Operations

Portillo's sees consumers reaching boiling point on pricing

When lower-income diners are pressured, the fast-casual chain feels it most in the drive-thru. To address that, Portillo's is working to get orders through car windows faster.
Portillo's
Portillo's is hoping to get back to pre-pandemic drive-thru speed levels. | Photo: Shutterstock

Portillo’s on Tuesday blamed miserable weather across much of the Midwest and a choppy consumer environment for a 1.2% decline in same-store sales in the first quarter, largely driven by a 3.2% decrease in transactions.

CEO Michael Osanloo said trends are improving so far in the second quarter, with same-store sales up in low-single digits based largely on menu pricing of about 5.1%, though transactions and menu mix continued to be negative, according to a transcript by Alpha-Sense.

Portillo’s increased menu prices 1.5% in January and another 1.5% at the end of March, but that pricing was in certain categories, or markets (like California). New salads tested at the end of the first quarter will launch a month sooner than planned, demonstrating how nimble the brand can be. The Spicy Chicken Chopped Salad and Chicken Pecan Salad with Bacon have already become top sellers and, as higher priced items, have begun to displace lower-margin offerings.

“Simply put, these salads are a win,” said Osanloo. “They are clearly delicious. They add menu variety that appeals to a range of demographics, and they make Portillo’s even more veto proof.”

Osanloo said the chain has not seen resistance to those price hikes, but, he noted, “we understand that the consumer is getting to a boiling point, so to speak, so we have to be very surgical about how we take price.”

When lower-income consumers are pressured and start tightening their wallets, Osanloo said Portillo’s tends to feel it in the drive-thrus. Dine-in continues to perform relatively well and catering and third-party delivery is still very strong.

So the Chicago-based chain is working on speeding service through drive-thrus, which Osanloo said has been “undeniably slower” than in 2019.

Getting back to 2019-level speed is a goal, he said. “That’s what gives us our confidence that we can get our swagger back a little bit and make sure that our drive thrus are moving as quickly as we would like them to.”

A 30-second improvement in speed equates to a single point of comp, Osanloo said, “So we continue to double down on speed of service by empowering our restaurant leaders with tools and coaching to give real-time feedback based on those key metrics at critical time points during the day.”

The chain is also seeing consumers order fewer items per transaction. To combat that, Portillo’s in April relaunched its Famous Five, a version of a bundled meal, on menu boards, which helps remind guests about other menu items the brand is known for, like fries and drinks.

A new smaller Restaurant of the Future format, which will shave about $1 million from buildout costs, is scheduled to open in Texas in the fourth quarter, and Osanloo expects the new format will keep up with the system’s $9 million average unit volume.

And Portillo’s is planning to test kiosks at units in California.

For the March 31-ended quarter, revenues were up 6.3% to $165.8 million. Net income wa $5.3 million, compared to a net loss of $1.3 million for the first quarter last year. One new restaurant opened during the quarter, for a total of 85 restaurants.

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