300 hundred restaurants in 22 countries might not sound like a billion dollar empire, but you would be wrong.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is… Well, it’s us, but we’re highlighting ads we’ve written and produced for our clients, so here’s one of those.

[OG Law Ad]

Dave Young:

Welcome back to the Empire Builders Podcast. I’m Dave Young. Stephen Semple is here, and we’re going to talk about the building of another empire. And I’ve got to admit, I don’t know a whole lot about this one. I’ve maybe…

Stephen Semple:

Oh, wow. That’s exciting.

Dave Young:

We’re going to talk about P.F. Chang’s. I’ve maybe eaten at one of them, I would say less than half a dozen times in my life.

Stephen Semple:

Okay.

Dave Young:

And I think it’s just more of a convenience and proximity issue. I’m never really near any of them.

Stephen Semple:

So while they’re big, they’re not massive. They’re 300 restaurants in 22 countries, so they’re not like many of the other things we’ve talked about where there’s thousands of them.

Dave Young:

Right.

Stephen Semple:

So no, they’re not as prevalent. But look, 300 restaurants is still pretty successful.

Dave Young:

Yeah, that’s a lot. How did they get started? I’m not going to guess. I’m going to let you tell me.

Stephen Semple:

Okay. The business was founded by Philip Chiang and Paul Fleming. And Paul Fleming, you might recognize because he’s of Ruth’s Chris Steakhouse fame.

Dave Young:

Oh, okay.

Stephen Semple:

They got together, and they founded P.F. Chang in Scottsdale, Arizona-

Dave Young:

That makes a lot of sense.

Stephen Semple:

… in 1993. Now, Philip spells his last name C-H-I-A-N-G. So at a certain point, he changed his spelling just to make it easier. Drop the I and make it easier.

Dave Young:

Drop the I and made it just… Spell it the way it sounds.

Stephen Semple:

… Spell it the way it sounds, make it easier for the U.S. market. And the company has been bought and sold a few times over the years, but the first acquisition from the founders, from Philip and Paul, happened in 2012 by Centerbridge Partners in a deal worth a little bit over a billion dollars.

Dave Young:

Wow.

Stephen Semple:

They did okay. They walk away with some cash.

Dave Young:

Now, was it before or after they started putting it in supermarkets?

Stephen Semple:

I do not know the answer to that question.

Dave Young:

Probably predates.

Stephen Semple:

I’m going to suspect after.

Dave Young:

Okay.

Stephen Semple:

But the story starts with Philip’s mother, Cecilia Chiang. Cecilia was born in Beijing in 1920 to a really wealthy family. She grew up in a palace in China, ate high-end food, full staff, chefs, the whole nine yards, part of the aristocracy. And during the Chinese Civil War and the Japanese occupation, her family fled China and relocated in Japan, and there, the family opened a restaurant. Now in the 1960s, she travels to the U.S. Cecilia travels to U.S. to help her sister who came to America because of the economic challenges in Japan, and her sister had opened a restaurant in San Francisco and needed help-

Dave Young:

Okay.

Stephen Semple:

… and Cecilia came over to help her. But that venture failed, but Cecilia still remained in the U.S. And look, Chinese food in America at that time was not good. If you look at just about every food that has come to United States, the first people who brought it, whether it was Italian, whether it was Mexican, whether it was Chinese, the first immigrants were the people who were poor.

Dave Young:

Yeah. What years are we talking about here?

Stephen Semple:

1960.

Dave Young:

Okay.

Stephen Semple:

So the first immigrants who came were the people who were poor, so therefore, typically the food is not the great food, it’s not made with the great ingredients. And so here she is, she’s looking around and she’s saying, “Look, there’s this poor Chinese food, all basically from the Canton region.” And most of it has been also turned into an American version, because basically, again, people were making it with whatever was available, so it really became very Americanized.

Dave Young:

Right.

Stephen Semple:

And Cecilia saw that, and what she wanted to do was introduce America to a more refined Chinese food, what she had experienced growing up as a wealthy person in China. So in 1961, she opens a sit-down restaurant with food from Northern China called The Mandarin.

Dave Young:

Okay.

Stephen Semple:

And it opens not in Chinatown, because here’s the thing that she recognized, context is everything. If she opened it in Chinatown, people’s expectation would be it would be the same as all the Chinese restaurants in Chinatown.

Dave Young:

All of them. Right, right.

Stephen Semple:

So what she did, she opened it on Polk Street, not far from Pacific Heights in San Francisco.

Dave Young:

Okay.

Stephen Semple:

Bit of a bold move, but she wanted to be seen as different, and that was how you did it.

Dave Young:

Makes sense.

Stephen Semple:

Now, the menu had some things that were unfamiliar, like pigeon, and it did not have some things that were expected like chow mein. And she struggled initially, because America was not really ready to try new things. Now, after two years of struggle came her breakout moment. The restaurant was visited by a guy by the name of Herb Kane, who was the most influential columnist in San Francisco history. He was a writer for the San Francisco Chronicle. But here’s the interesting thing, not a food critic. And he comes in the restaurant, falls in love with it, and gives it a great review. And overnight, the place becomes famous. You couldn’t get into it. It was visited by the likes of Julia Child, James Beard. It was totally on the radar. And I actually think the review may have even been more powerful because he was not a food critic.

Dave Young:

Sure. Yeah.

Stephen Semple:

But it also goes to show you… We talk about influencers, influence and all these other things, most restaurants be like, “We’ve got to get the food critics in here.” This guy was just a columnist who came in to try out their food-

Dave Young:

Right.

Stephen Semple:

… and it made them famous. And one of the things he loved was Peking duck, and so today Peking duck is pretty normal, it was really new back then. And suddenly, authentic Chinese food started to pop up. This really started it. In the late 1960s, Chinese restaurants in the United States doubled to about 10,000 of them. 1966, the first sushi restaurant opens. She opens the second restaurant, and Philip… And we’re talking about Philip Chiang?

Dave Young:

Right, right.

Stephen Semple:

Philip, her son, joins the business, and opens The Mandarin Cafe in LA, where he starts modernizing Chinese dishes for American diners, so starts doing a bit more of a fusion, right?

Dave Young:

Mm-hmm.

Stephen Semple:

Now, it’s here that Philip meets Paul Fleming, from Ruth’s Chris Steakhouse.

Dave Young:

Right.

Stephen Semple:

And Philip starts to build a bit of a friendship with Paul, and wants to work with Paul, wants to leverage his knowledge. Because after all, Ruth Chris is an upscale restaurant, and there’s this rise of casual chains, but Paul is not super excited, because none of them are Chinese, nor is Cecilia. She’s like, “I don’t really want to do this.” Philip is determined, he stays in touch with Paul. So 1979, things really start to change, because the restaurant called China Coach is opened by Wolfgang Puck, and it grows very quickly to 50 restaurants. And it’s the early ’90s, and Cecilia is ready to sell the restaurants.

Dave Young:

Stay tuned, we’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Using Stories To Sell Ad]

Let’s pick up our story where we left off, and trust me, you haven’t missed a thing.

Stephen Semple:

And it’s the early ’90s, and Cecilia is ready to sell the restaurants, which basically frees Philip to make the changes he wants to do. He cycles back to Paul. Paul’s now looking at it going, “Well, there is this place for this growth and all of this.” So they decide to start som...