This is an English adaptation of a FoodBud historical article originally published on October 21, 2021.
Portillo's Inc., the U.S. casual restaurant chain known for Chicago-style hot dogs, Italian beef sandwiches, char-grilled burgers, and chocolate cake, listed on Nasdaq on October 21, 2021 under the ticker "PTLO".
The company issued 20.3 million shares at $20 per share, raising $405 million. The IPO priced at the top of its previously indicated $17-$20 range. During intraday trading, the stock rose 45.5%, giving Portillo's a market value of $2.08 billion.
Joint bookrunners included Jefferies, Morgan Stanley, and BofA Securities. Before the IPO, funds managed by Berkshire held 98.77% of Class A shares and 93.21% of Class B shares. After the IPO, those funds held 34.47% of Class A shares and 93.10% of Class B shares.
Portillo's traces its history to 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. By 1967, the business had been renamed Portillo's and had moved into a more permanent location.
In 2014, the chain, then operating 38 restaurants across four states, was acquired by Berkshire Hathaway in a transaction reportedly valued at close to $1 billion. According to media reports at the time, six months after that transaction Portillo's repurchased some of its real estate, including 18 Portillo's restaurants and two food commissaries, with 20-year lease terms. Leases for another 20 restaurants were reportedly held by other entities.
Portillo's menu spans Chicago-style hot dogs and sausages, Italian beef sandwiches, salads, burgers, fries, house-made chocolate cake, and milkshakes. The company positions the brand around a mix of fast-casual and quick-service attributes, with large-format restaurants designed for high throughput.
Nearly all Portillo's restaurants had double-lane drive-thrus and layouts supporting dine-in, takeout, curbside pickup, delivery, and catering. As of June 27, 2021, the company owned and operated 67 restaurants across nine U.S. states.
Portillo's believed it could grow its restaurant base at around 10% annually over the following 25 years, expanding from 67 locations to more than 600.
Portillo's revenue was $455 million in 2020, compared with $479 million in 2019. In 2020, food cost, labor, and occupancy accounted for 31.3%, 25.5%, and 5.5% of revenue, respectively.
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. Compared with McDonald's, Portillo's drive-thru guest volume per restaurant was more than double in 2019 and more than triple in 2020 and the trailing 12-month period ended June 27, 2021.
Average dine-in sales per restaurant were $4.4 million in 2019, $1.9 million in 2020, and $1.9 million for the trailing 12 months ended June 27, 2021, reflecting the impact of COVID-19.
Average delivery revenue per restaurant was $500,000 in 2019, $800,000 in 2020, and $850,000 for the trailing 12 months ended June 27, 2021.
During the trailing 12 months ended June 27, 2021, each restaurant served about 825,000 guests on average, with average spend per guest of $9.60.
All restaurants were profitable, and the company had not closed a restaurant in its 58-year history. The article noted that Portillo's leases were non-cancelable, typically lasting 10-20 years with renewal options every five years 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.
The brand followed a broad-menu strategy. In 2020, no single menu item accounted for 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 shares of sales at 18%, 17%, and 16%, respectively.
In 2020 and for the trailing 12 months ended June 27, 2021, digital channels including the app, website, and delivery represented more than 20% of sales.
Portillo's operated large-format restaurants, using interior themes and local cultural cues such as jukeboxes and hippie-era design elements.
In the Chicago market, 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 year of operation.
In 2020, 89% of restaurants were in the U.S. Midwest, and 61% were in Chicago.
The average Portillo's restaurant exceeded 8,000 square feet, or about 743 square meters. New restaurants were typically 7,200-7,800 square feet, with each unit using a distinct design style.
A new restaurant took 15-20 weeks, or 105-140 days, to build. Investment per new restaurant was $4.5 million-$5.0 million, with recent openings costing about $4.9 million per unit.
In 2021, Portillo's planned to test a pickup-only restaurant with no seating. That format was expected to be 3,750 square feet, roughly half the size of a large-format restaurant.
As of June 27, 2021, Portillo's had $54.26 million in cash and cash equivalents and total debt of $470 million.
Note: IPO proceeds, valuation, ownership percentages, growth targets, and forward-looking store plans are historical figures from the 2021 source article.