Activist investor Engaged Capital will gain more representation on the Portillo’s Board of Directors.
The fast casual announced Monday a cooperation agreement in which the two sides will find a new board member. Engaged Capital was already responsible for adding Jack Hartung, former CFO of Chipotle, to the board of directors.
“We are pleased to have reached this agreement with Engaged Capital,” Michael A. Miles, Jr., Portillo’s chair of the board, said in a statement. “The Board is committed to overseeing decisive action to drive traffic, improve margins and deliver industry-leading unit economics for shareholders. We appreciate the partnership with Engaged Capital to identify a new director to bring additional expertise to our Board, in addition to the role they played in introducing us to Jack Hartung, who was appointed to the Board in January.”
In March, the activist—which owns around 8 percent of Portillo’s stock—nominated two executives. The first was Charlie Morrison, who is now the CEO of Jersey Mike’s. Given his new role, he will no longer be considered. The other was Nicole Portwood, who most recently served as CMO of Salad and Go. She also previously worked as VP of marketing for Mountain Dew, Energy & Flavors at PepsiCo.
“Although we wish [Charlie Morrison] well in his new role, we were disappointed it resulted in one of our nominees having to withdraw from this process. We are pleased to have been able to work constructively with the Board on an alternative solution for adding a highly qualified director with restaurant operating expertise,” Glenn W. Welling, founder and chief investment officer of Engaged Capital, said in a statement. “Portillo’s is one of the most iconic brands in the restaurant industry as demonstrated through industry leading AUVs in and outside of Chicago. Through the actions being taken to shrink restaurant size, drive sustainable same store sales, and improve restaurant margins, we continue to see a significant opportunity to create as much value for shareholders as Portillo’s delivers to their customers.”
Earlier this year, Engaged Capital publicly criticized Portillo’s performance, saying it suffered from outdated operations, ineffective marketing, and lower-than-justified cash-on-cash returns. It also urged the company to change its approach to new unit development, modernize operations and technology, and deploy targeted marketing investments to increase awareness and drive traffic.
Engaged Capital also made its mark with Shake Shack. The burger chain signed a cooperation deal and agreed to add former Domino’s CFO Jeffrey Lawrence and an independent member to its board of directors. Additionally, Shake Shack committed to retaining a consulting firm to enhance its operational and financial performance. Founder Danny Meyer, who serves as Shake Shack’s chairman of the board as well as Union Square Hospitality Group, and “certain of his affiliates,” will step down their director designation rights over time as well.
