Portillo’s is still working to solve its Texas problem.
The Chicago-based fast-casual chain on Tuesday reported fourth-quarter same-store sales down 3.3%, largely on transaction declines. For the full year, same-store sales dropped 0.5%.
Portillo’s new CEO Brett Patterson started the job this week, replacing ousted former CEO Michael Osanloo, but outgoing interim CEO Mike Miles, who is also board chair, led the earnings call.
Miles said Portillo’s average unit volumes and profitability remain strong in its core market of Chicago. But Texas remains a challenge.
“Our Texas market expansion continued to be a headwind for our business,” said Miles in a call with Wall Street analysts.
In fact, as it grows into other new markets, the chain is deliberately not doing what it did in Texas—moving in aggressively with multiple locations.
Last year, Portillo’s announced a strategic reset to slow down the growth planned across the U.S. Sun Belt and focus more on unit economics.
That plan, Miles said, will take time to bear fruit.
The chain added eight restaurants last year, after initially planning up to 12. Ending the year with 102 restaurants, Portillo’s plans to open another eight in 2026.
Learning from the challenges in Texas, however, Miles said the chain is encouraged by the brand’s move into the new market of Georgia, with a restaurant opening in Kennesaw in November. Like early units in Texas, Kennesaw opened big with about $2 million in sales in the first eight weeks.
In Texas, the brand also opened big when it moved into Dallas in 2023, fueling the brand’s national growth plans and an aggressive push into that market. The chain now has 16 units in Texas, including four opened last year, with more to come.
But then sales there rapidly lost steam.
Chief Financial Officer Michelle Hook said the losses seen in Texas had a 180-basis-point impact on consolidated restaurant-level margins in the fourth quarter, and 170 basis points for the year.
Miles said things will go differently in Georgia and other new markets.
The next Portillo’s to open in Georgia will be pushed to 2027, and it will open about 50 miles from the Kennesaw unit, to avoid cannibalization, said Miles.
“Our approach over the next several years will consist of more of these types of entries,” he said, “tapping into the pent-up demand from Portillo’s fans to support our first-in-market openings, then letting awareness and demand build before opening subsequent restaurants.”
The Kennesaw unit is also one of Portillo’s smaller Restaurants of the Future 1.0 format. It’s about 6,200 square feet, which is about 20% smaller than most opened over the past five years, and is designed for improved four-wall results.
Fundamentally, however, Portillo’s needs to drive traffic.
Miles said the Portillo’s Perks loyalty program launched last year is showing results, with membership reaching 2 million.
It’s more of a “surprise-and-delight” loyalty program, offering members experiences and access to merchandise, rather than a “punch-card” program allowing guests to accrue points toward free food or drink.
Pointing to problems at Subway, which recently had to change its Sub Club discount offer, Miles said Portillo’s is “not looking to get into a situation where we’re doing that kind of a punch-card deal at this point.”
Portillo’s raised prices about 3.2% last year, and the company is still evaluating whether pricing will be needed this year. But, Miles said, “Our focus will be on growth via transactions versus pricing.”
The chain is facing rising food costs, particularly beef and pork, and is expecting mid-single-digit commodity inflation this year.
Meanwhile, the chain is working to improve trends in Texas.
Last year, Portillo’s brought in Denise Lauer, the former CMO of Marco’s Pizza, as marketing chief. Miles said she has a number of levers to pull, but also a new boss to adjust to now with Patterson as CEO.
“Building sales is the No. 1 job to getting the Texas market to where it ultimately needs to be,” said Miles. “We’ve got restaurants in Chicago that do $4 million and $5 million and have for a long time, and make money, and I think we need to get that mentality into the market in Texas as well.”
Marketing efforts there have included third-party affinity offers through Perks, and bundled meal deals, he said.
But fundamentally, it’s about brand awareness.
“We’ve ultimately got to find a way to better explain Portillo’s to consumers who aren’t yet familiar with us,” said Miles. “People who know Portillo’s love it. And people who don’t know Portillo’s have no idea what it is, and we’re still trying to crack the code for how to market to the group of folks who haven’t yet figured it out.”
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