Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Portillo's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Barbara Noverini, Portillo's Director of Investor Relations. Thank you. ahead. go Please

Barbara Noverini

Good second operator. and to welcome Thank XXXX morning, earnings fiscal quarter call. our you, everyone,

You can Hook, at read in through Executive is the results we and President Officer. press on call Chief and Michael me Osanloo, our and announced release supplemental Financial With presentation Michelle investors.portillos.com. Officer; the today Chief earnings this morning

which management's and commentary unless about our call business begin Let's business constitute expectations not during conditions made and with on forward-looking not law. a performance. guarantees reminder this to are forward-looking market and of statements statements, financial update by these current We that results based undertake any are required future do future

may on our to XX-K and results report forward-looking include vary Form materially annual from discussions Form our factors cause these actual both Our that statements. XX-Q, of risk

call GAAP to comparable we reconciliations Today's the measures an be the measures. this to We not of morning earnings as materials you for measures. the to non-GAAP released considered alternative should these GAAP direct most

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

over Now Michael me call Executive to the turn Chief Osanloo, President Officer. let and

Michael Osanloo

profitability this of sales and achieved new XXXX. XX.X% level by restaurant-level six since under the proud second Thank XXXX have you highlight total level EBITDA our glad of you, earnings QX XX.X%. brand. of morning, to quarter and us we for call. revenue of durability Barb, We're with We delivered of grew that restaurants that and restaurant the good adding everyone. generated to I'm another double-digit report We quarter of our margins weight even growth, results

-- continue moment. have. the walk this drivers will momentum that positive detail main a To But let first, me our sorry. through Michelle performance financial of we this in

overall our contribution First, we their performance. class restaurants feel XX financial to about our and of great

year-to-date already expectations. Colony, happy early, done class know year-to-date, this restaurants a underwriting And lot The has about While restaurant an continues but million annualized That's That's in Texans. to our sales. it's still That's feeding lot of I not number. over a a talked $X.X outperform this we've number. of

Tucson our mature Schererville, emphasize both restaurants, To trajectory, deliver execution for generating we so and comparable cruising, Chicago guests. Indiana Gilbert weekly and this sales continue and an AUVs. that quality outstanding like already heavily average are to positive team generating Arizona and is members we experience

exciting have lower top line. we to tend margin of invest great early that ensure XX's class overachieving That's a the lighter restaurants the because to expected. has operating to drag that New both really the and strength additional on than on is margins performance. testament But they're of the resources that what's been fact class

grew because Which brings core. in an we've long-term me Michelle you single-digit But low we that sales the that's in to strength comp to the second our algorithm. signals, a our in X.X%. for single-digit delivered mid right quarter, of economic comps the same-restaurant we point, minute. have environment target earned decompose the mixed will been sending my growth next grow In in against

guests to offering confident for they right the are lot in experience greater guests where when fluctuations. is because even feel food lighter. our turn, guest thrive delicious, our overall for us are our a when allowed focus accuracy, engaging empowering the sustain to we're speed These team serving Our satisfaction, guest highs to serve and members, choosier are perception. restaurants consumers economic for We're members spend pinched that money weight feeling us team in in multiyear experience This service, metrics has and way in a great consistently staffed, their wallets at by about high-quality point. and price fully metrics key value of to like carry amidst prioritize great a environment an experience the importantly,

actively Finally, saw commodity this momentum. initiatives to we've restaurant in improvement. help implemented exposure, been strategic margin level locking rest the ride. and two One, us maintain this our quarter, prices appropriate managing when letting we continued We've in

expect continues continue unlocked portion as the to that commodity some benefit our margin ease. rate of to of basket from We inflation

displays we Chicagoland labor across goals. and that XX this efficiencies and changes remodels generating of restaurants relocated drinks. meet XXXX quick our Second, These of the margin example already grab-and-go bowl, XX us this capital-light system. that improvement of feature year. down helping planned One are continue legacy real is the self-service to and a operational hunt for involve Kitchen Kitchen X/X We've These salad initiative. fountain retail our conversions efficiencies completed we

class XX smarter online merchandising. is see of and doing we from This about just restaurants efficiency. also sales it We're initiative Kitchen not beverage And would, come in cost is product everything just in you'll better. incremental them builds the more But the as hoped XX. retrofits look new and and of frankly, seeing ongoing

our wage of for you of typically highest we the with heavy restaurant be to restaurants Now the on have that, will is the margin for couple recently We year increases the seasonally remain and our committed margin full remind me implemented quarter, and QX annual let XXXX. horizon. year a year-over-year that openings. headwinds improvement of Despite we margin the remainder

the about class of new restaurants talk in Now XX. let's the opening

new to out Central pickup to we'll As of Chicagoland, will a one of the in in Sunbelt, Florida. Worth restaurants XX announced scale. bulk efficient the Illinois, open class Arizona and three Rosemont, three in reminder, in we location Dallas-Fort the in markets achieve one market, second in be build that The continue our including we've Portillo's where

Metropolitan our Queen in area. marks Phoenix Creek Arizona in the sixth For example,

progress. Florida of recently we September expanding restaurants visits DFW plan in XXXX which These restaurants the feature actively of quarter. announced Development in footprint also We'll class fourth with the market that market. And Arlington, and are out the eight in we'll very in we're round two and XX and the location Day further in Fort our actively site XX. the Clermont, We're open more underway, QX class And happy during which We Central with a rest priority. is one to clear on Worth. Allen develops building

a have do the deliberately successful during ideal XXXX in into this XXXX. restaurants seasonally us earlier quarter first period, ninth and for it's but to the of We open busiest will pace tactic with very our not that out Operationally, pipeline, year. Colony we The was this restaurant

in environment cash all It is growth And All profitable of an reinvest is told, successful flow remember, economic while more growth solid. delivering we're uncertain Performance allows core growth. restaurants. us new our our navigating to fund building to our self-funded. and

it over Michelle. With that, let me hand to

Michelle Hook

we strong top revenue in increase attributable an compared new was the second of XXXX X.X% growth. was QX, quarter, due and which $XX.X decrease XX.X% Same-restaurant In to in XXXX. Michael. increased of $XXX.X transactions. million, restaurants increase revenues an XXXX Revenues sales X.X% line to of were average same-restaurant quarter you, This saw Thank the of Great. sales. during or in opening and reflecting primarily million a check X.X% the in increase increase an in to our and second

higher offset change prices, by The partially an X.X% mix. menu increase in approximate was in by a driven average check

to cannibalization expected be We restaurants. of from experiencing quarter the are opened this impact estimate We points. XX our basis approximately recently XX to some

and new more we short-term this is build occur. restaurant very expect to and worth attractive in additional cannibalization. margin well locally some of year, revenue do The cannibalization Illinois the As the we incrementality

our in line algorithm expectations, low Total delivering of revenue revenues we remain our are high on to and growth. long-term to with committed single growth double-digit

from an of prices. XX.X% due Food, XXXX our the by decreased to packaging revenue revenues XX.X% delivery in XXXX. as partially of in primarily commodity quarter increase a to costs beverage second and in This and third-party a in commissions, quarter of lower the second increase percentage offset X.X% was

inflation to the estimate year full commodity back that commodity overall and inflation ease for will in the half expect year. We mid the single-digit continue of

basket of for in pricing fiscal remainder have the XXXX. XX% We on of locked commodity our

XXXX partially the revenues up to prior rate period. offset a in XXXX year-to-date as by higher investments driven increases incremental members, and XXXX. quarter were increase in our was hourly in increase compensation in from of revenue. utilization second versus up XX.X% our in XX.X% primarily the including variable-based of This labor by second the quarter Hourly of year of Labor team quarter and the and increased percentage labor rates second X.X% the X.X% quarter-over-quarter,

quarter, third compelling a make providing did additional and for package. to the compensation in committed remain the and wage currently we In members estimate investments year. full We our labor benefits inflation team fiscal single-digit mid

of opening was million repair operating an restaurants. higher the expenses primarily due second of Other and XX.X% to and credit our fees credit and as expenses drive-thrus increase insurance drove well expenses, This transition as XXXX. higher as year-over-year, utilities to transactions an card increase card $X.X increased in the cashless quarter in maintenance or in new

in expenses of XXXX driven increased by or $X.X million the restaurants and primarily XXXX. opening Occupancy XX.X%, new

of of As expenses quarter a revenues, occupancy XXXX. percentage second net the flat were to

Restaurant level in four is level quarter in adjusted in second the fourth top margin EBITDA opening million adjusted second margin Restaurant new to XXXX, the EBITDA the quarter to from of in level XX.X% second XXXX. were XXXX the $XX.X $XX.X of the to second Restaurant margins quarter increased XX.X% of EBITDA million adjusted compared XX.X% XXXX quarter restaurants the XXXX. which XXXX. quarters have of at the start. This of all of in lower two of on first profile quarter improvement a continued since improve

restaurant half continued large have on aforementioned and in factor EBITDA margin actions to guest planned focus operational combined the wage We investments experience of very our Our XXXX. our the margins efficiencies. new restaurant by strategic back do pricing this been pressured and with be a in adjusted level anticipate the openings improvement,

combat approximately menu and have adjusted a progress we by towards margins power we this believe improve we At as In menu pricing, to reminder, level pricing EBITDA we year. fiscal continue XXXX. by taken our increased if two beginning necessary. prices We X%. goal increases These to May, the prices restaurant of can cost January, increased On we have pricing use approximately still inflationary X%. for actions pressures

We the our and monitor environment will continue in approach forward. flexible remain and moving current pricing strategic to

value our Our a providing remains great focus for guests.

in quarter variable-based and by fees. increase professional quarter of and related in wages XXXX. of from This $X.X XXXX higher Our XX.X% million to licensing primarily and the G&A costs expenses higher second driven in increase XX.X% increased an second was the compensation,

the $XX full million We for to the estimating fiscal year. to are of million targeted $XX at range currently our high be end

Preopening activities X.X% to decrease in $X.X our due location million planned of to from the of XXXX. X.X% in the second of restaurant geographic timing quarter openings. quarter the to and expenses second related decreased was The XXXX new

million of adjusted the increase led quarter in All XXXX of of versus XXXX, EBITDA of the second $XX.X second this million an in quarter $XX.X to of X.X%.

was primarily an in expense our lending Below second offset revolver of XXXX XXXX. from million $X.X million rate by with by quarter the associated term of increase improved the year-over-year driven the EBITDA $X.X loan interest quarter was the partially line, of XXXX, and environment, facility. the This second interest rising increase terms

term have of was effective borrowings outstanding the we and $X end $X rate against the paid loan interest QX, of As on facility. million of third million the X.X%. quarter, our on revolver our the down million In currently revolver $XXX

Income million the $X.X of second the from tax decrease of in was second quarter a of million expense quarter $X.X XXXX, XXXX.

was the for versus Our quarter of second XXXX. quarter effective the rate in tax XX.X% XX.X%

in partially tax or the with taxable the rate of of carry ended A net Class by forwards, income recording million XXXX, by primarily share decreased quarter ownership, in an loss. offset the which our increases effective $XX.X We increase equity operating Our driven quarter second cash. versus loss of

growth We in will remain and available by and committed top be operating our Our our line and delivering flows cash. bottom growth healthy to XXXX beyond. to cash continue line self-funded

And your I'll with for time. to you Michael. turn it that, Thank back

Michael Osanloo

Michelle. Thanks,

excited know to we're have shareholders. of constituents, be I'd like our our how questions, grow Still, reiterate by Portillo's right delivering continuously our the and our brand, we of just team space. future. a may for growth with open XX-year-old white a about each earn to we but I company to to our guests Before am a core lot members, we

fun to country. that across find team our and so career they great our our valuable Looking growth incredibly of restaurants the development, important at these and members our food, the restaurants guests as in and restaurants well our quality open new the for Portillo's lens open It's of value fans vibrant amazing experience prices. through taste gained

share it earnings value. can't do drives and over, ultimately that that then opened to with get compounding development more XX. in strengthen And our well at which over growth. to our Day power, restaurants we shareholder all on again We Dallas September on wait New you

line Thank you. please let's turn Q&A. questions. And with to Operator, open that, the for

Operator

Blair. from comes the first with Zackfia question Sharon the line And Instructions] of [Operator William

Sharon Zackfia

Michelle, development. down to the box. wait back come share can Chicagoland? out? Or to cost cannibalization, And And of XX expect the ramp do on September? level would on you a to I progress year until ways kind the comments then that Is as to considering is kind wanted know made about kind the on, a bring I that goes or where is working anything that the stick that we is to points something, basis to the to XX of you team of we about there have of good

Michelle Hook

No, good question, Sharon. Yes.

So I'll with the start prototype. new the question restaurant on

So Michael mentioned XX. Kitchen

towards of of we're the part that's as restaurant So the future. what calling we move evolution

of of which new restaurant representing will Chicagoland And is so builds future said I the And part those. the elements you'll short as Class think have is we're true, that see the of term, in what the then in Michael XX some restaurants. of

we've we then the some term we move that do mentioned expect again, future, as at both more with in which, will in And it's terms short of prototype you so forward. Development And we efficiencies share before, Day. the is kitchens, and as restaurants, those in smaller

So you with then. more that, and we'll share whole tight for

three from number, that the come good a think I the of I more because Sharon, as year, of come you'll impact, for this then XX, Chicago later And of pretty a see part the on. that's Class online standpoint, think, as cannibalization restaurants,

XX% now, XX% And number in the so term. near the a for fairly use decent to right to is

Michael Osanloo

reiterate happens point, in mentioned. think some And the Sharon, scale and where let on really I Michelle markets only just that it have the But density. we me cannibalization something

a that bump is it's really smart of margin for little little incrementality So, in cannibalization. worth I right? and the cannibalization, so on the well revenue, bit But Chicagoland of think Arizona. it's short-term The doing the that attractive incrementality

Operator

question Barish next line comes Jefferies. the Andy of the And from with

Andy Barish

margins. level the half commentary wanted set on Just to around second

you us we're little XQ levels. maybe a seasonal sequentially can color, bit Michelle? more a But I contextualize you give more move down know can If highest the expecting from year-over-year, or that

Michelle Hook

can to made and for last COGS think, that I But -- Yes, in tell that we Michael where help on both and you as see I see saw -- get high watermark QX, you the don't contextualize you you Andy, of we're know mentioned, margin the year, the the labor, And going. I happen we similar given what to to margins guidance. we get I comments year. this don't as want want will to this.

will I wage little expect come saw then So those you'll increases full because through and midway into as increases us that see to highs get we July. QX, put the don't hit impact we in bit that we wage investments the in have in a QX impact QX the QX of the of made into definitely we and

a not And so it's QX. impact full in

the back So pressure QX. in the see labor half where you'll come that full in is of on in line primary the the you'll year. see through points impact And that's come

Andy Barish

to Got better expected. around which terms the on purely you costs back new in doing you're than top the able cover inefficiencies, your circle line it have so extra opening you. that anything Or exceeding is really those to And also differently of is been then some restaurant just opening? expectations opening the restaurants? Are of wanted

Michael Osanloo

to Yes. the It's answer of that. all is, lot yes -- a

general, in XX line the through exceeding top flows mean, -- marginal -- expectations the So is on the our really Class there's certainly the element, well. I there's revenue an certainly of and

lot and steady faster. NRO open that's done get allow restaurants describe us to things So I our what how new we've But processes, differently in operations of obvious. as a to which we

pulling are more more training period more shorter of quickly out efficiently themselves. a resources restaurant bit the time. extra much of teams We're little are we So the because are there a that and for smarter, running capable

additional openings, have restaurants turning it. thoughtful to opening, so gone are those channels under on able their from the which to steady being away We about doing And bang get handle team until very big huge state legs them. more allows really we're

year well, restaurant off-premise, the recall, Orlando, it. did because we of needed example, off-premise get under not performing may like in its was for turn to channels -- a You legs the for restaurant the any on

contribute And profile things all early. that -- to so those margin improved an

Operator

question comes Sandler. Brian And from from line next Piper the the of Mullan

Brian Mullan

could just that that which said, you I to perhaps traffic. think a was you about count you've hoping way I better stats disclosing, speak entree been is to think

actions in your primary somewhat related speak now any weigh the like can yet you front on taking remarks, in just decision? And price pricing do you that, you any as terms and the to of additional from it year. minds considerations to center sounds the decided the haven't balance that prepared towards are of right But

Michael Osanloo

Yes.

the is really actually of to transactions. So getting mix close entree combination and count the

-- they're it's around So both three-plus percent. negative

stabilizes, component. think just cleanest channel I we're But and quarters, fact, which transaction combination that we number the first shifting So that. likely almost -- and stable mix. It's say three not that aside, have we're the our aberration better I'm the so that lapping quarter would about we're Michelle alarmed some talk as And and on, transaction actually on seeing to the mix. think last standardized in I more of mix of Brian, in trends the of transaction by now that probably the

So reasonably that. we about feel good

Michelle Hook

Yes.

seen saw last back this combined then mix the of know, going and you improved actually in into because what in of we to transactions I transactions as it think the and is. QX of going year. throw and were we over entire year obviously, QX Brian, you at industry, which, to Omicron transactions. macro improved point, when We've the QX I and But mix look Michael's rolling is environment when combination aside

that And look Michael like at are satisfaction business, accuracy, those look a of metrics us trends point, where scores, is all the when fact the like mentioned, good, really for which guest going. the of Michael's we to service, perception, underlying So we value indicator. speed those order think we I leading which

So about the business. we good feel

And of about what drop the year. October. do beginning we QX then on pricing on to to of We know made we're the pricing going at the off that going have front, remainder no decisions in X.X% that's in the have do yes, we

to have our so -- on I we're And there. mentioned, we flexible decisions we'll as no in remain we'll going But what made do decisions.

Michael Osanloo

reiterating. but and worth vis-a-vis consumer the Brian, getting of Michelle alluded competition. We -- are we've metrics really we satisfaction We're we're gotten. think it's with some pricing Yes. good where this, with still on to And I guest scores about our our feel best getting ever

terms In total great scores of getting we're and accuracy importantly, on of speed service, value perception. guest satisfaction, very

really that's So important.

most And most casual we're how bundles chains, seven $X than constantly of $X, our with their popular bundles. we're compare restaurant most high-quality from monitoring less different a bundles six, to in popular competitors' fast suite popular and $X anywhere

where I increases, So commodity have feel we we And take. we great of prefer we're not to be, we're if -- well and feel about we because to to pricing like or that. that take needs -- labor But power do we priced. have still if we positioned

Operator

next And from Senatore Sara the with of Bank America. line question the comes of

Sara Senatore

follow-ups, Couple if I may. of

the The investments. wage first on

labor So over as at have the beginning investments? have rather understand, so, of that? those And with the just increases if the recently please. of being Just some raises, that's those question, the the trying prompted more, maybe year like kind what and then first time more one just unexpected things to decision may may make -- to were I of on continuous versus or opposed to decided consistent

Michael Osanloo

across some our wage more increase The care And we continued of make it good Sarah, veterans. have members. air. up We minimum newer a years. out little complicated previous country, always of of than a saw to to and those we some the that contemplated. between our of team Okay. we differences were it little maybe a was to -- wanted roll the the timing tightening was in as no, bit taking sure wages veterans are And

XX, that appropriate so And XX the members, us relatively cetera. very we a who've raise we're wage we're and to team dollars tend of through be -- an that process been flexible, allocating veterans getting et went with so productive, years, they for thoughtful great XX,

it all that's So was.

percentage not standard peanut so the spread And a it's butter, across like board. increase X

double-digit saw weight percent Some people increases.

to it Some saw people took And just field. communicate a bit and to implement single low digit. time the little of

Sara Senatore

to I mix you And the Got then saying clarify it. were just plus what about transactions. wanted

that maybe So want both exceptional X.X% you of to the that were this more of strong. is sense negative the gets about the or characterize do relative quarter. But and entree would pricing, entrees. To in you Omicron. see I context the value negative but higher, Just those that your numbers price losing as those, also understand your declines is anything suggest it, of pricing think guess, trying then little have still between dynamic thought negative? being bit to the however you potentially on-trade I point, very XQ you talked a count in kind similar

Michelle Hook

Yes.

I Michael Sara. think this, mentioned

continue to As to value right, benchmarking we look continue be it multiyear our and bundles. highs we those scores, see the at

And are as, perception sign amount other lot so We're And are those too brands and decent and of not pricing those look brands pushback carrying scores. a seeing value that doing. of there's we what a at guest monitor price. see and that a we of pushback over do scores, satisfaction I

like So respect. in line from we're I approaching of terms that of how feel don't pricing we're out

lower And some to about the lower we've seen transaction, we've per is generally is attachment talked orders. component, items mix which of the

so continue our continue say, cheese the that action. when where than in we see you of sauce, category, of the pricing I would look see some We fries, things macro environment, nature. to to that I'd size say, of more the impact, at That's

Michael Osanloo

business think we of your at we when of we a I We but satisfaction. it. lot the confidence guest gives we're of business, I I a everything look the our good that at to execution and at from indicator question, we're be our mean, sound is on path. that we at want don't are look us trends underlying -- how Sarah, leading look underlying that look Everything concerned? glib, would doing a And a

Operator

question with from line the of Guggenheim. the comes And next Gregory Francfort

Gregory Francfort

a got couple of I've lists.

-- know just XX classes, are in is guys but little than smoother of that up, I -- is dragging of much last year. margins be year is how this How unit might to much I it's like that terms or open year XX%, the one versus -- first XX%, restaurants you that think, you have a what this steady guys versus maybe The more XX% this XX the growth? state and going

Michael Osanloo

Yes. Greg. I right, the talk the that question. don't eight XX have it's very actually number which this we is the from class, so will what a and we think opened we year, -- about like for think, from four a number, It's way, I us. of great I Class high by XX number, mean and this have with you're hangover the

at restaurant, obviously, brand-new especially And margins you a to open tend when steady-state restaurant, when in be six look you margin a general. right, lower the to months, they than first our nine

bit a that a a that revenue, is seeing be a to restaurants margin steady So much up historically. to we how just what we it drag. provide how need as of in these much do, better they're because of lot there are to A open, does support because but state. tend not have executing also lot little we get of as how is just overachieving on we We're we and quickly

we've think that quantified number. don't I So

Michelle Hook

have No, No. not. we

Michael Osanloo

undeniable we months But new not the shaking their an drag her call don't so X had bad of restaurants in it's first, existence. thought. But to there's head as as with Michelle And margin vigorously, XX it, try.

Gregory Francfort

us know want Okay. to thing market the turnover you in what Great. stands, -- seeing -- maybe And where I else or don't critical it, the frame what's just you're you labor that? update on can but how just on

Michael Osanloo

we points at Yes. look, from percentage if well. you standpoint. there's perform black the to box management probably continuing standpoint, associated costs to points hard We we're and especially we're a exceptionally look, -- Obviously, probably hourly with versus better get and We're an else us, better XX, -- XX like another -- competition, you everybody versus look XX it, turnover. elevated on percentage clear XX

cetera. don't hire cost, when doing spending things, just to quite aligned aren't people, out more lost But et know even like You're to we're with productivity, help probably new soft money people they there's each how other. who

huge to turnover hard to a sure be we're important continue engaged, a make for continues work us, that. a workforce tactic maintaining and initiative very, doing very we'll very improving to highly happy is us, So for

Gregory Francfort

maybe the just, I in me year. opening any you're you might you Joliet box? new the is different? small And smaller, it's from think to Can last another talk one this for you're Just up the later footage And be like the what drive-thru, I what about think changing Joliet, box Michael, format? is taking changes square

Michael Osanloo

the car in park and It's right near is yes. all hotel services is The Yes, a dining for O'hare a hotel. new one at Rosemont, which where large front Illinois, just outside of It's O'hare. corridor.

We But excited We're success. before, being as it. So It's it's kind exceeding of location. great overbuilt think have Joliet, a probably we I've room enough a mentioned the fantastic we up it. not would love coming about super describe Joliet build. people, expectations. wanted people themselves food identified I about who for improvement did as We to walk in inside. probably continuous everything we pick the our didn't to

So we've tweaked it.

very, have kitchen, should a little generate it's plus We're it a revenues. smaller still cost to and it less to should still a bit build, smaller size going very, footprint. a It's

it, excited we're So Greg. about super

still. have no But I the think I doubt better operational we doubt And Version we at a X.X make we than version will produce have -- and a be functionality that be much no it's Portillo's be think place can pickup. I that better will Joliet X.X them. it will of ease. in mass then might I where of terms

Operator

with next question the Stifel. the from of And comes Chris O'Cull line

Chris O'Cull

question site? related development selected follow-up missed is they projections the a on And cannibalization Company's with line if I strategy. had in question a and to I then apologize but I when of level the cannibalization this, the

Michelle Hook

introduced in Indiana where we we which in put Yes, we to place, Yes. going a cannibalization, was we've as that. bit and talked this all And those some have of of place, restaurants are and be level is that put why this yes, that's Chris, we've I seeing in three you knew cannibalization. we little year about Gilbert later And line. that, But this Illinois kind Schererville, as we there knew we're understand to online before. make we do coming concept, expect of sure wanted as

comfortable it that that, and is incrementality Michael's point to going was generate well absolutely revenue clearly we're before, However, to the worth with expected. we're the And very of that.

Chris O'Cull

wondering Okay. locations wondering recent if drive the the Michael, of cost to of rethink like higher I'm obviously you that seem it development backfilling brand more necessary And is but I new mean, the has build, the to, in high-profile I'm these -- allow if openings building new volumes, markets pursue strategy. to with reconsider, sooner? doesn't awareness -- more which really may then, success I you new Company's just caused guess,

Michael Osanloo

business I that. achieve undeniable here's local think our benefit scale. that's flip for we an of side the to a when I us. great challenge There's mean,

two that example, the eight restaurants restaurants in benefit improve shared by metropolitan So bottom on to you the where getting particularly to area, a with --- Arizona, six, going line. from seven, We've just four see

Michelle Hook

had basis XX We points.

Michael Osanloo

Yes.

XXX basis Chris, two to improved we four margins in Arizona. going, Just restaurants, points

opening first et to challenging when in new So operational getting open, to -- for does cetera. market, move to in scale particularly benefit is undeniable a us, markets. the execute, there's There's also new and a you're a to market it density a in an challenge to

derisking how invest investments And so that and we're in making we sure those really work huge out well. money believers

doing Colony. new year the that built one exceptionally Dallas. essentially we It's well. year. love market the is This cadence was I our So fact every

three Feel here the of half that. DFW. have in online in coming great the second We more about year

that said is going openly Houston we've think cetera. we're et Houston. level still pretty away, requires I It's different of next geographically, Texas, year, resources, far market, very into but different a

possible. as high and us expectations margin as very and quickly density keep -- those two think that And that both in to so achieve internal markets new get a entering restaurants from I maybe year one, building profile, revenue to our a soon viable so it's for very given

Chris O'Cull

catering then one opportunity in the think channels. I'm could Okay. prices if channels just what channels raise I'm kind be just wondering if us may more different to you're several with lastly, sensitive you of price? is. the in or or to of curious be And benefits drive-thru maybe the pricing that And pricing of in-restaurant restaurant would less sales just menu I share other having taking

Michael Osanloo

Yes, it's question. a great

think so I great a that's And we question. do when pricing,

Let do me explain how we pricing.

is. all, pricing are of of those what pricing eight we number tiers. and market have of at cost pricing First reflection different a local that We're structure tiers, a tiers

has, -- municipality $XX it's at wages wages. a a minimum municipalities that's for might have if different structure minimum $XX, to cost going have than hour, that a different say, an cost So us different

there. differently price we So

When like channel May did effectively. X% across get we we in We don't item for X% we and by it, price we and wasn't the carefully price price, the by can we board. do butter and peanut look spread and where very go

third-party there's delivery, to how percentage price and catering We're the those we a in-restaurant situation gap recently, experience. we're one we third-party big between priced to price might are just said standpoint look, we our So get going not that, two from price x pricing pricing. via we We catering and of where delivery. in

thoughtful make careful by and by very is look to and way. pricing to how at we're So by least Did sense? line, it what product the impactful we pricing and need generate we that to get mix, the transaction think both about channel, that

Operator

UBS. comes line the the Dennis with next of And question from Geiger

Dennis Geiger

question, of, to maybe of et that new I to kind story much development strength reasonably your let's over learning up in some openings from sort the better. what sort you just efficient observed with it, of want of several much team you've on start a kind ramping cetera. of the if adjustments to has confidence means I spent the bit Michael, the even And to level, on adding forward, last been team how that even off know one as of story, the gotten could new and a go better you more But brand, higher addressing just better the and the Michele. time given make of call years it of sort the how a speak this. Michael have and openings those more lot and or

anything think development if to impact we on level, story. Just extra a there's as high at the add about that

Michael Osanloo

big you I is all Portilloâ€™s I'll is and tell GMs Portillo's sound targeting we're that's only to apple first this mean, opening now Yes. experienced motherhood one pie. for Those the things GMs. So all probably question, are we GMs. Dennis. a 'XX, a with of General couple the know we're that function. like restaurants But supposed ones The eight Great new experienced how open Portillo's experienced And an Manager. restaurants Portillo's deal, year, right?

experienced to the general about managers. to that running And team the our people. every experienced a manager. are the XX%, new an of I move or hourly can one who had understand is other XX% benefit assistant a five what them run our there members are general has That typical how year typical huge general And going Portillo's manager because of Portillo's also manager to supposed able this we're make knows to We restaurants, to a is that be. managers, XX% has assistant like, supposed supposed of restaurant you're one leadership culture a also They operate. has but to be six opening think is XX% and and restaurants operation what to have those smooth the not around things it's look you

We're a And promoted. know, that pipeline have of talent have to that's restaurants. you have from we've to opening tell we we now want them. to be would people thing worked and I biggest to pipeline derisk a leadership in single So experienced really training know that the those is we people -- hard

place. the programs have We training in

there's lifting the a last we've get that over done many So -- of -- been to over three position. lot heavy just really years us in or two

So big one thing. that's

fast to hour. be Well, very, When hour might very speed. you've casual We in worked a hour $X,XXX $X,XXX $X,XXX, or if an $X,XXX, on setting, train -- setting learned do busy a lunch frequently. QSR another folks at you'll Portillo,

out. train light our and react how buckle and pressure. how under teams so to in difference people change on we can handle They how ton And deal. out burned get don't quickly, I as of would other People a that a things don't now freaked and speed to big business, get done been it. That's the volume they it's then And little describe. handle a we've

opening open, NRO, restaurant needed we XX-plus can restaurants we've Our to three restaurants NRO new in open to. now heavily teams. with and we if invested simultaneously, geez, have bandwidth We theoretically

team we investment have can big the quickly to world-class open in, as as a sure make then a that that one to possible. a and parachute That's move on restaurant next

of -- successful more few are So, make we're months, then lot you, a I the think be sustainable likely it to derisk over. of you -- very I them doing examples an things much opening, make a you get of guests, first-time chance and get would that give those and -- first in a fashion. that Those things and sure three that one to win

really So months. well first important it's those three to execute

Dennis Geiger

of respect dynamics could the net potentially with high anything pressures you you pricing add that pricing of at effect Very on that. new to expected, relative appreciate margin sort Then additionally I wage helpful, that and some a could level, to of curious, opening sort again, to of some the the Michael. of come. spoke Michelle,

full of Just Obviously, of on expectations some putting is can numbers your on in the do to last to extent. prior high that level framing the But year year without could margins have versus up how margins maybe relative changed. we the this quarter? think you to net change -- how roughly speak anything you kind there math about quarter, it, on sort

Michelle Hook

Yes.

really, think think expecting roughly look full commodity we at year. the coming still I labor still year, labor, we full that about Dennis, it's inflation it planning I when We're mid-single the for right? the as I digits think, outlook, mentioned where for in we're on I thought was, mid-single digits

So I year in the commodities. say terms there's my don't all. the at outlook back outlooks on we the know of don't wouldn't of is a change the what would we some know say in of What in half I

of I but year, we mentioned, are locked there. the the with As some back still we're XX% half floating items in

we So some there. still got exposure

to year, take to look, don't it, to need lever move. want but say too, going that And price those because we're this have as be again we're costs pull we as flexibility that said we firm to input to going not Michael to not

here quarter to a move. little to change I think back in during we the a of have with happen markets going there's outlook rest first I the versus no half start the But But still unknown bit wage what's if no, on of my say in sitting the to year of fairly discussions. so year. And environment, the good would outlook there's the

Dennis Geiger

if more, I One helpful. Very please. may,

on You strength which metrics, satisfaction across in is a scores the bunch encouraging. commented of the whole

interesting one changes the day the off-premise I been on think other changing day the for Anything observation. changed. week, customer as it's versus any whether that's order of in items number observed else It's of you kind an part, maybe on only is of there delivery. commented I really of the behavior changes, questions. But behavior. appreciate

Michelle Hook

call Dennis. that I Nothing out, would No.

transaction. we and the we're I combined performance metric good at, items we when is again, feel to the seeing at look per and lower very as that. we're transactions Michael what at, industry before the where our compare of industry versus mix, called just look especially think with out the there we back-box And mentioned, when I still we whole, comfortable when we in a I about look feel we at think

So no, call nothing out. I would

Michael Osanloo

just said, the for but specific us. months like does last would little six seem bit that over reiterate really channels be I what have Michele more it a stabilized

last very level catering, drive-thru inside six like channel of movement delivery, we're over et little normal. some at of seems had new months. our the et very, cetera, mix It has cetera, So

Operator

next comes from line of with the question the Tarantino And Baird. David

David Tarantino

questions A couple here. of

metrics? recent we think there for what those Is half the I'm making I building we're to second First, you pricing think is back traffic be asking know and the on when models and anything to contribution mix your take of for really unusual our we assumptions that any year, didn't what relative really, our maybe about the year But think we about quarter about more. should here in if the Michelle, factor half as component. of the the for most would

Michelle Hook

X%, look X.X%. then mix transaction at the at higher, standpoint, QX so X.X% were price were so I we when we released QX, were around when in tell but we over pricing pricing just percent X.X%. X.X% I'd the the trends, aside, David, we -- combined I QX. In we expect you, today were bit of timing to of nine-ish were a numbers Yes, at QX And when the I'd we at based just 'XX, say say at versus little on from QX just the we took saw I trends, a look in again, the will QX, be

trends. those So getting call changes two, in don't four-ish all combine the of a you the I don't percent. it to half year sudden the those When any I extremely back see really see better. of environment

so me, seeing those on change material don't items a that been expect two I And in combined. to those trends we've line

pricing the think it, and already David, about then would So that's I know how you component.

David Tarantino

terms openings XXXX I the be I to into occur. like just year slippage year. then know again, a year and to it very the very Yes. of going year you'd is similarly had helpful. backloaded? And when seems have Great. spread ideally and in this on little question you evenly Or That's a guess, backloaded is more last across like backloaded some maybe this Michael, was extremely It development.

getting update loaded? on it the any So more progress even to

Michael Osanloo

about so fun not It's lie not going backloaded, be to to I'm this that. Yes.

have We for time for than this a this time years much ago year last 'XX. for 'XX 'XX pipeline better or did we two

that we're much the and pipeline working much, we're better So deals terms of finalizing. in of actively

-- 'XX. terms still than more 'XX not year We of or perfect timing. we ahead now the right But did of definitely way have the front this than of have game. in in still we're in will 'XX It half be more we for will we'll 'XX deals have -- signed

that extra lifting November not is first is prefer perspective, in 'XX December. very, open all November hope November, open just the I by an restaurants -- see my December December. and restaurants us It's our year. I prefer seasonally XX when for the very in we to But to are new of heavy ideally, new busy. in and to periods my them open of will any

hope goal my fervent this doing is we'll than 'XX, openings a that some the of lot my year. in better still not that's it's second by half is is have that. we're but So what Undoubtedly, XX, it that class

Operator

question comes next of the Stanley. Harbour the line And from Brian with Morgan

Brian Harbour

second what's comment think just food you kind the improvement more guess, better? side, generally, I on primarily in half of similar locked? And be food maybe, the Could do you in cost in there'd or fact,

Michelle Hook

Yes, Brian.

[indiscernible] be back of most the and the going locked of year. is beef beef our have to So line half on on what that we item in

locks and you some know, of But smaller our other have percent We beef some items. is XX-plus as basket. overall

We've most on year, back positions for of line So but mostly it's QX on the into 'XX, of the in flat is form. the lock come some of that that half the in, taken going item. to

so, And mentioned, rest the of year. as the XX% I

we're up feeling look saw QX, I in we paper can you when down good our -- there. but And saw half year, of you what We of so X.X%. QX in QX. as expect to digit. tapering the us commodities a sit the mid-single know, back -- inflation we to little from at that where was trend, about on and the down bit X.X% I that get to And

saw versus half to in for full back of a mid-single So I the tapering digits bit little do year. expect in the what QX the to us get we

Brian Harbour

Got it. Okay.

some the terms margin a kind new of stores drag from versus stores, there Just other the impact markets? is of less of of Chicago of in

Michael Osanloo

it's the stores already in a profile and with Chicago It's just because margin the point. very up have where place benefit. -- high Yes. opening opened a revenues up we great scale And they're

Chicago bit revenues why that's -- of So much those tend with margins. well they open and of restaurants are up because less a they And with worth be it better drag. margin up little to open higher is that cannibalization not

Operator

question-and-answer the queue, also are That and Ladies there concludes session. today's questions further the concludes in that gentlemen, teleconference. and no

your time. your and day. lines you You this participation, may at Thank for great disconnect have a

Portillo's (PTLO) 3 Aug 232023 Q2 Earnings call transcript