Most of the United States may not have heard of Portillo, given that it only exists in nine states. But there’s a good chance they’ll do it soon.
Chicago-based 67-unit hot dog restaurant chain debuted on NASDAQ
What excited investors so much, especially after a year in which vulnerabilities in the restaurant industry (such as security, supply chain, and pressures on the workforce) have been exposed? For starters, Portillo’s average unit volumes are out of this world, around $ 7.9 million. For context, Chick-fil-A’s AUVs cost around $ 4.5 million, while McDonald’s
Plus, Portillo’s is very different from its competition, with an emphasis on hot dogs and beef and sausage sandwiches. This bodes well in an otherwise homogeneous industry. Simultaneously, it also competes in the burger and chicken sandwich space and also touts its desserts and fries. He is therefore generally able to overrule any veto vote.
âI’m thinking of our Italian Beef Sandwich, which is roast beef au jus. The combination is masterful, and it translates all over the country. We are the beneficiaries that nobody else is doing nationwide, âCEO / Chairman Michael Osanloo said in a telephone interview on opening day.
Of course, Portillo is not yet quite national. The company plans to use the proceeds of its IPO to pay off debt and then focus on growth. That’s the plan now, at least, as the opening day bell still rings.
Osanloo admits the market is “turbulent”, and some IPOs this year (like Krispy Kreme) have proven it. Still, he’s confident in his concept’s ability to sustain investor interest, and it’s not just because of the food.
âWe are a strong and successful company and we take great pride in being a people-centered organization. We have amazing people, food, culture, and if you can understand that, that’s the basis of a great restaurant business, âhe said.
The ultimate goal, Osanloo adds, is to become one of the most exciting growth dining options out there. This growth will come organically in neighboring Midwestern states, as well as along the Sun Belt, particularly Texas, Florida and Arizona.
âWe know these states are growing rapidly in terms of population. They also have a pent-up demand for Portillo’s. Texas is the number one state we ship to. If people tire of Chicago winters, these are the states they go to, âOsanloo said.
Currently, the plans are modest. Portillo’s plans to open two new units in the fourth quarter and seven new units in 2022, including its first flagship restaurant in the Dallas market. The company is also partnering with Kitchens United to explore the growth of the low-investment, delivery-focused ghost kitchen space.
âOur partnership with Kitchens United is going exceptionally well. It is intended to ease the pressure on our dense locations for third party delivery. We love him and we think he has legs, âOsanloo said.
Portillo’s also plans to open a drive-thru-only location in Joliet, Ill., In the first quarter of 2022. The model represents about half of the traditional Portillo site and includes three drive-thru lanes, including a dedicated one. specifically to digital traffic in advance. The challenge with such a model, however, is that it will be difficult to replicate the brand’s dynamic environment without a dining room. Osanloo said the company is trying to solve this problem; for example, outfitting the “crew” in NASCAR outfits.
âWe are sometimes criticized because our restaurants are expensive to build. My answer is always “no”. You can cut costs in some ways, but our restaurants are differentiators, âsaid Osanloo. âIt’s balance sheet marketing. Our restaurants are engaging, inviting, fun. It’s some of the best marketing that we’re going to get. We are working very hard to have a similar customer experience with our drive-thru. We will not lower that bar.
Arguably the restaurants in Portillo are âengaging and funâ because they are more than full. This is evidenced by its AUVs and large drive-thru volumes, and it’s a rarity in today’s harsh environment.
Osanloo says his company has been somewhat isolated from current labor pressures, however, due to what he calls “enlightened capitalism.” He says Portillo’s turnover rates are 20% lower than industry averages, while executive turnover is 10-15% lower. This may be of interest to investors as well, as several concepts in the industry struggle to maintain hours of operation amid historically high resignation rates.
âThe key to our success is that we are truly a values-driven organization. When COVID happened, we didn’t fire or put a single member of the team on leave. At the time, 50% of our business was from dining rooms, but we trained people to do the sidewalk and order taking and tested self-delivery, âhe said. âWe paid them bounties and meals and created a 501v3 so we could take care of them. When you take care of your team, great things happen and we have the best level of productivity we’ve ever seen. I feel really, really good about the direction we’re headed.