About four years ago, Portillo’s hired an analytics company to determine its white space. 

As the firm conducted research, the fast casual provided certain guardrails, like no two restaurants within 5 miles of each other and no stores below $6 million in annual sales. After those considerations, the analytics company returned with more than 600 locations across the U.S. While that’s quite a goal for the 76-unit Portillo’s, it needs a refresh, CEO Michael Osanloo said at Baird’s 2023 Global Consumer, Technology & Services Conference earlier this month. 

In the time since the chain requested that data, the traditional box was tweaked and the brand debuted a smaller drive-thru-only model that can infill existing markets. Portillo’s is also receiving many inbound requests from international franchisees. So as of right now, 600 units systemwide is the absolute minimum; Osanloo said an updated prediction will be given during Investor Day in September. 

“Despite being a 60-year-old concept, we’re at our infancy when it comes to growth and where we are in our development curve,” Osanloo said. “So we’re very early in a lot of things, although it’s a concept that’s stood the test of time. Never closed a restaurant in 60 years.”

” … We generate enough cash to grow,” he added. “We don’t have to borrow from a rickety bank at high interest rates. We finance our own growth and things are good.”

Portillo’s has opened four stores this year (Kissimmee, Florida; The Colony Texas; Tucson and Gilbert, Arizona), but those were holdovers from the class of 2022 because of equipment and permitting delays. There will be nine restaurants in the fast casual’s 2023 class, with all of them coming in Q3 and Q4. Six of these openings have been shared publicly—Allen and Arlington, Texas; Queen Creek, Arizona; and three in Chicagoland. One of the Chicago-based stores will be on a pad near one of the busiest Walmarts in the world. 

READ MORE: Portillo’s Sees Future for To-Go Prototype, but Tweaks Are Needed

This year’s unit growth equals about 12 percent, which is above the brand’s 10 percent target. Osanloo noted that stakeholders often ask why the restaurant doesn’t shoot for 15–20 percent, and it comes down to opening units in the right way. That means taking time to get the right people in place. 

“The gating factor for us, when you open a new Portillo’s at our revenues, at our volumes, the number of people coming through, you really need to de-risk that investment by having experienced management,” Osanloo said. “And so the nine we’re opening this year—all experienced general managers, all experienced assistant general managers, and half of the management team otherwise are all experienced. We wanted to build a strong pipeline of talent so that we can open restaurants with really experienced crews so that they open strong.”

Portillo’s is widely known as a Chicago brand, but in recent years the company has proven more than capable of replicating its industry-best AUV in other markets. The chain ended Q1 with an AUV of $8.7 million, but there are restaurants in Arizona, Florida, and Texas that do more than $10 million in sales. 

In addition to craveable food and experienced management, Oslanoo attributed this success to entering markets with the intent to scale. When he joined Portillo’s in October 2018, there were two locations in Arizona. When two more were built, there was a 370-basis-point improvement in sales because of benefits with distribution, supply chain, labor, and marketing. And the chain is looking at the long term when selecting suburban markets. For example, housing growth in Gilbert, Arizona, implies 10-12 percent population growth for the next five years, and if that holds, it should serve as a solid comps tailwind, Osanloo said. 

Texas appears to be headed in the same direction. In early January, Portillo’s opened in The Colony, Texas, which is part of the Dallas metro area near Frisco and Plano. The restaurant is located in Grandscape, a sizable mixed-use real estate development with dining, hotels, apartments, offices, retail, and entertainment. The store is in front of the highway, a mile away from corporate buildings, and also in front of Nebraska Furniture Mart, a venue that’s just under 1.9 million square feet and earns $1 billion in annual sales. 

Oslanoo said in March that Portillo’s first Texas store was earning $48,000 per day. For perspective, that’s about $17 million in annualized AUV. The brand doesn’t expect to keep that pace, but it is confident about the location being consistently top 5 in the system. The CEO said this performance isn’t on the backs of Chicago ex-pats either. The restaurant sees people with Chicago Cubs hats and Chicago Bears jerseys, but the majority of customers are locals. And product mix is consistent with what the chain sees anywhere else. 

Like other locations, Portillo’s opened the Texas restaurant with capable leadership. The Colony unit is run by a bilingual operator who moved from Chicago. The idea is to reach scale in Dallas and then move to Houston next year. San Antonio and Austin would follow. There are already general managers in Texas preparing for these upcoming store debuts. 

“To me, that kind of says the concept has legs, that it does move, and that it is portable,” Osanloo says. 

The fast casual’s same-store sales increased 9.1 percent in Q1, including a 7 percent rise in average check and 2.1 percent growth in transactions. Prices were up 9.2 percent, partially offset by a change in menu mix. 

Oslanoo said he’s cautious and anxious about the state of consumers ahead of a potential recession. He knows consumers are looking for value, so Portillo’s is being careful about watching peers and pricing behind competition. The company comped positively during the Great Recession, and the CEO said that’s because the brand’s dining room matches up well with casual dining. He explained that families often dine in during weekends but with a lower average ticket, no tip, and faster service. 

“We’ve been anticipating this recession for five years, it has not happened,” Osanloo said. “But I think we’ve mentally prepared ourselves by having very sharp value proposition. And our 22.6 percent restaurant-level margins, I’m not ashamed of those, but those are a little bit lower than they were the last couple of years because we’ve invested in the consumer.”

Portillo’s won’t be attracting guests with short-term menu innovation. Oslanoo said the chain is “morally opposed” to LTOs, adding that it’s a nightmare for operators, creates complexity, and guests are annoyed if an item they enjoy is taken off the menu. Instead, the brand’s policy is to introduce new products that replace ones that aren’t performing well. A recent example is the Rodeo Burger—comprised of a one-third-pound patty, brioche bun, American cheese, onion rings, red onions, and barbecue sauce. Guests have responded well, even to the point of requesting a Double Rodeo Burger. The best part, Osanloo says, is that it didn’t require incremental SKUs, investors love it because it’s a more expensive item, and it took over for a product that wasn’t selling. 

“I feel like I get to run a unicorn restaurant company that should have the greatest multiple in this industry, because the food is so distinctive, so iconic. Nobody does what we do and nobody can match our economics,” Osanloo said.