When it comes to Asian concepts in the fast-casual segment, the U.S. is vastly dominated by Panda Express.
But tiny Pepper Lunch is making a go of it here. And, though the brand is still evolving for the U.S. audience, it appears to be off to the races.
Of course, Pepper Lunch isn’t exactly tiny. The concept has nine restaurants now open in the U.S. But it’s a global brand, with more than 540 locations in 15 countries around the world.
Parent company Hot Palette America two years ago brought in Troy Hooper as essentially CEO of the Western Hemisphere to grow Pepper Lunch as a franchise brand on this side of the planet.
Over the next 12 months, Hooper expects 20 to 24 Pepper Lunch locations to open across the U.S., and about 100 are in development.
The brand is franchising in Canada, and is soon moving into the Middle East (Oman), as well as beginning the process to franchise in the United Kingdom and Brazil, Hooper said.
But first, Pepper Lunch needed a little modernization work.
Born in Japan in 1994, the concept is known for a variation on cook-at-the-table teppan-style stir fry. Proteins, vegetables and rice (or noodles) are arranged on sizzling hot iron plates for guests to mix as they like at the table with sauces.
It’s experiential and customizable—and it’s one of the few chains where a plate of beef and rice with curry sauce can be accompanied by a side of fries or onion rings.
The classic Beef Pepper dish. | Photo courtesy of Pepper Lunch.
This year, however, Pepper Lunch has opened three new restaurants as new prototype units, which Hooper described as “lighter, brighter, fresher.”
The units have kiosk ordering, for example, and the kitchen flow has been redesigned with double work stations, as U.S. diners tend to visit in larger groups with multiple entrees. In Asia, it’s more of a food court brand.
“In most of our stores, it’s a three-burner single station. Now we have a four-burner double station, so we can do eight plates every three minutes,” said Hooper.
Pepper Lunch is also working on improving the brand’s off-premise flow, adding a separate make area for to-go orders. Hooper said they are testing semi-automated rotating woks that can prepare single bowls as guests order online.
Hooper said Pepper Lunch also streamlined the menu a bit in the U.S., eliminating about nine items and adding about four.
“We’ve seen a five-X increase in sales on the new items, compared to the old, so consumers are responding,” he said.
New dishes include a teriyaki-marinated boneless chicken thigh, prepared sous vide, for example. Seafood dishes that were once combined on the sizzling plate are now offered individually, like salmon and shrimp. And there are now three beef dishes, including an Angus steak, rather than four.
It’s something a bit different that is attracting franchisees like Carl L. Karcher Group, a franchisee of Carl’s Jr., Dave’s Hot Chicken and Jamba, which has committed to about 20 Pepper Lunch units in Las Vegas and California.
In Texas, Jinya Ramen franchisee Phil Guo recently signed a deal to open five Pepper Lunch units under PhilX Hospitality.
And Paul Tran, Pepper Lunch’s franchise sales director, is also a franchisee who plans to open a total of 12 restaurants. He operates a flagship location in Irvine that is among the three prototype units opened this year.
The interior of one of the new prototype units. | Photo courtesy of Pepper Lunch.
Tariffs, however, do pose a problem for Pepper Lunch, Hooper said.
The brand imports proprietary ingredients from Japan, China and Thailand that are key to maintaining authenticity. A 10% tariff—which was the rate at the time of this interview—Pepper Lunch could absorb, he said, but it’s not clear what will happen.
For now, it’s something the chain is monitoring.
“I think it’ll be temporary,” Hooper said, “while also chaotic and unpredictable and weird.”
There is clear interest in Asian flavors in new formats in the U.S. Some of the most rapidly growing chains on the Technomic Top 500 restaurant brands last year were hot pot and Korean barbecue brands, for example.
Among fast casuals, the 60-unit Hawaiian barbecue concept Mo’ Bettahs grew sales nearly 30% last year. The 158-unit Teriyaki Madness’s sales increased more than 21%. And 74-unit Bibibop Asian Grill was up more than 10%.
Panda Express, meanwhile, grew sales more than 5% to nearly $6.2 billion last year. It ranked No. 11 among the Top 500 brands and is very likely to join the Top 10 chains this year.
Pepper Lunch has a long way to go to be a contender. But the brand is one to watch.