Panda Express eyes growth outside of the food court

Panda Express is the latest food company to change its business model in an effort to increase revenue and drive profitability.

The ubiquitous fast food restaurant is a staple in malls across the U.S., but company officials are spearheading a plan to overhaul food offerings in a bid to compete against large competitors such as McDonald's, which has unveiled a line of healthy options as a means of attracting more customers.

NPR reports that the Panda Express is not only seeking to change its menu offerings, but also to move the locations of its outlets. The company is working to entice Americans who are increasingly concerned about their health, and executives at the firm said that opening stand-alone restaurants would help them tap into an entirely new demographic.

Still, shifting a company's established business model is no easy feat, and analysts said Panda Express had its work cut out for it as it augments menu items and opens new stores. The fast food player will need to implement cost reduction measures to keep profits from falling during its investment into new stores, for example, and it may have to work with procurement consultants to assist in the strategic sourcing of new fruits and vegetables.

Panda Express first opened its doors in the U.S. 28 years ago, and its popularity has rapidly increased since then. The company is one of the fastest growing chains in the nation, according to the news provider, though executives are not comfortable to simply rest on their laurels amid mounting competition from big-name players in the restaurant space.

"Before, I just gave customers a big chunk of meat," Panda Express head chef Andy Kao said in an interview. "Now I need to make sure [the] nutrition's good."

The company's path away from processed foods and toward fresh ingredients first began in 2007, when it introduced a campaign to serve 20 different kinds of vegetables all chopped in-house each day. The company is endeavoring to change its public perception from that of a fast food chain to an upscale dining experience. In effect, Panda Express executives are hoping to shift into the so-called "fast casual" space, next to the likes of Chipotle and Panera.

While the U.S. restaurant sector has experienced sluggish growth in the wake of the recession, fast casual eateries have witnessed their revenue climb as consumers increasingly flock to them. The niche market, however, is exceedingly difficult to break into, as brands must craft an identity that is both ethnically authentic and affordable. Some companies working to break into the market have kept costs down through business cost reduction campaigns and rehashing contract supplier negotiations.

Experts contend that the key to succeeding within the space is offering delicious food that customers will not be able to purchase elsewhere. That is why Panda Express executives said the company is poised to succeed, as its orange chicken entrée is one of the most popular items on its menu. Last year, the restaurant chain sold 60 million pounds of it, according to Panda Express product manager Patricia Lui.

"Sweet and sharp and salty," she said, referring to the orange chicken. "You don't want any flavor to stand out. You want it to be balanced."

The company is also testing a number of other potential new menu items as it courts growth amid what economists say could be a sustained U.S. economic recovery. While the path may be crowded, Panda Express is confident it can successfully break into the niche of the restaurant industry.