Eats shoots grows-Panda Express sees sales gain

* Increases 2010 new store goal to 75 from 57

* Eyes 10,000 U.S. units over long term

* Same-stores sales up in March

* One of fastest-growing U.S. restaurant chains

By Lisa Baertlein

LOS ANGELES, May 21 (Reuters) - Panda Express, the largest Asian-themed restaurant company in the United States, is accelerating unit growth as a healing U.S. economy drives more diners into its nearly 1,300 quick-service outlets.

"Our business is up nicely," said Peggy Cherng, co-founder of the chain's privately held parent Panda Restaurant Group, based in Rosemead, California.

Company revenue rose more than 3 percent to $1.27 billion in 2009. Rival P.F. Chang's China Bistro (PFCB.O) reported 2009 revenue that grew almost 3 percent to $1.23 billion.

Like many other restaurant chains, Panda Express saw same-store sales fall when the economy forced consumers to cut back on eating out. But it was in lockstep with many of the industry's healthy operators when it saw sales return to positive territory in March.

Same-restaurant sales at Panda Express chalked up a 6.4 percent gain for the four-week period ended March 19. Sales for the period ended April 16 and May 14 rose 4.1 percent and 5.3 percent, respectively.

Late last year, Panda Express set a goal to open 57 new units in 2010, but raised that number when sales momentum improved.

"We are pushing ourselves with a stretch plan of opening 75 stores," she said. The company now has restaurants in 38 U.S. states and will debut in Wyoming, Tennessee and Minnesota this year.

Cash flow is more than $200 million a year.

ASIAN-INSPIRED TASTE

Panda Express started in 1973 in Pasadena, California when Andrew Cherng -- Peggy Cherng's husband -- opened the Panda Inn restaurant with his father. A decade later Andrew Cherng opened the first Panda Express, which serves food adapted from the menu at the since-expanded Panda Inn.

The Panda Express chain dominates the Asian category of the so-called "fast-casual" niche situated between full-service restaurants and fast food.

"They basically own the segment, just like P.F. Chang's owns the full-service segment," said Darren Tristano, executive vice president at consulting firm Technomic.

The menu at Panda Express features "bolder, spicier flavors" and fresh vegetables that appeal to a broad audience, Tristano said. The chain's dishes include Kung Pao chicken, Beijing beef and eggplant tofu.

There are 1,256 Panda Express units in the United States, including stand-alone restaurants and locations in shopping malls. All of the stores, with the exception of 30 in venues like stadiums and airports, are owned by the company.

"We'd like to have 10,000," said Cherng. "We have a long way to go."

Staying private has given the owners the ability to focus on long-term growth rather than short-term results, she said. "Being a public company is very tough these days."

Rivals run the gamut from mom-and-pop restaurants to P.F. Chang's limited-service Pei Wei Asian Diner, Noodles & Company, Pick Up Stix, Leeann Chin and Manchu Wok.

Lunch prices at Panda Express are higher than at the typical fast-food chain, running between $6 to $10 for a two-item entree and a drink. Because of its dominant position, the chain has avoided the rampant discounting many fast-food chains are using to lure diners.

During the 1990s, the company tested a fuller-service concept called Panda Panda, where diners ordered at the counter and had food delivered to their table by servers. It refocused on Panda Express after its clientele expressed a preference for faster, buffet-style service.

P.F. Chang's stepped in where Panda Panda left off and now operates about 170 "quick-casual" Pei Wei restaurants in addition to around 200 more upscale namesake restaurants.

P.F. Chang's said same-store sales at its full-service Bistro restaurants fell 2.7 percent for the first quarter ended April 4 and were down in all three months. Pei Wei's rose 2.2 percent for the quarter and were up every month. (Reporting by Lisa Baertlein, editing by Leslie Gevirtz)