* P.F. Chang's opened first Canadian location in July
* Mexican, Kuwaiti debuts came before Canada
* Market seen promising for U.S. chains despite costs
* Smashburger, Famous Dave's among other recent arrivals
By Atsuko Kitayama
TORONTO, Sept 27 P.F. Chang's China Bistro, one
of the most popular casual dining chains in the United States,
opened its first Canadian restaurant in an upscale Toronto mall
this summer, at least two years after its international debuts
in Mexico and Kuwait.
Business is already exceeding expectations, the chain says,
raising the question of why it waited so long to enter a
neighboring market that would seem a natural fit. After all,
many border-hopping Canadians are familiar with the brand.
Canada already has a few U.S. full-service restaurant chains
- Darden Restaurants Inc's Red Lobster is an obvious
example. But the rows of chain restaurants inside or just
outside malls all across the United States are missing in
Canada. That would seem to be an opportunity worth exploiting.
For P.F. Chang's, perhaps the most prominent of the U.S.
restaurant chains now testing the Canadian waters, the high cost
of operating a restaurant in Canada was one reason for waiting.
Pay is much higher in Canada, benefits cost more, and supply
management boosts prices for key ingredients such as poultry and
dairy, said Michael Aronovici, president of Interaction Asian
Restaurants L.P., P.F. Chang's Canadian franchisee.
The Scottsdale, Arizona-based chain, operating more than 200
of its own namesake full-service restaurants in the United
States, also wanted experience in other international markets
through franchising before coming to Canada.
"Once we established the brand in Latin America and the
Middle East, we gained a lot of confidence to execute the brand
through partners," said Mike Welborn, president of global brand
development for P.F. Chang's, which recently went private in a
$1.1 billion deal with private equity firm Centerbridge
"Canada is our first test of more a developed economy," he
said. "If we can be successful in ... Canada, that means we can
be successful in other higher-cost markets around the world."
For chains such as P.F. Chang's, Canada has some obvious
Some 47 percent of Canadians dine out daily, including
visits to quick service places such as Tim Hortons Inc,
compared with 44 percent in the United States, according to
market research firm NPD Canada.
"Canadians love using restaurants," said Robert Carter, NPD
Canada's executive director for food service.
While P.F. Chang's Chinese-inspired cuisine has fueled
impressive growth, its home market is highly competitive and the
fragile economy means less cash for restaurant meals.
Carter said the U.S. full-service segment has experienced a
sharp drop in traffic and revenue during the economic downturn,
while the Canadian market has been relatively stable.
The Canadian market may also be a bit less competitive. Tim
Horton's dominates Canada's quick service segment, but
independents command 55 percent of traffic in the full-service
segment, Carter said.
That leaves an opening for P.F. Chang's, which plans three
more locations in Canada in 2013, two of them in Montreal. It
expects to add three to four units a year until it gets 20 to 25
It also plans to move into different parts of the world,
including Amman, Istanbul, Buenos Aires, and Bogota.
"Fast casual dining" - somewhere between casual dining and
quick service - was the fastest growing segment in the United
States over the last five years, Carter said, and other chains
in that category are looking to expand in Canada.
"Canada is the biggest near-term opportunity for
international expansion," said David Prokupek, chief executive
of the U.S.-based Smashburger, a fast-casual dining chain that
opened its first two outlets in Calgary in May and June.
"The trend for the fast casual dining, where you order at
the counter and the food is brought to you, is somewhat
underdeveloped in Canada," he said.
Denver-based Smashburger aims to open 15 to 20 locations in
Calgary and Edmonton over the next two to three years, and a
couple of hundred throughout Canada over 10 years. It expanded
into Kuwait this year, and plans to open in Costa Rica and Saudi
Another U.S. chain, Famous Dave's of America Inc, came to
Canada in July, choosing Winnipeg for its first Canadian
location, partly because the city boasts a higher number of
restaurants per capita than many other cities, said Victor
Salamone, vice president of franchise operations and development
for the chain.
"Per capita expenditure for eating out is comparable to
Manhattan," he said.
In its opening week, the Winnipeg restaurant was "probably
the second busiest restaurant in Famous Dave's history," he
Minnesota-based Famous Dave's plans to open somewhere
between 25 and 75 Canadian restaurants, depending on how warmly
Canadians embrace its concept, as it expands its North American
footprint to 400 to 500 restaurants.
In general, Salamone said, "the concept of BBQ translates
very well in Winnipeg".
P.F. Chang's concept also translates well, Interaction's
Aronovici said. There was no need to change the menu to
accommodate Canadian tastes, though it compiled a wine list from
scratch because Canadians often prefer local vintages.
"A lot of Canadians are exposed to the brand in the U.S.,
and they are expecting P.F. Chang's to be exactly the same,"
Aronovici said. "That's what they want."