Portillo’s CFO Michelle Hook told investors “the consumer is getting to a boiling point” in terms of how much price they’re willing to stomach from restaurant outings.

The Chicago-based chain took 1.5 percent price in January and at the end of March to mitigate food and labor inflation. That second action was pushed up from the second quarter to offset the implementation of California’s new fast-food law that raises fast-food minimum wage to $20 per hour. These actions, combined with the lapping of previous pricing decisions, put Portillo’s at an effective 6 percent price increase at the end of Q1. About 3 percent pricing rolled off last week, putting it at an effective 3 percent about six weeks into Q2.

The chain hasn’t seen much resistance, but it’s still wary.

“I think that we have a lot of optionality and flexibility to pricing,” Hook said during the chain’s Q1 earnings call. “I think we still continue to have that as we move forward. We are not committed one way or another to not taking price or to taking price. We are going to continue to see how things move within the landscape and I’ve continued to say and [CEO Michael Osanloo] has that we look at pricing as a lever to offset the inflationary pressures. That’s how we’re going to continue to view it. But we’ve seen a little resistance within the first couple of pricing actions we’ve taken this year. … We have to be very surgical on how we take price.”


Portillo’s Reaches into Toolkit to Boost Traffic Figures

Portillo’s Future Lies in the Sun Belt

Portillo’s Finds That Smarter Development Equals Better Traffic

Same-store sales dropped 1.2 percent in Q1, fueled by a 3.2 percent drop in transactions, offset by a 2 percent rise in average check. However, the fast casual attributed the weaker sales to lapping a strong Q1 2023 and unfavorable winter weather in the Midwest that spanned several weeks and caused transactions to drop by double digits. Same-store sales and traffic have since improved; comps are now in the low positive digits.

AUV was $9 million, up from $8.7 million last year.

Portillo’s is seeing a pressured lower-income consumer and fewer items per transaction, more specifically lower beverage attachment at the drive-thru.

“It’s a little bit of a continuation of the same story for us, which is, when the lower-end of consumer is pressured, it tends to impact us a little bit more in the drive-thru where they are going to [quick service],” Osanloo said. “Most [quick service] is largely drive-thru business. That’s why for us, being incredibly quick, efficient, fast, and generating throughput is so important in the drive-thru and that’s why the focus is on speed in the drive-thru. Our dining rooms continue to perform relatively well and crazy as it is. Catering and third-party is still very, very strong for us.”

The chain has made improving the drive-thru a priority in 2024. Overall satisfaction scores have been good, Osanloo said, but service has slowed. For Portillo’s, a 30-second improvement in drive-thru speed equates to a point of comp. From a menu perspective, the chain is looking to build traffic and product mix by relaunching its Famous 5 combo meal that features an entrée, side, and drink.

Additionally, Portillo’s believes it can build traffic through menu innovation, marketing, and digital engagement. At the end of Q1, the chain tested a spicy chicken chopped salad and a chicken pecan salad. The feedback was so strong that Portillo’s accelerated their launch by a month. Thus far, these salad sales are the highest of any new menu launch in the past five years—that’s without a full marketing campaign too. The salads have also helped mix by displacing lower-margin items. Starting this month, the fast casual will push these product innovations with an advertising effort on digital channels.

In addition to the new product news, Portillo’s made a small investment in traditional advertising to boost its awareness in Arizona, the only other market where it has scale outside of its home base of Chicago. The company has seen signs of transaction improvement in response, and because of that success, it’s planning another around in Chicagoland in Q3. In conjunction with those moves, Portillo’s increased advertising on third-party delivery sites outside of Chicagoland to generate trial.

Regarding technological innovation, the brand is exploring ways to better its digital ordering experience through its app and testing kiosks in California. Portillo’s recently hired Keith Correia—a veteran of Steak ‘n Shake and Dairy Queen—as its new chief information officer.

Each of these traffic-driving initiatives should fuel further unit growth. Portillo’s is on pace to open its first “restaurant of the future” in Texas in Q4. This is a smaller prototype that cuts 1,500 square feet and saves at least $1 million.

“These restaurants will still look and feel like a Portillo’s,” Osanloo said. “They will have local personality. They will be led by an experienced GM and most importantly, we expect them to still produce the same industry-leading AUVs of all our other restaurants. We have a few restaurants of the future coming online this year and we’re really excited to see what they do. We’ve built a tremendous development pipeline, and we feel confident in our ability to continue to expand at a faster pace than we have in previous years. We know Portillo’s has a long runway for continued growth.”

Portillo’s finished Q1 with 85 stores after opening one unit in Denton, Texas. Eight more restaurants are scheduled to open before the end of 2024.

Fast Casual, Finance, Growth, Story, Portillo's