Operations

Portillo's keeping menu price hike options open

Traffic dropped in the second quarter, but the company said consumers still see the Chicagoland brand as a great value, and there's room for price increases.
Portillo's exterior
A streamlined location with no dine-in seating is scheduled to open in Rosemont, Ill. | Photo: Shutterstock.

Portillo’s may not be done raising menu prices this year.

So said Michael Osanloo, the Chicago-based chain’s CEO, in discussing second-quarter results. Portillo’s same-store sales increased 5.9% for the June 25-ended quarter, but that increase was attributed to a 7.1% increase in average check, resulting largely from a 9.9% increase in price on certain menu items during the quarter.

Offsetting those factors, however, was a 1.2% decrease in transactions.

Still, Osanloo said Portillo’s continues to enjoy high consumer ratings on metrics like value, giving the company reason to think more menu price hikes could come later this year, if needed. About 3.4% in pricing will roll off in October, and Osanloo said the chain is taking a wait-and-see approach.

“Guests are a lot choosier about where to spend their money when their wallets are lighter,” he noted. But feedback indicates guests still see Portillo’s as offering a great value.

“We feel great about where we’re priced,” said Osanloo. “And, if need be, we feel like we still have pricing power that we prefer not to take, but if we have to take because of commodity or labor increases, we’re well positioned to do that.”

Though commodity costs are easing for the brand, labor expenses went up slightly during the second quarter, in part because Portillo’s increased wages to keep up with minimum-wage rates in various jurisdictions and ensure compensation for veteran team members was also keeping pace. Hourly rates went up 4.7% during the quarter and 6.5% year to date. For the year, the company is projecting labor inflation in the mid-single digits.

Revenues for the quarter increased 12.3% to $169.2 million. The company reported a $0.9 million decline in net income to $9.9 million.

During the quarter, Portillo’s opened one new restaurant in Gilbert, Ariz., for a total of 76. The company said the newer class of restaurants—many across the Sunbelt in Florida, Texas and Arizona—are reporting average unit volumes that rival the brand’s Chicagoland restaurants but have low margins.

Among new units coming this year are three more in Dallas/Fort Worth, three in Chicagoland—including a pickup/drive-thru location in Rosemont, Ill. The company is also planning to add one in Arizona and one in Florida.

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