at Chinese restaurants in Los Angeles, they are right below doughnut shops as the most prevalent type of restaurant,” said Randall Hiatt, president of Costa Mesa-based Fessel International, a restaurant consulting firm. “Making matters more competitive is the proliferation of all types of Asian food over the past 15 years. It used to be just Cantonese -- but now there’s Mandarin, Szechwan, Japanese, Korean, Thai, Indian and Vietnamese.”

Competitors have taken note of the public’s expanded palate for Asian flavors. For example, Pick Up Stix, which first opened in 1990 in Rancho Santa Margarita, recently switched to a new prototype, changing its motto from “Chinese Wok’d Fresh” to “Fresh Asian Kitchen.”

Another complication: finding wok-proficient workers. It’s not as easy to learn to cook by wok as it is to flip a burger or assemble a sandwich, industry experts say.

“A wok is not something a lot of American cooks are used to,” said Dennis Lombardi, executive vice president of Technomic. “There needs to be a premium on keeping the turnover in that category low so that your training costs don’t get out of line.”

In addition, the chains are battling for high-profile locations in Southern California where real estate rivals include coffee houses, vitamin stores, mattress shops and the like.

“It’s a very challenging market out there,” said Roger Glickman, chief executive of A.O. One, a franchise company that has inked a deal to develop 56 Noodles & Co. outlets over the next seven years throughout Los Angeles, Orange and San Diego counties. “Everybody wants great parking.”

Pei Wei officials don’t expect to pierce the metropolitan Los Angeles area until late next year or in early 2006.

“It’s not like Scottsdale, Ariz.,” said Russell Owens, president of Pei Wei Asian Diner Inc. “There’s not miles and miles of undeveloped land where new centers are being built.”

But Glickman said the first Los Angeles area Noodles & Co. would open in Beverly Hills by January. The chain does noodles with a twist: Roughly a third of the restaurant’s menu consists of Asian offerings like “Japanese Pan Noodles” and “Wok-Seared Lo Mein,” but it also features dishes such as “Wisconsin Mac & Cheese” and mushroom stroganoff.

“California is a very, very complex market,” said Darin Kraetsch, executive vice president of Atlanta-based Raving Brands, which plans to open Southern California’s first Mama Fu’s Asian House near Costa Mesa’s South Coast Plaza.

“It’s got a tremendous amount of players, but at the end of the day the companies that thrive are the ones with good food, atmosphere and real estate.”

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A sizzling sector

Percentage of total market for quick-casual restaurants

Restaurant chains offering fast, fresh food in a casual atmosphere are expanding rapidly, but Asian cuisine is still a small part of the market.

*--* Bakery cafes 23% Mexican/Southwest 16% Chicken 13% Italian 10% Soup and salad 8% Deli sandwich 5% Asian/noodles 5% Varied menu 4%

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Source: Technomic