P.F. Chang's Pei Wei in Mexico

P.F. Chang's China Bistro Inc. (PFCB - Snapshot Report) recently inked a development agreement with a Latin American quick service restaurant and casual dining operator Alsea, S.A.B. de C.V. to spread its Pei Wei Asian concept in Mexico. The first location is slated to open in Mexico City in few months from now.

Per the deal, Alsea will set up three restaurants during the first 18 months. It also entails the company to a long-term option to open 50 restaurants over 10 years. P.F. Chang's has a long-standing relationship with Alsea and already operates eight restaurants in Mexico under an exclusive development and licensing agreement signed in 2009 to develop 30 P.F. Chang’s restaurants throughout Mexico over 10 years. In May 2011, Alsea also entered into a similar agreement with 17 P.F. Chang’s restaurants for development in Argentina, Chile and Colombia over the next 10 years.

The recent deal affirms management’s intent to make Mexico one of the prime markets for international expansion. The company’s restaurants have so long been well received by Mexican customers. This inspires P.F. Chang's to take its Pei Wei experience to that market.

Alsea is the leading operator of quick service restaurants, coffee shops and casual dining establishments in Latin America, operating successful brands such as Domino’s Pizza Inc. (DPZ - Snapshot Report) and Burger King, Chili’s Grill & Bar of Brinker International Inc. (EAT - Analyst Report).

P.F. Chang's, which owns and operates two restaurant concepts namely P.F. Chang's China Bistro and Pei Wei Asian Diner has successfully operated restaurants in the domestic market while many of its international locations are operated by franchise partners. We believe that the company is trying to spread its presence beyond the U.S. more aggressively following cutthroat competition in the rather saturated domestic casual dining market.

P.F. Chang's currently retains a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating. We also maintain our long-term “Underperform” recommendation on the stock.

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