An Oreo dessert platform had strong consumer appeal. | Photo courtesy of Portillo’s
In Chicagoland, the deep brand love for Portillo’s is a “towering strength,” says CEO Brett Patterson.
But outside Chicago, not so much.
On Thursday, Patterson outlined a strategy to change its approach to growth and to turn around negative sales trends. Patterson, who was named CEO in February, has already started making progress.
Same-store sales were up 1.4% in the third quarter (the first positive result since 2023). That increase reflected a 2.1% increase in average check boosted by menu price increases, and a 0.7% decline in transactions.
But Patterson said comparable sales improved sequentially through the quarter, and also into the fourth quarter, as consumers embraced a recently launched Oreo dessert platform, a Char’diniera Dog, and a Dr Pepper Shake.
Patterson believes the company’s plan to strengthen core fundamentals will deliver annual 2% to 3% same-store sales growth going forward. And Portillo’s upgraded 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.
But a key part of the chain’s turnaround plan is rethinking the 109-unit chain’s path for expansion outside Chicago.
One of the first steps is to shutter a “mid- to single-digit” number of underperforming restaurants outside Chicago, mostly in the fourth quarter.
The company didn’t identify which restaurants would be closed, or where.
Portillo’s has opened seven restaurants this year, all in Texas, with another one scheduled to open in Chicago before the end of the year.
Portillo’s has had a handful of locations as far away as California for years. But after the chain went public in 2021, it began a push across the U.S. Sun Belt, where population hubs were growing, with Texas as a target market. There are 20 restaurants in Texas, including one in the Dallas-Fort Worth Airport, but the brand has also moved into Florida, Arizona, and Georgia.
Patterson said the chain has made mistakes in how it was branded outside Chicago.
In Chicago, consumers know Portillo’s menu, with its Italian beef sandwiches, hot dogs, and that famous chocolate cake. But brand awareness wasn’t translated well in new markets, he said.
“If they don’t know what you do, it’s kind of hard for people to figure out,” said Patterson.
Outside Chicago, the sites were “very casual-dining like,” said Patterson. Initially, people had to drive too far to reach one, which hurt frequency. Then, as the company aggressively filled in those markets, restaurants suffered from cannibalization.
Now, going forward, Portillo’s will be much more disciplined about site selection, with four to six restaurants planned for next year, he said.
There’s also a new prototype, which is about 4,600-square feet, about 40% smaller than the average for the brand. It requires only 1.5 acres, as opposed to the typical 3 acres, which will reduce costs.
“Smaller does not mean less Portillo’s,” added Patterson. The new design has potential for high volumes.
Nearly 15% of the chain’s restaurants generate more than $1,500 in sales per foot, with a few surpassing $2,000, he said.
Patterson noted that they are not necessarily expecting to see Chicagoland volumes out of the new prototype.
“We believe the optimized kitchen, more standardized design, and greater site flexibility can improve throughput and productivity while targeting a lower capital investment,” he said.
After doing a lot of research about Portillo’s consumers, the chain is planning to refine its marketing to better communicate value, and to better reach Millennials with digital experiences and a simplified loyalty program.
Patterson said he is encouraged by early progress.
But, he added, “One quarter is not a trend. We have significant work ahead, and our focus is simple: run great restaurants and run this company with the discipline to deliver durable sales and profitable growth.”
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Lisa Jennings is a veteran restaurant industry reporter and editor who covers the fast-casual sector, independent restaurants and emerging chain concepts.
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