Amid the closures planned, Portillo’s has opened seven restaurants this year, all in Texas, and expects to open one more in Chicago. Photo: Shutterstock
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Portillo’s plans to close a “mid- to high-single digit” number of underperforming restaurants outside Chicago, mostly in the fourth quarter, as part of a turnaround plan.
The company did not say which restaurants are scheduled to close or where specifically.
The Chicago-based chain reported a same-store sales increase of 1.4% for the third quarter on Thursday, reflecting a 2.1% increase in average check, mostly based on increased prices, and a 0.7% decline in transactions.
Still, Portillo’s upgraded its guidance for the year, saying it expects adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of $98 million to $101 million, compared with earlier projections of $92 million to $96 million.
Portillo’s CEO Brett Patterson said the fast-casual chain has taken an honest look at the business and confronted a “hard reality: Portillo’s does not deliver the returns our investors expected.”
Patterson outlined a strategic plan to strengthen the core business, including the closure of underperforming locations, as well as taking a more disciplined approach to growth, particularly outside the home base of Chicago where the brand has struggled to find purchase.
There is deep love for the Portillo’s brand in Chicagoland. “It’s a towering strength for us,” said Patterson.
But the company has made mistakes trying to grow the brand outside the region, he said.
“We did a little damage to ourselves with how we branded the restaurants [outside Chicago],” Patterson said. “In some of them, we have the name Portillo’s. We took off what we do, what we serve. And, for new market penetration, if they don’t know what you do, it’s kind of hard for people to figure out.”
Under the new strategy, Portillo’s field managers will have fewer restaurants to oversee, so they can spend more time in each restaurant. The company is also investing in more training, and will invest in technology and equipment to improve order accuracy and speed of service.
Patterson said the brand is working on a new marketing strategy that will refine the brand positioning, focusing on Millennials by modernizing digital channels. That will include a simplified loyalty program to increase engagement and drive frequency, he said.
Portillo’s also recently brought in its first-ever executive chef, former Guzman y Gomez chef Chris Hansen, who is prioritizing menu quality and innovation, he said.
Despite the mid- to single-digit closures planned this year, growth will not stop at Portillo’s.
The 109-unit chain added seven restaurants so far this year, all in Texas, with another scheduled to open in Chicago in the fourth quarter.
Going forward, however, Portillo’s will infill existing markets and move into adjacent areas, after more-rigorous site reviews to ensure the locations will achieve cash-on-cash return targets. The goal is to get those returns above 20%, beginning in 2028.
The chain will grow with a new 4,600-square-foot prototype that’s about 40% smaller than Portillo’s average and requires only 1.5 acres, rather than the usual 3 acres.
Patterson said the long-term goal is to reach same-store sales growth of 2% to 3% annually. Within three years, the company expects to ramp up new restaurant growth to a high-single-digit percentage and expand margins.
For the third quarter, revenues increased 7% to $194.1 million. Net income was $4.8 million, representing a $4 million increase.
Dining and Cooking