PTLO - Earnings call transcript Q3 2021

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Operator

Good day ladies and gentlemen, and thank you for standing by. Welcome to Portillo’s Third Quarter 2021 Earnings Conference Call. At this time all participants have been placed in a listen-only mode. Please note that this conference is being recorded today, November 18 2021. I would now like to turn the call over to your host, Mr. at Director Managing Taylor, ICR. Fitzhugh may Thank you, you begin.

Fitzhugh Taylor

Company's everyone. you, Osanloo, the on And Hook, President morning, Rob. good With the Michelle call Portillo's, Chief Officer me Financial Executive Officer. Thank and of Chief today is Michael

by required filings remarks, begin forward-looking law. relied everyone we to include that me discussion we update and and unduly statements unless these These undertake release We are our Before do of let impact SEC today forward-looking should to financial you our of could earnings results future be for And today's of future performance that statements refer detailed discussion remind operating Portillo's upon. not formal condition. our the will statements. part in risks not guarantees not more

include is such earnings website to on you EBITDA, comparable Our as income we considered adjusted net which financial our as our financial to their to for level of measure be remarks non-GAAP measures should morning, adjusted or available EBITDA, this other as alternative such also GAAP measures restaurant and these direct position. GAAP measures reconciliations our financial most release issued or any measure, of GAAP operating an not income, or liquidity non-GAAP Any measures. non-GAAP

Finally, lines we after for remarks, we the deliver will your open our prepared questions.

Let me now turn Michael? to Michael the call over Osanloo.

Michael Osanloo

everyone. you time earnings joining all exciting morning, appreciate us is We an And a as call quarterly good public our Portillo's. what Thank inaugural you, company. Fitzhu. for incredibly for It's

our guest is so far new reflected which and successful evolving of normal. IPO performance into pleased proud business continuing traffic we're a with is the so our year, of as completion are improvement in We this our

all be our improve. their and family, pivot amazing pleased values our efficient doing Our and more this teams our importantly, of environment. in loyal with ability couldn't and I a And serve adjust greatness, continue to smart, teams in to performance while our by a living energy continue led safe guests they're to fun. way to successfully

the our since results a more special. want and review I talk is to quarter in makes earnings brand Since call Michelle what to minutes so share our this Portillo's detail. Before about few let just our IPO, take I first

Partners Our named when $X,XXX Park, tamales. success American beginning expansion our and additional and few brand, states. restaurants in story. as After just national Portillo's the over Illinois. Dick decades, states. gradual XXXX be restaurants six later, story Chicago a first reality fries burst XX to began XXXX a hotdogs, it he a years steams in institution, that XX across And we've is trailer people but invested to dog the multiple it, great Berkshire become as in his was our acquired of Portillo's. Portillo XX restaurant today, Dick in has growth, think accelerated soon The Most and Portillo's sold this with Villa freestanding across since opened called adding house of nine A

do much We that grilled remarkable char has fresh grown, third dogs, pound obsessed. something our and of everyone. who beef got food Chicago with unique unrivaled that favorites a Chicago salads, made point. style sandwiches, for price craveable Italian We've and burgers, All hot more. at this street we've with American as status are maintained we've iconic fans Even our truly menu all

to Portillo's operational channels. addition menu. order across to thing. before even it want numerous channels been multi I stress also was a amazing excellence In this We've since

the the chasing especially this, on been our pandemic, in what other early this since brands have outset done has is Portillo's While of from history.

drive-through. ending annual QX represented million and our restaurant the pre and just in in idea now, an $X.X $X.X you million our Just XXXX our both of pandemic to XX-months business, per drive thru-sales XXXX. give That's

represented sales million the in dine-in XX-months and XXXX. restaurant $X.X million $X.X ending XXXX per QX in Our

its restaurants and locally beautiful, engaging. of then our And XXXX, memorable started dine-in impart in We and That's because handle and because inspired there's decor. QX for remains has the they're decreased providing while ending each in with accounted $XXX,XXX in traffic differentiated delivery it nearly They're restaurant XX-months delivery. and pandemic, experience the incredible thoughtfully own a having volume, per healthy. are $XXX,XXX still about XXXX Although XXXX. designed to

convenient gatherings formats also fans are I and mentioned other and any cater we occasion. of people food growing, are channels tons obsessed, events. love Portillo's already for that that Our their tons our literally fit in catering

gives strong put direct-shipping a to have us where into the volumes for an restaurants. of space margins us multichannel only allows demand achieve best-in-class in highest approach latent adjusted class but EBITDA We provides including economics, business not This sales, unit our average in that that really us the unit also and casual fast there's key insights elite business.

new Madison to in second the in strong in new be market. of open the Indianapolis channels. restaurant our will XX adds on two distinct the are these fourth north Madison, of entry trade City The Each of restaurants portfolio. By to Indy Madison, our added be brand, Wisconsin. in end our and have serves from to as the in location incredible new side QX, a to will separate locations Indianapolis in location weeks outside restaurants Opening of We all already an to with market Chicagoland fourth and XX Westfield, the a demonstrate about the state. And to state. the the sales multichannel to committed a our opening we Westfield and presence in core the number of strategy Switching location location two the of development. Both area. number new and world-class seventh continuing restaurant

new and which With Michigan. new in Florida, our markets these Orlando, two, we two will Heights, having have added opened restaurants first XXXX, includes Sterling including five

As we move we're whitespace next excited beyond, into year massive opportunity. and our about

is the with restaurants IPO obviously plan to SEC, long-term filings we growth in over at expand a annually. there's and As growth number This our potential the we've XXX about XX% Portillo's country. for previously stated throughout

if two-pronged to current Arizona, expansion our the for presence One restaurants to growth. expand than Portillo's I and have for open it us other premise smaller well allows core off restaurants, Texas. what traditional market our will approach Our we're in a expansion to Unlike highlight our targeting pickup, into Joliet, our only is, the Illinois. Portillo's which not be this to features Indiana, into we're a to footprint in calling Strategy located gives opportunistic Sunbelt to room. will dining and feature new spot in initial fill area us to delivery. And as expand lanes great mature plan as markets presence location option across pickup want targeting a our the first and three a XXXX. an successful, first, second, Midwest, as catering it'll tap and the 'XX Michigan, Instead, that markets. is Florida, plan continuing drive-through national across a well seven specific in is in prototype and This as

our grow we our count, focused unit we continue on be to talent as Finally, pipeline.

and and our and family, We will greatness, in energy day. each programs, values our live continue to every invest develop leaders of fun training

it our efforts over these about results. With I'm to performance. cover financial details to and to that, are of financial All turn drive our going more reflected Michelle

Michelle Hook

Michael. you, Thank

including outstanding, all IPO each the IPO Also A totaling $XXX.X million hand with credit let that over-allotment members certain approximately $XX the LLC IPO units X, and we one, was borrowings for commissions in the of end common LLC to underwriting by part million the outstanding discuss shares pre of of connection prepayment Class including XX.X whether discounts option completed our we share. under our second an payment premium, to the option totaling million penalties, plan, an aggregate at and million. of cash quarter to following proceeds redeemable equity the the X, purchasing shares price me for approximately vested IPO. of million. all purchase $XXX.X XXXX of our or of results, unvested, a XX vested whether full, Class amount third offering We under incentive the a of briefly all or and the along plan the approximately received issuing and quarter, approximately net in fourth shares, recap stock their expenses, after option offering sold A from underwriters agreement, options, our in October respect the was the equity substituted million received an per unvested, preferred $XX cash $XXX.X XXXX used, and quarter, stock and shares Before million. holders as $X.X which X including incentive recent of under On on equity we repay common lien with estimated number of redemption or option repay

expense record of to modifications the awards, of addition, fair based on pre a value the performance will of In compensation vesting awards. we modified IPO result as terms certain a the

compensation recognize fourth cash non-cash a in million approximately to each approximately compensation the $X.X $XX.X of expect a expense million will quarter. We of expense and

our our $XX.X of by with in XX.X%, partially X.X% quarter restaurants two average increase of driven million, the by XXXX. restaurants sales, increase million, traffic. primarily to new same-restaurant or to our a XXXX. and turning third quarter offset three increase the of opening of fourth was decrease opened was quarters in the the X.X% results in a revenues Now an three quarter, new of combined sales in were The reflecting the XXXX by in same-restaurant for first a of third check, $XXX compared driven This increase X.X%

in of reflected and was traffic per due check average higher Our to items pressure mix from more prices, items decrease menu COVID. sold, order. in The continued our increases

people levels. As fewer partially restaurants This we through by pre people offset our channels. our thru have drive more going was pandemic dining versus in

quarter, were to guests. we locations. for mass of a loyal the to opened dining service our and many exceptional both to safe indoor subject during environment all provide local We dining While team in mandates in aim to to third for continue members our be guests rooms our continue

distribution a our to returning We, offset year, cost work prices, partners revenues specifically amortization increase industry both we're to of XX.X% commodity to others our maintain the sold our to When by chain, Now of comes XX.X%last continue chain, goods continue to of and and to depreciation from sold. and along This as an in percentage hard was in we through confident due with suppliers. in in navigate an check. supply increase average to increased our Cost beef. it excluding in supply inventory. primarily disruption goods

to have feel We us will we procure our in allow relationships continue and we strategy. believe needed, distribution products that confident to outstanding extremely

check. as a discretionary bonuses. and percentage labor. All rates, to our an due by XX.X% increased Moving investments partially primarily in XX.X% increase costs training of revenues these an to increase costs offset in year, hourly average on from last in Labor, to made were

market training enhancement labor as development. impacts in made quarter the rates team to now and the aware, benefits, nearly we labor for a in investment competing all quarter-over-quarter. And substantial average is is extremely talent. hourly are talent seeing ongoing We've part an quarter of are pay tight the pay, the and you second XX% As up expenses, flow right everybody third in are our as through our member

While limit and to to guests in in elevated had within future. continue family, expect you the restaurant every costs at would or members staffed, and produce committed margins labor when be margin and Even year our our the labor current We operation. each level food not of investing year fully near ability to adjusted the hindered costs, our continue our Portillo's remain we strong to as labor team challenges service of we margins results our quarter. hours look market service and are have the to the EBITDA committed over proud channels And day. both result, increases restaurants that in with have a

was Now, expenses the five expenses, the increased to restaurants new which million since other $X.X to or third our quarter opening operating of turning due XX.X%, XXXX. those of primarily

repair as with All and incremental to maintenance combined an direct addition and costs costs. in third well quarter as this year. cleaning, for marketing increase last expenses, capacity have the utilities, dining In as our was of expanded since

occupancy the the seeing. level our due the decreased sales, previously a EBITDA, restaurants of primarily to in those of since the Looking the prices When restaurant opening labor inflation. have and of not and as year-over-year the metric to result that of of a reflect you of of the approximately at third any increase increase part largely commodity costs, $XX.X the did we're XXXX. increased both five pricing our million, described an during headwinds, inclusive decreased labor the We take quarter, combat quarter adjusted and X.X% to commodity third and at percent early look as sales impact fourth X% quarter, incremental to price certain new

costs X.X% versus resulting rate of program, last a leadership, primarily and increase decrease associated of you as to future this quarter, becoming a When a open million, a of of year's from of to percentage expenses EBITDA all third adjusted $XX.X with year from higher roll off, publicly X.X%. wages, to training higher million, revenues G&A traded restaurant filling annual it company. Our versus positions, higher proper $XX.X due led X.X% increases, prior

today our Now proceeds with Class to full, remains preferred cash common and Lien balance from stock shares Second pre-IPO from on mentioned, over from A $XX the our repay cash-on-hand and as on million or previously outstanding payments, sheet we units After Credit repay borrowings perspective, the a agreement, of certain hand our healthy. along numbers. purchase those I equity is making IPO LLC redeemable use in

has preferred with debt full completion our it $XXX our redeemable extinguished now been results. for With I'll to our over equity closing million, remarks. of and IPO. that of decreased turn the concludes financial the Michael in have Additionally, balance by connection that,

Michael Osanloo

landscape a our We've there's standout lot so makes Across to people unit really is culture. quick growth. restaurant chains, that major service casual Michelle. talked and centric component But omics. you, fast Portillo Portillo's a brand comes driven is of Thank is about it our values special. It one when the

we care family care our that fun invest Portillo's. Our greatness, invest And and in turn purpose in principle our members, and everything they in values do. and as is guiding for to team we central for and energy we of our use

another of motivated completed of coming obsessed. restaurant to We Portillo's and And we proud family work to you. just an for even a am when grants. they're our harder as of for example, It's care awarded our one back craveable that's we our managers teams that month, know at guests. amazing to members, palpable over for XXX translates For nurturing they're work point, By its every last unit IPO leaders. food the a across single all most experience managers price Thank our aren't coming why Operator experience. take fantastic restricted care And to one-time our I to team the hard guests. you. It's stock our that Portillo's take connections They the day. country. are

Operator

That concludes our formal remarks.

comes for in you Jefferies. [Operator As Our Andy Please always, Portillo's. from your thank question Barish proceed with Instructions] your first question. interest with

Andy Barish

good Hey, morning, guys.

equilibrium the we seeing about. at Just a much quick term question, things of I'm trying how do to term sort the and a margin sort an be looking move industry near of been expect some And as third being pressures, of near or has you talking reach you should conceptualize quarter more 'XX. as through challenges base, then

to term trying the Just of a near get margins there? some sense color on

Michael Osanloo

from hear nice you, Andy, to first, doing you're Yes, well. hope

anyone the want and commodity think all thing of no mitigate to QX, don't of kind I that took we gloss Before full one I of the of I brunt that. Michelle, inflation, there's over to and was Is wage to the turn pricing that there some over.

took So let of keep in pressure. we mind, that mitigate at some Michelle And pricing very of that QX. the we I'll obviously, the will think But margin expand. beginning

Michelle Hook

Andy. Yes,

lines end And at mentioned to we which action QX, evaluate to we're at think terms further. that to decisions commodity based that way look was them the to what pressures beginning make 'XX as going half evaluate that about to I the outlook the think into those around both when back we we inflation. X% we're on on point, if like. look continues we to expect look I the pricing is this we adjust adjusting to in in think we again see continue know through of But when don't you we we continue pricing. we'll fourth year, to And healthy we at well, pricing of think to need I business seeing, labor And price grow 'XX. quarter. need as and into an growth. But Michael's But and move food see in took of the key as we'll sight the this look I if transaction into 'XX, continue of

Andy Barish

pricing. a you your increase? few do mentioned as how follow-up And so? kind just typical look of on And that, is next price as you When the annual at or months over

Michael Osanloo

maintain be industry, rest Yes. carefully price What proposition. laggards of But doing. casual value I we sure we now sharp is as comes we like that that typically disposal. of in strategy to the price pricing QSR don't And Andy, some feel strong have to ongoing very, we part a the make think of we basis, we an we very what evaluate fast to where and the And an typical evaluate points, our we is on rest have try our at versus exceptionally also it right inflation. it live commodity we and power do environment when

treating we're And need So and and as is, we're the the we we're evaluating market we're we're is. idiosyncratic, this be, year pricing where appetite where the somewhat evaluating at rest consumer’s constantly. evaluating to looking what of

Andy Barish

Okay, Thank very helpful. you.

Michael Osanloo

Andy. Thanks,

Operator

John from is your question Glass next with question. Morgan Please proceed with Stanley. Our

John Glass

you morning. the some performance thru COVID drive dining good Hey, color in gave around and the pre Hi, business. post Michael, COVID

that dine-in those any think in remain hold drive got about If you what constant? look get where is, know, elevated think Is relatively as volumes you levels diminution state possible doesn't drive a the is thru And are back you And you seeing do prove, the those? thru the to dining can the that future? improved? of Or you've diamond you first how in the out three I'm trying you quarters through sales? XXXX, is

Michael Osanloo

John, right as drive It's dynamic, hear of of hope in interesting been it's mix. think, slow you're to an it's And I to mix, our and be Great from now, about low XX% XX% you, dining used well. Yes. our back. coming our

there's to that. think two factors I

I our mask bit even restaurants with in that. has think little one is rebounding Chicago, been are America slow across dine-in and affected in by more think still been a also, that general mandate, I COVID. But a which in under

is news resilient. remains the Now, drive actually strong thru traffic good and that incredibly our

know our dining would where to how mix, thru a it has but us, I a of stabilize, And it versus shifting? how affected up will of towards slowly I incremental so eked lot be as drive is back on, it foolish this for negatively opportunity it not our that is think don't there's guess has had channel. much of of much me

John Glass

you base? Thank a about think you event? timing as When is, based necessarily that. that you location of you seam selected? the for talk next the Why did it How you select not you think did Or mentioned city just that city? can Can Texas year you what's about Texas? maybe was you

Michael Osanloo

to And performer first that run. it's be their going. you I I great we're foray about we super believe -- the Because you. where It's obviously where we is. home in -- city. that of I'll flagship am want location we're Here, it I state that you our we But really about to really, be strong to the think a about that's should here's for what what going. it's excited I a be know it tell and is room so a others can't everybody the to Texas, to are the I, head going tell vigorously talk shaking and eager into going us. restaurant,

certainly unfortunately, and specifically But the open can it is. you excitement I So where is everyone momentum. tell up quarter, can't will John, it I will I build where tell it when exactly fourth and

John Glass

Got it. Thank you.

Operator

question. your with from with question Geiger Please with proceed Dennis next comes UBS. Our question. Please proceed your

Dennis Geiger

Good And folks. morning. Great. thanks,

First, could those just metrics stores new what system? you of Michael, profitability just feeling the performance other if some Or of in most in on newer remind on of about you to kind share though comp any or markets, perhaps stores the seeing could been in maybe share or those or you the of the those newer open sort wondering rest markets? relative stores folks you're highlighting commentary recently the how of

Michael Osanloo

opened that are about Yes, qualitatively, We -- feel now you meeting Michelle There's And all qual specifics. I'll really a go, are fun. the just the hired you, with five think than these exceptionally exceptionally our class, thrilled nuances that from we've tell going expectations, them. we're we greatness, experience good. love give opened right, of providing to we we But or hires, restaurants the our people get they the that financials, XXX% six we have, a I'm up represented family what that is who them. beating good as so other values with based actually energy, to values up I let is restaurants our guests the that

that success so from highlight heck a great care can great guests. thrills me, restaurant perspective, setting care qualitative the taking up as that's term financials. And Michelle of And for our for you teams, out a of the long our of

Michelle Hook

outlined in I and Yes, Dennis this this, was S-X think as well. the so

So look since that quarter, restaurants above expectations. five performing third when XXXX, our at the opened they're we've you

our quarter, XX% mentioned, So above are X.X that in averaging for typically, since new five million that performing opened metric. one restaurant expectations we restaurants, be the third roughly that what around the the would I a AUVs are year

outside restaurants So performance. of of the to of our Most proud market. Chicagoland we're Michael's are point, extremely those

So our restaurant Glendale, restaurant Heights, a Sterling Orlando, and near restaurant and flagship in Michigan first Florida. our Arizona, in then and

the year that were like and roughly targeting performance AUV. what that about we fact proud we're XX%, mentioned they're, I that above So in

Dennis Geiger

et months, XX note next Great, to spoke or then as I to the strength relationships. But anything challenges XX and it shortages, of sound relates there second And there just stores it you like to build opens Thank opening if there's costs, your cetera? it on the et to as next Michelle, months to question, think, thought curious any impacting or you. over impact respect relates doesn't labor chain, over you. supply just with thank cetera. Any so, just a the

Michael Osanloo

Dennis. lot question There yours, was in second of that a

just opened of at West So me We for the weeks out those Wisconsin. the Madison, in were both wood of restaurants. attracting training tease the recently two pleasantly talent knocking I'm hiring we're Indiana, parts. opening teams me some ease different on process those because in Westfield, we let relative in in of up of we're surprised and up. let And

There those that open opening is fully restaurants are fully if mine with trained we're are staffed, staffed. up, are I get restaurants and going. to but markets a know a -- We don't this in our the labor dynamic ability those coal freeing canary thrilled get those folks

While in then there affecting I spikes and our way It's and hiccups, down. are our how they chain and something supply certainly describe we that's It's costs just, it spikes would our comes some and back see come down run back negatively or some else no ability and idiosyncratic it. business. business to

of what when we them we're pay minimum And across if choose. to heart it six to wage to but because them our and dynamics. just truly our country, I of comes also take any which We're believe know provide keep opportunity wage that Dennis, -- the we going we think significantly people minimum know on months of are above values, we teams. of a opportunity, so they differentiated care do, the our restaurants. is, this, But you hire so keep labor, at and the responsive a next And we requires supply chain provide business, don't lifetime people, nine be the doing based just us for I we people agile to we super to

Dennis Geiger

And guys. congrats. Thanks, Great.

Michael Osanloo

Thank you, Dennis.

Operator

question please with Sandler, next Nicole comes question. from Our Piper your proceed with Miller

Nicole Miller

sold think think is measure I that costs Labor but efficiency? morning. labor you how challenging, efficiency, are hour? Good flip you. around Thank you about if items labor by and it per

Michael Osanloo

Yes.

Nicole, all, hi, from nice First hear to of you.

labor You we are in this off and lot did if our terms you're massive And not the pandemic year, that remembers lay right, this. everybody invested of in And it is the aware -- we in a I labor XXXX actually pride know of at of we or things items efficiency, increase I person, of don't XXX%, we think But people. during look one saw single per in right. XXX% a in. It's we take a hour.

an cross the XXXX incredible be worked the that us to in that people much our we've we investments so news we've our for made you, little and good that with about it them, -- we was honest too the learnings year, showed hard. improvement love And probably But a was is, training is XXXX that a IPLH XX% yields XXXX. in and versus did, the in people, too the

And of efficient. work more cost the it is our that part And diligently. so, what's mitigating folks just is pressures incredibly are some they absolutely of

our And so think will and and that team we continue in our year for investors a that fruit that us, COVID that's we years members to the learning got bear that to for come.

Nicole Miller

with does the EBITDA be you would And taper proactively quarter? And increases? the where debt? Or can ideally, And you the why as down end at just comfortable level? ratio you're run that through you debt-to-EBITDA stood a of paying on ratio

Michelle Hook

$XXX debt-to-EBITDA the paid million, I'll Yes, after a on off post roughly Nicole, structure, around X.X times which Second we the comment debt ratio. our Lien, we're

we to grow continue occurred line, proceeds. post Second is, the a just payoff in EBITDA as that capital the QX structure of IPO Lien stronger position naturally we're post but as IPO of going obviously the given to at the that expectation end our of that higher, so delever, is the that ratio is is the And quarter part

Nicole Miller

Alright, thank you luck. much, good so and

Michelle Hook

Nicole. Thanks,

Operator

question. Our next from America. your of Bank [indiscernible] with with is proceed Please question

Unidentified Analyst

lower about then investments also I follow you a comment. The on were quick but thank increased a labor. by question offset levels, discussing, And staffing just productivity have Hi, labor you've pricing the up just I partially you. you as said made guess, were But staff restaurants. to you extent said the from perhaps like about hindered which your some might would close you you have I longer and have perspective. didn't talk to top not line? sales presumably, as as were you lost know lines much you can having that

that So some might there's extent the that that also Or productivity? sales? on what's to Can terms you in? you of more actually systems? whether of me, you've affected your any that is in that just insights been driving have And technology invested the remind

Michael Osanloo

first, in hear yours. you lot a you. great There's Thank again, Great, to that from question very of much.

the there we there's about -- is labor a think algorithm, things going So bunch on. of

So versus we slightly ideal, the first right. thing sort of are that is understaffed

has little course of roughly that the it of we're a so XX% quarter. as And over the think understaffed bit ideal but versus third flexed

third element third is than wage quarter then is second in that third quarter. that quarter hourly in significantly is more productive we're historical The of -- prior component year. than the the during the that the higher And was

different So one slows a and less right, guests thru, line. it are your understaffed, there's down, your it drive Intuitively, are you experience to providing when down elements things against down than slows perfect you another. working you're absolutely it slows that three

would hard in better and to intuitively, which premise argue So results guests it frequency. that results with in your better staffing performance, be better repeat

that plan staffing as certainly and we we restaurants staffed on those avail there. opportunities fully opportunity there's believe comp themselves, fully So better, intuitively some because perform that

and logic. you're with agree thinking it XXX% the that So about way

Unidentified Analyst

hold price I is off, one one as sort the the are of a give about thinking of about stable of of traffic. two traffic just should sort just kinds right know, you on I that And year pricing, and to way cognizant have in about you about the traffic. there really but elasticity, some that to being going takes, I ability I image maybe or in of puts you it some you and of added customer all you think think think talked on more I'd know I price, like of kind be again, know, you. you it. about though, kind trade think thank Great, see take trends, of forward, thoughtful as then price If about, to back your

might in actually we So acceleration see an comp.

Michael Osanloo

It's a business this as the -- or businesses. at same I'd in a I've consumer restaurant say is seen remarkable our does not it, that have businesses elasticity effect pricing as another looked I've

people I expect. more have inelastic would We than demand, think

reiterate to it careful pricing there's I really and incremental. need that we smart I So Michelle price. the That we think it. a lot be also to said, really, said is and about want earlier, how of being

restaurant people it's important us team, business and our healthy we coming is growth. to believe we through Our more want healthy. driving transaction That's when hugely that's our

increases. to pricing lever what think as cost is I an will describe important I idiosyncratic with deal

So labor no we you price that is intent. commodities the very some have price run XX but sharp our that proposition. really a But That good away. of choice The our on we craziness in have value saw is to is of transaction that months growth. driving news and some last markets, by business the the healthy

and effect, there's after really We And managing we fast proposition, we're will to idiosyncratic sure while have increases are priced good. great look the of QSR across commodity casual we covering that make cost and labors. pricing in elasticity continue most so from still value that

Unidentified Analyst

you. Thank

Operator

Our with next Alton your from Please with Stump is question. question Capital. Loop proceed

Alton Stump

a missed wanted to Good years couple you. morning. but a was year clearly just ask, five cash or I pandemic openings you've three, last thank investment XX% return outperformed Great, with even the you've by in your target of on talked outbreak. about that cash

to is been able what to being appears be returns we it conservative, cash a bit over forward some you going of there below last the have do see should cash on why couple reason or years? So

Alton Stump

a leadership upside very there's First, from we lot restaurants going what that restaurants, exactly classes management us like from of And with I we jinxing performance where to cautiously or we expect -- are forward. last building a -- very you're that Alton. our you, we're and expect feel we're comment. the that as be we're little team, like we optimistic hear team nice these as downside. really We're -- to are a couple generating feel

necessarily certainly So that expectation, I fair? it. you on hope not our bank our to and tell Is but would it's

Alton Stump

as existing of is, still you've an bit markets returns average trending? a in those that of my you Chicago That course, how makes that. no, is Thank RAM sense. absolutely. a AV, for core awfully Michigan et And bit that but assume of course I as course, market cost just think probably core of lower It's then bills it your definitely leading of Indiana, of building are kind the done call cetera. versus industry your If follow-up. outside of lower which your Yes, was than average kind your market, non-core the about in

Michael Osanloo

Chicago there's much noise to I Yes, that. so answering more in The is, there's comparing of so outside historically, that. about kind expensive doubt because to that noise mean, build, wash, it's much I'm to problem question. everything But bill was the a build today a much no more great yes, it's Chicago Because, in if historical question. cost so Chicago, gotten has expensive.

a is what we build. ago couple build spent in to years Chicago So what would spending we're to have probably today

and fundamentally, to Florida, why intuition Arizona, we Chicago So go as that's But noise. like Texas, is of it build less in and and Michigan and market. Indiana, cost than there's the that your is dense places

really, be And argument well so can perform a from Chicago. that cash the to standpoint, a we really -- outside good return made there's

Alton Stump

Great, back the queue. thanks Michael. much I in so hop

Michael Osanloo

You bet. Nice talk to to you.

Operator

from with is question your David next Baird, Our Tarantino question. please proceed with

David Tarantino

to on My think this questions ideally certain whether goals and XX% you quarter, you'd you've staffing on by a getting progress fully fourth any Hi, good staffed see question is, levels. internally I you're to that mentioned you're quarter, be. first timeframe. whether morning. the narrowing to third below like about Michael, back set starting gap where in And my

Michael Osanloo

two new weeks that will David, question, is pleasantly staffing fingers and And of up in two We're that, all I Madison, Wisconsin, an we those restaurants towards up, great fully toes just in like and guide what opened would indication open two Westfield, opened you Indiana, hoping crossed. we A restaurants in surprised just our general. in that's we are are that and staffed. we're the got

in the system staffing are across We general. up

of are We a really a holidays deal. do ton big us, catering. For the

back lot grab a who've come have and kids hours. want and of off lot seasonal to We gone few staff, a of to college

not or are staffing even that And victory, so to we But declare some improvement. declare not seeing ready I'm to ready yet. just I'm

positives. on do would feel labor. and confident say more But positive victory declare in negative to we I there's certainly think way signs. no signs there I are

David Tarantino

settled is thinking how And thoughts long-term dine-in and basis. have And delivery the more you're change Got forward new you How So in the drive building through realized that you seen optimize you've about how going less then that and and great. question you're lot big prototype there out the be thinking on a had any not cost is business. that. the a to may when would business designed? a opportunity I for to of an yet. about out changing digital units? the very box, I a business. it. Thanks mix about But fully your prototype have extent And mean, design I in on

Michael Osanloo

It’s one to another about favorite you're allow my question, to great me going topics. wax on of

So we are puck we're where is. going where to is one puck quote the not the the going great going,

be is -- will so percentage going to puck bigger described, you what and where is And sales premise of premise. on versus exactly the continue a which our is off

built and towards are And we that Orlando prototypes the so sales. we and Chicago Glendale, including and in in building what there Addison premise off increased gearing Heights, and they are we Sterling Kimball

is So what smaller. you a formal are little getting rooms see space, in these the less restaurants dining dining

a is vestibule very in patio right premise. of curbside quickly. fast it third and special via access we're have and or it. racking with but by really so bunch right essentially toying get with we're you in we're parking zip the as lane to for and I a special Madison can of We're drive mean, it's people we've of entrance lane. the very flexible. third-party app them and third where have And delivery. And gets I I creating doing cracked a people kind experience, We're calling highly from we've for through Now spots for want can of a on kind code system that through where guests mentioned, then curbside dedicated pass drive concept food by building and you now supplementing you. your don't car, done are out we've we're a that has -- Joliet. super thru this ordered bit lane. come of didn't drive outdoor type things creating this West being thoughtful a say out think get spaces off door that we're to because through format a lane, And the It's But little only idea the cheating who out desirable brought

So are the of winded is consumer long more sit towards access we is, the availability. and consumer XXX%, my to down. premise need of which want where into the we off where the moving kind says, saying coming is restaurant way And

are new built. our And so prototypes that's of being how all

David Tarantino

context. the for Thanks Great.

Michael Osanloo

you. to You bet David. Nice talk to

Operator

Stifle. proceed Our next Please question. question with your is O'Cull with from Chris

Chris O'Cull

Yes, thanks. guys. Good morning,

provide large we're I ask the mid-November, or volume typically in that group Now I sizable wanted about in know catering a holidays orders. bring to list.

have what and into So up I at how that of curious for visibility then you point kind follow-up. I was just shaping had the year this a

Michael Osanloo

a right. biggest Eve of quarter. There's on is year. whole won't our business A all ecommerce day catering people Christmas the But Yes. day, monster single and And the you hands a for get this deck. is in fourth that just massive us It of this know is this. lot

last support few But area should a we really in about so We're and year strong catering weeks business a for restaurant last be basis. last I really, it's to you huge is a the center catering you way us. off feel Portillo's because Chicago the quarter. optimistic from thing. take at members team have cautiously significantly not year, catering, we plan really thing because tell on that those don't the back We And Christmas been out looking helping I fourth extraordinarily that a business our want Eve, going it right E-commerce catering, all I anything on think would to now. of be during you restaurants bounce I'm you the But I comp tell good business performing nice the our have numbers over you on the have tell from is would loath from forward to tell positive will a numbers.

Chris O'Cull

order a to look I wondering implement then you'd bit tested. being little forward? change the you a that's if about a speak I'm how that design guess third just through can consumers. that's lanes you being And more ahead going received think by And drive format, that's or Great.

Michael Osanloo

be if West sorry, But in I opens it's I'm which misspoke. precise. going Madison, be to weeks. just Yes, two in to

somebody you've almost wait and to how of it your are a ahead honestly app, really I on it's screaming with it's with interacts kinds in your food. as for all guess and restaurant consumers? a you're think be is as will line to in Because just more there's paid, you. So received don't for channels. consumer want you've good who the be and how to in kids consumers like received be need three anybody you by pick mom you to well. asking There's And going micro the more up flexible wants, it's mine back, if companies want ordered

super And that and see we that performs going We quarter have we're of 'XX. that in when made open to how we'll up see in in easy West the that Joliet how Madison. performs first

with them. very, a of I to think if nuances Because, how us. and important continue very ask sort consumers for you engage these it's require learning for in

institutionally, always be then to they thing. what a remarks, want acquiesce and consumer interact think were I said work do to how I that. my in if can it's restaurant multichannel lane in we heck or to better going us. to us, the I to as kind the of we'll consumer And a that that there's that We're we respond think yeah, companies be I demand that's way to and making super and wants with think before that position responsive opening of a third

Chris O'Cull

Makes sense? Thanks, guys.

Michael Osanloo

you. Thank

Operator

from with proceed is with Gregory Our Please next question Francfort Guggenheim Securities. your question.

Gregory Francfort

question. just, pricing. the first had the I two for one, the Thank just

twice. historically, Thanks. once happen? next we and that Can year it and when year, think what might when basically tell evaluate think you have this I taken per it take as normally year, you you're about just taking you you guys me pricing

Michael Osanloo

think you. as agile to on hear Greg, years, I from pricing. and last tell it couple good So, little all, bit the think, a to I will been like of first you I of we've more,

the So we've event the on third like pricing at yes, year. quarter the quarter. spring, But the done annual do third pricing, has fourth in in quarter, of a rhythm fourth then pricing to the been need, where set that's late we inflationary the demand, pricing go in early also in smaller of we summer. the certainly the look in early quarter through early the either primary there sort some price a late late last And in or, sort and couple years,

to at don't want data, down look on I tie we pricing. at what look so basis, we pricing. a pricing is I specific We weekly impact competitor the a rhythm our elasticity And think to on scrape of existing

analyzing weekly basis. are regular a We on it

think I to are going gauge what to to to not know important really consumer that experiencing. consumers really But ongoing It's what it's we're pricing. Now, is competition response to frequently. price important your And know it's doing. really important

to So we're need we're it we labor, it may see pricing seeing we looking where mentioned, price. take Michelle may not issues, if of price I right, we're looking a as at the because, where should idiosyncratic we would don't need pockets -- at we think inflation, mean in year, surprise I anyone small commodities, sometime next

Gregory Francfort

Thanks. you're your kind a on how why you of differentiation ability? why like than the Portillo's pricing of has about of greater some just increase. there? out absolute the thinking you about level is power talk it. sort then Can it of as like to labor, companies that two Got is Got maybe on the And investors kind price it? most themes well of two as investor, staff restaurants the focused seems ability the check it competitors or that Is Portillo's on

Michael Osanloo

and is that food, is number that's it's provide. the of gone I you start -- ticket out that it's and like know, we quality we've food Portillo's for SEC a our that -- mean, you -- the it abundance Compare for pulled with low number not And that number. it's the mean, just of number end, right, surprisingly vetted, rear obviously through I person fact know, my scrutiny, Greg, a per is is a I that that at of that. $X.XX. average the let's our is with starts experience think just validated, real the

value think so an it starts with have And sharp incredibly I proposition. we

we an latent do, we because we incredibly I it have and why how is me We they're are the why unit we sharp so one pricing perform pricing. have we to value per we of seems our see like reasons have pricing, that And power, the that aggressively as -- have competitors do revenues where proposition. well we certainly I see as

that people you details, inured we the pricing, Our gone be points price, competition. it need go we I don't when priced that everywhere if as all our frequently laggard, think or the price up we they've the to been means already continue through have accept as price else. it. And much to as And

Gregory Francfort

you. Thank

Michael Osanloo

to talking Nice you. Greg. bet You

Operator

Our Sharon Please William with next from with proceed your is Blair. question Zackfia question.

Matt Curtis

Sharon. question Curtis and a Matt Hi, have it's actually I for on menu evolution. on your

think a done looking menu You've going simplification And about about the or products may be recently specific I wondering of private. was terms new menu you to evolving forward of were you in categories expand? while how you lot just

Michael Osanloo

disingenuously skews to It's some XXX that XXX skews the a were On during restaurant been, average, each great pandemic, there simplifying question. And took of out. we have yes, restaurants think menu. I we the took we XX out

improved quality was embarrassed. salads. you, I really chicken quality We it of and cold that sells taken sells there's our had We but -- we've our the chicken, tell a dramatically hard just sandwich. improve menu we’re had dramatically menu have items what that are evaluating guests constantly We dramatically menu We the them. guests We do like, out, good. our stuff don't I if wasn't improved salad if worked better. mean we is improved seeing like what the and items. improved fish of and -- we've the I’ll we Caesar to on have

for we every sense kind good amazing. on of things to ruthless And of much make that's that that spicy we priority replaced as for don't better, example think is we're that menu something is we perfect sure first look should them And And so single item the us I And chicken they else always a make our with that are we either much, better. that sandwich. our much or think be. as them is in

wasn't chicken that sandwich croissant have We broiled a just good. chicken a very sandwich on or

the spicy sandwich in brought actually chicken category awesome. It's chicken XX% that year-over-year. win was unique, up a amazing. It's it. all love which is And The sandwich, a our got we by pushed because And for because it. killed we is great it's chicken so guests spicy our if free really they And give pronounce ownable not I'll what want thing It's jardiniere We're a We does. be us. not like trying other it’s narrow to unique else. any you restaurant to it. on you jarred sauce Portillo's. company Portillo's correctly. that's everybody it's a can But like be to

menu There and that's the that our the And that's things a tease example hard culinary exercise And so the we at. I think I and strong on look I because we menu a taking call menu, it team of are with weak, is what Darwinian do. a perfect have kill innovation. our other

Matt Curtis

if little the also investments just then And I'm I public underlying guess just sounds it And about question wondering costs incremental you've the But continue. Okay, on to likely have company's going forward? are perhaps ability great. you some technology, can another G&A obviously, that the your leverage like is talked things G&A, company and for next training, of an basis, like in on to while.

Michelle Hook

incremental equity and have point you Yes, incentive think to stock of it's company years look also compensation plan. mentioned in based result in I and remarks, have at to a going some we're our quarter public prepared expense question. going to as when future come, the of changes to my And a the I modifications good G&A. to your we're incremental

going investing out, it's as to that through. the G&A you're two expect those the to around our strip see future. we And I'd folks at expense so do going we And come to need say but particularly in we be forward, the of run that once not training, leverage you restaurants not to the in move big buckets,

leaders. tell those when and So Michael definitely line we're forward going that you can that two to continue or move as to I future training we items. you committed restaurant out to pull leveraging make in are But investments I line you when

Matt Curtis

IPO. the congratulations Thanks terrific. much, Okay, and on very

Michael Osanloo

you. Thank

Michelle Hook

Thank you.

Operator

This today's conference. concludes

for at participation. we this your You your thank time, disconnect you may lines and

Portillo's (PTLO) 19 Nov 212021 Q3 Earnings call transcript