This is an English adaptation of a FoodBud historical article originally published on October 11, 2021.
Portillo’s believed it could grow its restaurant count at roughly 10% per year over the next 25 years, expanding from 67 restaurants to more than 600.
FoodBud reported that, according to U.S. SEC filings, U.S. fast-casual restaurant chain Portillo’s Inc. had filed for an IPO on Nasdaq under the ticker PTLO. The company planned to raise $100 million, but had not yet disclosed the offering price or number of shares.
According to The Wall Street Journal, the chain was seeking a valuation of $2.5 billion to $3.0 billion, with shares expected to begin trading before the end of 2021.
Portillo’s is known for Chicago-style hot dogs, Italian beef sandwiches, char-grilled burgers and chocolate cake.
The business began in 1963, when founder Dick Portillo invested $1,100 in a 6-foot by 12-foot trailer and opened a hot dog stand in Villa Park, Illinois, called The Dog House. In 1967, the business was renamed Portillo’s and moved into a more permanent location. Over time, the brand became closely associated with Chicago.
In 2014, when Portillo’s had 38 restaurants across four states, Berkshire Hathaway acquired the chain in a deal valued at nearly $1 billion. Portillo’s IPO prospectus did not disclose Berkshire Hathaway’s ownership percentage, nor whether it planned to sell shares after the listing.
Media reports at the time said that, six months after the transaction, Portillo’s bought back part of the chain’s real estate, including 18 Portillo’s restaurants and two food commissaries, under 20-year leases. The leases for the other 20 restaurants were reportedly held by other entities.
Portillo’s menu spans popular U.S. categories including Chicago-style hot dogs and sausages, Italian beef sandwiches, salads, burgers, fries, house-made chocolate cake and milkshakes. Its model combines fast-casual and quick-service elements with high-volume restaurants and a lively, themed in-store environment.
Almost all Portillo’s restaurants include double-lane drive-thrus. The layouts are designed to support multiple access modes, including dine-in, takeout, curbside pickup, delivery and catering.
As of June 27, 2021, Portillo’s owned and operated 67 restaurants across nine U.S. states.
Portillo’s revenue was $455 million in 2020, compared with $479 million in 2019. In 2020, food and beverage costs accounted for 31.3% of revenue, labor for 25.5%, and rent for 5.5%.
In the first half of 2021, revenue was $258 million and net income was $13.87 million.
Average drive-thru sales per restaurant were $3.4 million in 2019, $4.6 million in 2020, and $4.9 million for the trailing 12 months ended June 27, 2021. FoodBud noted that Portillo’s drive-thru traffic per restaurant was more than twice McDonald’s in 2019, and more than three times McDonald’s in 2020 and in the trailing 12 months ended June 27, 2021.
Average dine-in sales per restaurant were $4.4 million in 2019, falling to $1.9 million in 2020 due to the pandemic, and remaining at $1.9 million for the trailing 12 months ended June 27, 2021.
Average delivery sales per restaurant were $500,000 in 2019, $800,000 in 2020, and $850,000 for the trailing 12 months ended June 27, 2021.
For the trailing 12 months ended June 27, 2021, each restaurant served about 825,000 guests on average, with average spend of $9.60 per guest.
Portillo’s said all its restaurants were profitable and that it had never closed a restaurant in 58 years. FoodBud noted one structural reason: its leases were non-cancelable, typically lasting 10 to 20 years, with five-year renewal periods and rent increases. Even if a restaurant closed, rent obligations would continue.
From January 1, 2018 to June 27, 2021, Portillo’s opened 15 restaurants across eight states.
Unlike operators that pursue a highly streamlined SKU strategy, Portillo’s emphasized menu diversity. In 2020, no single menu item contributed more than 23% of product sales.
In 2019, lunch represented 52% of restaurant sales and dinner 48%. By day of week, Saturday, Friday and Sunday contributed the highest sales shares, at 18%, 17% and 16% respectively.
In 2020 and in the trailing 12 months ended June 27, 2021, digital channels including app, website and delivery generated more than 20% of sales.
Portillo’s operated large-format restaurants and used the space for nostalgic, locally infused themes, such as jukeboxes and hippie-era references.
In the Chicago market, Portillo’s average unit volume was $9.6 million in 2019, $8.7 million in 2020, and $9.1 million for the trailing 12 months ended June 27, 2021.
Outside Chicago, AUV was $6.3 million in 2019, $5.6 million in 2020, and $5.8 million for the trailing 12 months ended June 27, 2021.
For new restaurants, Portillo’s targeted AUV of $5.8 million and a cash-on-cash return of about 25% by the third operating year.
In 2020, 89% of Portillo’s restaurants were in the U.S. Midwest, while 61% were in the Chicago market.
The average restaurant was more than 8,000 square feet, or about 743 square meters. Newer restaurants were typically 7,200 to 7,800 square feet. Each restaurant had a different design style. New restaurant construction took 15 to 20 weeks, or 105 to 140 days, with investment of $4.5 million to $5.0 million. Recent new restaurants required about $4.9 million per unit.
Portillo’s also planned to test a no-seating pickup restaurant in 2021. The format was about 3,750 square feet, roughly half the size of its large-format restaurants.
As of June 27, 2021, Portillo’s had $54.26 million in cash and cash equivalents, and total debt of $470 million.
FoodBud concluded that the growth strategy described in the prospectus was conventional: continued restaurant expansion and related execution.
Note: IPO, valuation, expansion targets and forward-looking figures are historical as of the 2021 source article.