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Panda Express owners to move from fast food to dry cleaning

Owners partner with Procter & Gamble in effort to expand beyond restaurants by using fast-food chain principles in what is mostly a local business.

December 28, 2011|By Tiffany Hsu, Los Angeles Times
  • Panda Express founders plan to open a Tide Dry Cleaners in Henderson, Nev., in partnership with Procter & Gamble.
Panda Express founders plan to open a Tide Dry Cleaners in Henderson, Nev.,… (Tide Dry Cleaners )

The San Gabriel Valley entrepreneurs who brought Panda Express Chinese food to malls and airports throughout the country are now betting that Americans will want the same standardization in something a little less tasty — dry cleaning.

Co-Chief Executives Andrew and Peggy Cherng, who built a fast-food empire of quick-serve Asian cooking, now want to bring the same chain-venue principle to clothes.

The Cherngs' new Rosemead-based company, Panda Dry Cleaning, plans to open as many as 200 standardized shops nationwide in the next five years in conjunction with consumer goods giant Procter & Gamble.

The first of the franchised shops, under the name Tide Dry Cleaners, opened Tuesday in the Las Vegas suburb of Henderson.

"There isn't any consolidation in this particular industry," Andrew Cherng said. "There is no McDonald's of dry cleaners. We see this as an opportunity."

The closest is probably Martinizing, a 62-year-old Ohio-based chain that claims to be the country's largest dry-cleaning franchiser, with locations across the U.S. and in eight other countries and territories.

Panda is set to open at least five more Tide cleaners in 2012. Many of the future shops could be planned for California, where they have exclusive rights to develop the facilities.

As it did decades ago with Chinese food, the Panda team hopes to take a scattered market and create a dominant national brand. With the Panda fast-food restaurants starting to crowd one another in key markets, the Cherngs looked to dry cleaning as another way to stretch their entrepreneurship muscles.

"The restaurants are already pretty saturated," Cherng said. "Doing another line of business presents us with more real estate opportunities."

The Panda plans brought a major boost to the Procter & Gamble dry-cleaners franchising venture, which launched a year ago and has six outlets in Ohio and Kansas. They feature drive-through concierge service and customer access to 24-hour lockers and drop boxes.

The cleaning machines look like large orange boxes of Tide, a Procter & Gamble signature brand.

The $9.2-billion dry-cleaning industry is made up of nearly 39,000 establishments across the country, according to the research group IBISWorld. The market is highly fragmented, with the top four companies generating 2.5% of total revenue. More than 90% of dry cleaners have only one facility.

Analysts believe dry cleaners are headed for a revival over the next few years amid heightened demand from hospitals, restaurants and hotels. But the last five years have been rough, with the number of dry-cleaning companies shrinking nearly 2% each year between 2006 and 2011 as consumers scaled back spending and operators struggled with rising utility costs, more stringent environmental regulations and concerns that too much dry cleaning wears out clothing.

Jack Hakopyan, who co-owns two Los Angeles cleaners with his brother, laid off employees to get through lean years. But he said many locally owned dry cleaners are offering — or planning to offer — services equal to and beyond those promoted by the new chain.

Among them: same-day delivery service, all-day drop boxes and dry-cleaning vending machines.

"I've got the same stuff going on for myself," Hakopyan said.

Jeff Wampler, chief executive of Agile Pursuits Franchising, which manages the Tide dry-cleaners business at Procter & Gamble, said that the standardized nationwide system will provide better service for customers.

"They've generally been dissatisfied with the poor physical environment, routine errors with garment care and unremoved stains common at many dry cleaners," Wampler said. "We're trying to elevate the industry."

But Jack Yerevanian, who owns Jack's Cleaners in Pasadena, predicted that Panda will not find it easy to apply chain-restaurant principles to the business.

"It's not like fast food, where you can open 50 stores in one location and hire anyone off the street," he said. "If it were that easy, I'd open up 10 locations myself."

A second-generation dry-cleaner operator, Yerevanian said he works long hours and searches for experienced employees to maintain the operation's reputation. He said the Panda-owned cleaners could siphon away customers, especially if they offer discount pricing, but he was skeptical that the chain model will have much of a shelf life.

"They're going to start big," he said, "but then lose market share once customers see the difference in quality."

The Cherngs' entrance into the clothes cleaning business brings a modern twist to the timeworn stereotype of Chinese laundry workers. Thousands of Chinese immigrants who came to the U.S. in the 19th century ended up toiling in commercial laundries because racial prejudice kept them out of other lines of work.

"The hand laundry served as their first long-term avenue to economic survival," said John Jung, author of the 2007 book "Chinese Laundries: Tickets to Survival on Gold Mountain."

Andrew Cherng, who was born in China, opened the first Panda Inn restaurant in 1973 in Pasadena before being invited a decade later to open a food court version in the Glendale Galleria. Cherng and his wife eventually grew that operation into a fast-food empire that had sales of $1.4 billion last year, according to the Technomic research company.

And now, to learn the laundry business, they have to bring in experts. Panda is buying Summit Cleaners of Colorado Springs, Colo., for an undisclosed sum to provide trainers for its new venture.

"We obviously don't have operating experience in running dry-cleaning sites," said Mark Tarzian, who is heading the Panda cleaners venture. "It was a tactical move to gain experience.

"We need to gain expertise rapidly."

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