Just months into his tenure as Portillo’s CEO, Brett Patterson and his leadership team announced layoffs.
After the second quarter, Portillo’s reduced its corporate workforce as part of a companywide effort to simplify the organization, lower costs, and redirect resources toward restaurant operations. This action didn’t affect restaurant-level workers.
The move comes as the 109-unit fast casual reassesses everything from restaurant development and site selection to prototype design after softer-than-expected performance in newer markets, particularly Texas.
The restructuring is expected to contribute to $10 million to $15 million in annualized savings alongside supply chain and development efficiencies, though Patterson said the primary goal wasn’t simply cutting expenses.
“We made the purposeful decision to simplify our G&A structure so we can operate with greater focus, move more nimbly, and better support our restaurant teams,” Patterson said during the company’s second-quarter earnings call.
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Patterson said the layoffs were intended to push decision-making closer to operators and guests.
The restructuring comes as Portillo’s works through several operational challenges. Second-quarter same-store sales declined 1.2 percent as transactions fell 3.4 percent. Revenue increased 5.6 percent to $199 million due to new restaurant openings, but restaurant-level margins narrowed because of commodity inflation and weaker-than-expected performance from newer restaurants. The company also lowered its adjusted EBITDA outlook to $92 million to $96 million.
Following the restructuring, Patterson said the company has spent much of the past several months examining nearly every part of the business, including customer research, menu development, restaurant design, and real estate strategy.
The work produced three studies that Portillo’s had never conducted before, focusing on guest segmentation, brand perception, and menu satisfaction. Patterson said the findings gave the company a clearer understanding of who its core guests are, what differentiates the brand, and where menu innovation should head.
“We’ve clearly identified who our target segmentation is for our customers. We’ve got, we believe, real growth opportunity in a couple of different target areas,” Patterson said.
The research also confirmed Portillo’s appeal extends well outside its Chicago roots.
“The guest loyalty, I would say fanaticism, kind of brand love or net promoter score, is as high as anybody in the industry once they get to know the brand,” Patterson said. “And so we know outside of Chicago, it actually is absolutely just as strong. It’s just how we get them in the door the first time to hook them.”
Those findings come as Portillo’s rethinks its development strategy after disappointing results in some of its newest markets.
The company now uses a new real estate forecasting model that measures site performance, expected sales, and the impact restaurants have on existing locations. Patterson said those tools made it clear the company expanded too quickly in Texas. In Dallas, the chain built 12 in three and a half years. In Houston, it opened six in 16 months.
Cannibalization has weighed on sales.
“I think one of the great things about this brand is, as you all know, is people will drive a long way to come to Portillo’s,” Patterson said. “The downside of that is if you impact a restaurant with another location fairly close by, there’s significant cannibalization. And that’s really what we’ve seen to great detail in a couple of markets.”
In Q2, Portillo’s was also impacted by pressure from last year’s buy-one-get-one Italian beef promotion and the discontinued breakfast pilot.
The company doesn’t intend to respond with deep discounting. Patterson said Portillo’s plans to pursue profitable transaction growth instead of repeating BOGO deals or 50 percent-off burgers.
Portillo’s also sees an opportunity to improve productivity inside its restaurants. Lessons from its first airport location at Dallas-Fort Worth International Airport are already influencing future designs. The restaurant features a footprint under 3,100 square feet, a kitchen roughly one-quarter smaller than previous prototypes, and new equipment intended to improve efficiency.
“We’ve got a much smaller kitchen, we’ve designed it differently from a layout standpoint, and we have new equipment, which will generate future efficiencies in the back house productivity,” Patterson said. “We’re going to continue to deploy that model into some of our Texas locations and the kind of current prototype to see what kind of benefit we can get there.”
Those learnings will feed into a new prototype expected to debut in 2028. This updated layout will further reduce footprint and reimagine the kitchen with new equipment.
Menu innovation is another priority. Portillo’s recently hired Christopher Hansen as executive chef and introduced a Dr Pepper Shake after research pointed to opportunities in beverages.
“We know beverages are certainly really popular across the industry right now,” Patterson said. “We’ve got that opportunity because we have equity in beverages with the shakes, the cake shakes. And coming off our recent menu set, we know those score very well from a satisfaction standpoint. So that’s why we leaned in on this innovation with Dr Pepper.”
Despite the difficult comparisons, Portillo’s said trends improved as the third quarter began. Patterson pointed to positive same-store sales early in the quarter and said the company believes operational improvements, new menu items, and more disciplined marketing can support traffic without relying on steep discounts.
“I think where the work really has to be is we just have to continue to build better business disciplines and make sure that, look, we have a very clear strategy, a focused strategy, and very resilient disciplines towards achieving that strategy and will be a very bright future for this brand.”
