8 unchanged sentences
• Our financial condition and results of operations have been and may continue to be adversely affected by the COVID-19 pandemic or future pandemics or disease outbreaks.
−Removed: • We are vulnerable to changes in economic conditions, costs of food and consumer preferences.
+Added: • We are vulnerable to changes in economic conditions, increases in food and commodity costs and consumer preferences.
• We may be unsuccessful in opening new restaurants or establishing new markets and our new restaurants may not perform as well as anticipated, may not be profitable or may close.
2 unchanged sentences
• Our marketing programs and any limited time or seasonal offerings may not be successful and could fail to meet expectations, and our new menu items, advertising campaigns, heavy reliance on social media and restaurant designs and remodels may not generate increased sales or profits.
−Removed: • Incidents involving food-borne illness and food safety, including food tampering or contamination could adversely affect our brand perception, business, financial condition and results of operations.
−Removed: • We face significant competition for guests, and our inability to compete effectively may affect our traffic, our sales and our operating profit margins, which could have a material adverse effect on our business, financial condition and results of operations.
+Added: • Incidents involving food-borne illness and food safety, including food tampering or contamination could adversely affect our brand perception.
+Added: • We face significant competition for guests, and our inability to compete effectively may affect our traffic, our sales and our operating profit margins.
• Our restaurant base is geographically concentrated in the Midwestern United States, and we could be negatively affected by conditions specific to that region.
−Removed: • Damage to our reputation and negative publicity could have a material adverse effect on our business, financial condition and results of operations.
+Added: • Damage to our reputation and negative publicity.
• The digital and delivery business, and expansion thereof, is uncertain and subject to risk.
2 unchanged sentences
• Any prolonged disruption in the operations of our two commissaries could harm our business.
−Removed: • We face potential liability with our gift cards under the property laws of some states.
−Removed: • We depend on our executive officers and certain other key team members, the loss of whom could have a material adverse effect on our business, financial condition and results of operations.
−Removed: • Our inability to identify qualified individuals for our workforce could slow our growth and adversely impact our ability to operate our restaurants.
+Added: • We depend on our executive officers and certain other key team members, the loss of whom could have a material adverse effect.
• Failure to maintain our corporate culture as we grow could have a material adverse effect on our business.
• Matters relating to employment and labor law could have a material adverse effect, result in litigation or union activities, add significant costs and divert management attention.
−Removed: • Labor shortages or increased labor costs could have a material adverse effect.
+Added: • Labor quality, labor shortages or increased labor costs could have a material adverse effect.
• We are exposed to risks associated with leasing property subject to long-term and non-cancelable leases and may be unable to renew leases at the end of their terms.
1 unchanged sentence
• An impairment in the carrying value of our goodwill, indefinite-lived intangible assets or long-lived assets could have a material adverse effect on our business.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 2
• Natural disasters, unusual weather conditions, pandemic outbreaks, political events, war and terrorism could disrupt our business and result in lower sales, increased operating costs and capital expenditures.
2 unchanged sentences
• Our level of indebtedness could have a material adverse effect on our business and limit our ability to plan for or respond to changes in our business.
+Added: Portillo's Inc.
+Added: Form 10-K | 3
• We may be unable to generate sufficient cash flow to satisfy our debt service obligations or experience a downgrade in our credit ratings, which would have a material adverse effect on our business.
19 unchanged sentences
• If we fail to maintain effective internal controls over financial reporting, our ability to produce timely and accurate financial information or comply with Section 404 of the Sarbanes-Oxley Act of 2002 could be impaired, which could have a material adverse effect.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 3
General Risks
−Removed: • Our management does not have experience managing a public company and our current resources may not be sufficient to fulfill our public company obligations.
• Fluctuations in our tax obligations and effective tax rate and realization of our deferred tax assets may result in volatility of our results of operations.
−Removed: • If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
• Our insurance may not provide adequate levels of coverage against claims.
• Changes in accounting principles applicable to us could have a material adverse effect.
−Removed: • Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions that may be initiated by our stockholders, and designates the federal district courts of the United States as the sole and exclusive forum for claims arising under the Securities Act, which, in each case could limit our stockholders’ ability to obtain a favorable judicial forum for certain disputes.
+Added: • Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions that may be initiated by our shareholders, and designates the federal district courts of the United States as the sole and exclusive forum for claims arising under the Securities Act, which, in each case could limit our shareholders’ ability to obtain a favorable judicial forum for certain disputes.
• As a public company, we incur significant costs to comply with the laws and regulations affecting public companies which could harm our business and results of operations.
9 unchanged sentences
The mobility restrictions, fear of contracting COVID-19 and the sharp increase in unemployment caused by the closure of businesses in response to the COVID-19 pandemic, have adversely affected and may continue to adversely affect our guest traffic, which in turn adversely impacts our business, financial condition or results of operations.
−Removed: Even as the mobility restrictions were loosened or lifted, some guests remained reluctant to return to in-restaurant dining and the impact of lost wages due to COVID-19 related unemployment has dampened consumer spending.
+Added: Even as the mobility restrictions were loosened or lifted, some guests remained reluctant to return to in-restaurant dining and the impact of lost wages due to COVID-19 related unemployment dampened consumer spending.
Our restaurant operations have been and could continue to be adversely affected by employees who are unable or unwilling to work, whether because of illness, quarantine, fear of contracting COVID-19 or caring for family members due to COVID-19 disruptions or illness.
Restaurant closures, limited service options or modified hours of operation due to staffing shortages could materially adversely affect our business, liquidity, financial condition or results of operations.
−Removed: To protect the health and safety of our team members and guests, we implemented COVID-19 safety measures.
−Removed: We implemented enhanced safety protocols in all of our locations, temporarily introduced one-time use menus in our restaurants, and developed COVID-19 training covering risks and the protocols implemented to ensure safe operations for our team members and guests.
−Removed: We also launched a new mobile app for self-delivery to supplement our other third-party delivery platforms.
−Removed: Additionally, we increased spending on healthcare and team member bonuses as a result of the COVID-19 pandemic.
−Removed: We temporarily paid 100% of the employer portion of premiums for active team members and team members on voluntary leaves of absence participating in our health insurance program, eliminated the team member payment for a meal provided while working and distributed a $100 Portillo’s gift card to all team members.
−Removed: These investments decreased our operating income by an estimated $4.5 million in 2020.
−Removed: As a result of the COVID-19 pandemic and the closure of our dining rooms, we negotiated with our landlords for rent relief and certain modified obligations under our leases.
−Removed: Due to operating uncertainties, we modified the timing of new restaurant openings and delayed the negotiation and commitments for new locations, as well as delayed plans for remodeling existing restaurants.
−Removed: These changes have impacted our pace of business growth.
The extent of the impact of the COVID-19 pandemic on our operations and financial results depends on future developments and is highly uncertain due to the unknown duration and severity of the outbreak, including the potential impact of future COVID-19 variants.
−Removed: As of the date of this filing, all of our restaurants continue to operate, with dining rooms open.
−Removed: State and local regulations remain in place and new legislation is pending.
−Removed: Businesses that fail to comply with these regulations will be subject to fines of varying amounts.
−Removed: We are actively monitoring the situation and will adopt policies at the appropriate time to ensure we are acting in the best interest of our team members, customers, suppliers and shareholders;
+Added: All of our restaurants are currently operating in all sales channels.
+Added: We are actively monitoring the situation and will adopt policies in accordance with state and local regulations at the appropriate time to ensure we are acting in the best interest of our team members, customers, suppliers, and shareholders;
however, any failure to comply with, or difficulty maintaining staffing levels due to governmental rules or regulations may have a material adverse impact on our business, financial condition and results of operations.
−Removed: The COVID-19 pandemic or other infectious diseases may also have the effect of heightening other risks disclosed in this prospectus, including, but not limited to, those related to our growth strategy, our liquidity and ability to service our debt obligations, comply with debt covenants, access capital markets and other funding sources, changes in consumer spending behaviors, supply chain interruptions and/or commodity price increases.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 5
−Removed: We are vulnerable to changes in economic conditions, cost of food and consumer preferences.
−Removed: The restaurant industry depends on consumer discretionary spending and is often affected by changes in consumer tastes, national, regional and local economic conditions and demographic trends, including changes in behavior caused by the COVID-19 pandemic.
−Removed: In addition, factors such as traffic patterns, weather, fuel prices, local demographics, local regulations and the type, number and locations of competing restaurants may adversely affect the performances of individual locations.
−Removed: In addition, economic downturns, inflation or increased food or energy costs could harm the restaurant industry in general and our restaurants in particular.
−Removed: Our profitability also depends, in part, on our ability to anticipate and react to changes in the cost of sales, including, among other things, pork, beef, chicken, potatoes, bread, and produce items.
−Removed: Adverse changes in any of these factors could reduce consumer traffic or impose practical limits on pricing that could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Changes in the price or availability of certain food products, including as a result of the COVID-19 pandemic, could affect our profitability and reputation.
−Removed: For example, beef supply shortages during the second quarter of 2020—largely due to the COVID-19 pandemic—resulted in significant inflation in beef prices, and impacted our results of operations.
−Removed: While a portion of other commodities we purchase are subject to contract pricing and therefore have not been fully impacted by price inflation as a result of the COVID-19 pandemic thus far, as our contracts expire we may not be able to successfully re-negotiate terms that protect us from price inflation in the future or the portion not covered by contact pricing might increase unexpectedly, creating price inflation we have not planned for.
−Removed: Furthermore, we experienced higher commodity prices in the second half of 2021 and expect that trend to continue into 2022.
+Added: The COVID-19 pandemic or other infectious diseases may also have the effect of heightening other risks, including, but not limited to, those related to our growth strategy, our liquidity and ability to service our debt obligations, comply with debt covenants, access to capital markets and other funding sources, changes in consumer spending behaviors, supply chain interruptions and/or commodity price increases.
+Added: We are vulnerable to changes in economic conditions, increases in food and commodity costs and consumer preferences.
+Added: We are subject to volatility in food and commodity costs and availability.
+Added: Accordingly, our profitability depends in part on our ability to anticipate and react to changes in food and commodity costs and availability.
+Added: As is true of all companies in the restaurant industry, we are susceptible to increases in food and commodity costs that are outside of our control.
+Added: Factors that can impact food and commodity costs include general economic conditions, inflation, labor shortages, seasonal fluctuations, weather and climate conditions, energy costs, global demand, trade protections and subsidies, food safety issues, infectious diseases, possible terrorist activity, cyberattacks, transportation issues, currency fluctuations, product recalls, and government regulatory schemes.
+Added: Changes in the price or availability of certain food products, including as a result of the recent inflationary environment and the COVID-19 pandemic, among other things, have affected and could continue to affect our profitability and reputation.
+Added: While a portion of the commodities we purchase are subject to contract pricing, as our contracts expire we may not be able to successfully re-negotiate terms that protect us from price inflation in the future or the portion not covered by contact pricing might increase unexpectedly, creating price inflation we have not planned for.
+Added: Furthermore, we experienced 15.2% commodity price inflation for the year ended December 25, 2022 compared to the year ended December 26, 2021.
In the event of cost increases with respect to one or more of our raw ingredients, we may choose to temporarily suspend or permanently discontinue serving menu items rather than paying the increased cost for the ingredients.
Any such changes to our available menu could negatively impact our restaurant traffic, business and results of operations during the shortage and thereafter.
−Removed: While future cost increases can be partially offset by increasing menu prices, there can be no assurance that we will be able to offset future cost increases by such menu price increases.
+Added: While future cost increases can be partially offset by menu price increases, there can be no assurance that we will be able to offset all future cost increases by such menu price increases.
If we implement menu price increases, there can be no assurance that increased menu prices will be fully absorbed by our guests without any resulting change to their visit frequencies or purchasing patterns.
Competitive conditions may limit our menu pricing flexibility and if we implement menu price increases to protect our margins, restaurant traffic could be materially adversely affected.
+Added: Portillo's Inc.
+Added: Form 10-K | 5
+Added: The restaurant industry depends on consumer discretionary spending and is often affected by changes in consumer tastes, and national, regional and local economic conditions and demographic trends, including changes in behavior caused by the COVID-19 pandemic.
+Added: In addition, factors such as traffic patterns, weather, fuel prices, local demographics, local regulations and the type, number and locations of competing restaurants may adversely affect the performances of our individual locations.
+Added: In addition, economic downturns, inflation or increased food or energy costs could harm the restaurant industry generally and our restaurants in particular.
+Added: Our profitability also depends, in part, on our ability to anticipate and react to changes in the cost of sales of, among other things, pork, beef, chicken, potatoes, bread, and produce items.
+Added: Adverse changes in any of these factors could reduce consumer traffic or impose practical limits on pricing that could have a material adverse effect on our business, financial condition and results of operations.
Our restaurants are primarily located in high-activity trade areas that often contain retail centers, lifestyle centers, and entertainment centers.
3 unchanged sentences
A key part of our growth strategy includes opening new restaurants in existing and new markets and operating those restaurants on a profitable basis.
−Removed: From November 2020 through the end of 2021, we opened seven new restaurants, including new locations in Illinois, Michigan, Florida, Wisconsin and Arizona.
−Removed: Over the long term, we plan to increase our number of restaurants by approximately 10% annually.
+Added: From November 2020 through the end of fiscal 2022, we opened 10 new restaurants, including new locations in Illinois, Indiana, Michigan, Florida, Wisconsin and Arizona.
+Added: Over the long term, we aim to increase our number of restaurants by approximately 10% annually.
We must identify target markets where we can enter or expand, and we may not be able to open our planned new restaurants within budget or on a timely basis, and our new restaurants may not perform as well as anticipated.
8 unchanged sentences
Any failure on our part to recognize or respond to these challenges may adversely affect the success of any new restaurants and could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 6
Some of our restaurants open with an initial start-up period of higher-than-normal sales volumes, and our Restaurant-Level Adjusted EBITDA Margins are generally lower through the first 12 months of operation.
In new markets, the length of time before average sales for new restaurants stabilize is less predictable as a result of our limited knowledge of these markets and consumers’ limited awareness of our brand.
−Removed: In addition, our AUV and same-restaurant sales may not increase at the rates our existing restaurants have achieved over the past several years.
+Added: In addition, our average unit volume ("AUV") and same-restaurant sales may not increase at the rates our existing restaurants have achieved over the past several years.
Our ability to operate new restaurants profitably and increase AUV and same-restaurant sales will depend on many factors, some of which are beyond our control.
1 unchanged sentence
If our new restaurants do not perform as planned or close, or if we are unable to achieve our expected restaurant sales, it could have a material adverse effect on our business, financial condition and results of operations.
+Added: Portillo's Inc.
+Added: Form 10-K | 6
Further, our existing restaurant management systems, financial and management controls and information systems may be inadequate to support our planned expansion.
5 unchanged sentences
Our growth strategy depends on opening new restaurants, which will require us to use cash flows from operations.
−Removed: We cannot assure you that cash flows from operations will be sufficient to allow us to implement our growth strategy.
−Removed: If this cash is not allocated efficiently among our various projects, or if any of these initiatives prove to be unsuccessful, we may experience reduced profitability and we could be required to delay, significantly curtail or eliminate planned restaurant openings, which could have a material adverse effect on our business, financial condition, results of operations and the price of our Class A common stock.
+Added: We cannot assure that cash flows from operations will be sufficient to allow us to implement our growth strategy.
+Added: If this cash is not allocated efficiently among our various projects, or if any of these initiatives prove to be unsuccessful, we may experience reduced profitability and we could be required to delay, significantly curtail or eliminate planned restaurant openings, which could have a material adverse effect on our business, financial condition, and results of operations.
In addition, as our restaurants mature, our business will require capital expenditures for the maintenance, renovation and improvement of existing restaurants to remain competitive and maintain the value of our brand standard.
This creates an ongoing need for cash, and, to the extent we cannot fund capital expenditures from cash flows from operations, funds will need to be borrowed or otherwise obtained.
−Removed: If the costs of funding new restaurants or renovations or enhancements at existing restaurants exceed budgeted amounts, and/or the time for building or renovation is longer than anticipated, our profits could be reduced.
+Added: If the costs of funding new restaurants or renovations or enhancements at existing restaurants exceed budgeted amounts, or the time for building or renovation is longer than anticipated, our profits could be reduced.
If we cannot access the capital we need, we may not be able to execute on our growth strategy, take advantage of future opportunities or respond to competitive pressures.
3 unchanged sentences
It is possible such initiatives will not be successful, that we will not achieve our target same-restaurant sales or that the change in same-restaurant sales could be negative, which may cause a decrease in sales growth and ability to achieve profitability.
−Removed: This could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 7
+Added: Any such events could have a material adverse effect on our business, financial condition and results of operations.
Our marketing programs and any limited time or seasonal offerings may not be successful and could fail to meet expectations, and our new menu items, advertising campaigns, heavy reliance on social media and restaurant designs and remodels may not generate increased sales or profits.
11 unchanged sentences
This harm may be immediate, without affording us an opportunity for redress or correction.
+Added: Portillo's Inc.
+Added: Form 10-K | 7
As laws and regulations rapidly evolve to govern the use of these platforms and devices, the failure by us or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties and have a material adverse effect on our business, financial condition and results of operations.
11 unchanged sentences
Although we believe all guest and team member cases have been identified, additional cases may be reported and additional lawsuits or negative publicity may result.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 8
There is no guarantee that our restaurant locations will maintain the high levels of internal controls and training we require at our restaurants and some food-borne illness incidents could be caused by third-party food suppliers, third party food delivery services, guest take out or catered events.
6 unchanged sentences
The restaurant industry is intensely competitive with many companies that compete directly and indirectly with us with respect to food quality, brand recognition, service, price and value, convenience, design and location.
−Removed: We compete in the restaurant industry with national, regional and locally-owned and/or operated limited-service restaurants and full-service restaurants.
+Added: We compete in the restaurant industry with national, regional and locally-owned or operated limited-service restaurants and full-service restaurants.
We compete with fast casual restaurants, quick service restaurants and casual dining restaurants.
5 unchanged sentences
If these third-party delivery companies cease doing business with us, or cannot make their scheduled deliveries, or do not continue their relationship with us on favorable terms, it may have a negative impact on sales or result in increased third-party delivery fees.
+Added: Portillo's Inc.
+Added: Form 10-K | 8
Our continued success also depends in part on the continued popularity of our menu and the experience we offer guests at our restaurants.
9 unchanged sentences
As a result of our concentration in this market, we have been, and in the future may be, disproportionately affected by conditions in this geographic area compared to other chain restaurants with a national footprint.
+Added: For example, we experienced significant sales declines the due to Winter Storm Elliott.
+Added: We estimate that Winter Storm Elliott had a negative impact of at least 0.7% on our same-restaurant sales growth in the fourth quarter of 2022.
In addition, our competitors could open additional restaurants in the Midwestern United States, which could result in reduced market share for us in this key geographic region, which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 9
Damage to our reputation and negative publicity could have a material adverse effect on our business, financial condition and results of operations.
1 unchanged sentence
Any incident that erodes consumer loyalty for our brand could significantly reduce its value and damage our business.
−Removed: We may be adversely affected by negative publicity relating to food quality, the safety, sanitation and welfare of our restaurant facilities, guest complaints or litigation alleging illness or injury, health inspection scores, integrity of our or our suppliers’ food processing and other policies, practices and procedures, team member relationships and welfare or other matters at one or more of our restaurants.
+Added: We may be adversely affected by negative publicity relating to food quality, the safety, sanitation and welfare of our restaurant facilities, guest complaints or litigation alleging illness or injury, health inspection scores, integrity of our suppliers’ food processing and other policies, practices and procedures, team member relationships and welfare or other matters at one or more of our restaurants.
Any publicity relating to health concerns, perceived or specific outbreaks of a food-borne illness attributed to one or more of our restaurants, or non-compliance with food handling and sanitation requirements imposed by federal, state and local governments could result in a significant decrease in guest traffic in all of our restaurants and could have a material adverse effect on our results of operations.
9 unchanged sentences
A significant increase in the number of these claims or an increase in the number of successful claims could have a material adverse effect on our business, financial condition and results of operations.
+Added: Portillo's Inc.
+Added: Form 10-K | 9
The digital and delivery business, and expansion thereof, is uncertain and subject to risk.
15 unchanged sentences
If any third-party delivery provider we partner with experiences damage to their brand image, we may also see ramifications due to our partnership with them.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 10
We have a limited number of suppliers and distributors for several of our frequently used ingredients.
7 unchanged sentences
Contingency platforms have been developed to mitigate the risk in various cases including secondary supply, floor stocking arrangements, product diversification and inventory management.
−Removed: While we therefore believe that alternative supply and distribution sources are available, there can be no assurance that we will continue to be able to identify or negotiate with such sources on terms that are commercially reasonable to us or that the quality of the product from an alternative supplier is comparable to existing standards.
+Added: While we believe that alternative supply and distribution sources are available, there can be no assurance that we will continue to be able to identify or negotiate with such sources on terms that are commercially reasonable to us or that the quality of the product from an alternative supplier is comparable to existing standards.
If our suppliers or distributors are unable to fulfill their obligations under their contracts or we are unable to identify alternative sources, we could encounter supply shortages and incur higher costs, each of which could have a material adverse effect on our results of operations.
4 unchanged sentences
As a result, any prolonged disruption in the operations of any of these facilities, whether due to technical, operational or labor difficulties, product contamination, destruction or damage to the facility, limited capacity or other reasons, could adversely affect our business, financial condition and results of operations.
−Removed: We face potential liability with our gift cards under the property laws of some states.
−Removed: Our gift cards, which may be used to purchase food and beverages in our restaurants, may be considered stored value cards by certain states in accordance with their abandoned and unclaimed property laws.
−Removed: These laws could require us to remit cash to such state in an amount equal to all or a designated portion of the unredeemed balance on the gift cards based on certain card attributes and the length of time that the cards are inactive.
−Removed: The Company formed an affiliate in Florida, PHD Card Services, LLC that handles the issuance of Portillo’s gift cards, and the gift card breakage is recorded based on historical data on gift card redemption.
−Removed: The analysis of the potential application of the abandoned and unclaimed property laws to our gift cards is complex, involving an analysis of constitutional, statutory provisions and factual issues.
−Removed: In the event that one or more states change their existing abandoned and unclaimed property laws or successfully challenge our position on the application of its abandoned and unclaimed property laws to our gift cards, or if the estimates that we use in projecting the likelihood of the cards being redeemed prove to be inaccurate, our liabilities with respect to unredeemed gift cards may be materially higher than the amounts shown in our consolidated financial statements.
−Removed: If we are required to materially increase the estimated liability recorded in our consolidated financial statements with respect to unredeemed gift cards, our financial condition and results of operations could be adversely affected.
Portillo's Inc.
2 unchanged sentences
We rely upon the accumulated knowledge, skills and experience of our executive officers and certain other key team members.
−Removed: Our chief executive officer has been with us for more than three years and our executive officers have a combined total of over 140 years of experience in the food service industry.
+Added: Our chief executive officer has been with us for more than four years and our executive officers have numerous years of experience in the food service industry.
The loss of the services of any of our executive officers could have a material adverse effect on our business, financial condition and results of operations, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs, or at all.
3 unchanged sentences
Our inability to meet our executive staffing requirements in the future could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Our inability to identify qualified individuals for our workforce could slow our growth and adversely impact our ability to operate our restaurants.
−Removed: Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified team members to meet the needs of our existing restaurants and to staff new restaurants.
−Removed: A sufficient number of qualified individuals to fill these positions may be in short supply in some communities.
−Removed: Competition in these communities for qualified team members could require us to pay higher wages and provide greater benefits.
−Removed: We place a heavy emphasis on the qualification and training of our personnel and spend a significant amount of time and money on training our team members.
−Removed: Inability to recruit or retain new team members could also delay the planned openings of new restaurants and could adversely impact our existing restaurants.
−Removed: The inability to retain or recruit qualified team members, increased costs of attracting qualified team members or delays in restaurant openings could have a material adverse effect on our business, financial condition and results of operations.
−Removed: The COVID-19 pandemic has exacerbated staffing complexities for us and other restaurant operators resulting in a decreased applicant pool for all positions and ongoing staff call-outs and exclusions due to illness.
−Removed: The COVID-19 pandemic has also resulted in aggressive competition for talent, wage inflation and pressure to improve benefits and workplace conditions to remain competitive.
−Removed: Our existing wages and benefits programs, combined with the challenging conditions due to the COVID-19 pandemic and the highly competitive wage pressure resulting from the labor shortage, may be insufficient to attract and retain the best talent.
−Removed: Our failure to recruit and retain new team members in a timely manner or higher team member turnover levels all could affect our ability to open new restaurants and grow sales at existing restaurants, increase labor costs, compromise the quality of our service and have a material adverse effect on our business, financial condition and results of operations.
−Removed: Failure to maintain our corporate culture as we grow could have a material adverse effect.
+Added: Failure to maintain our corporate culture as we grow could have a material adverse effect on our business.
We believe that a critical component to our success has been our corporate culture and values of Family, Greatness, Energy and Fun.
3 unchanged sentences
If we cannot maintain our corporate culture as we grow, it could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 12
Matters relating to employment and labor law could have a material adverse effect, result in litigation or union activities, add significant costs and divert management attention.
18 unchanged sentences
These factors could materially adversely affect our business, financial condition and results of operations.
−Removed: Our business is subject to the risk of litigation by team members, consumers, suppliers, stockholders or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation.
+Added: Portillo's Inc.
+Added: Form 10-K | 11
+Added: Our business is subject to the risk of litigation by team members, consumers, suppliers, shareholders or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation.
The outcome of litigation, particularly class action and regulatory actions, is difficult to assess or quantify.
10 unchanged sentences
Further, if we enter into a new market with unionized construction companies, or the construction companies in our current markets become unionized, construction and build-out costs for new restaurants in such markets could materially increase.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 13
−Removed: Labor shortages or increased labor costs could have a material adverse effect on our business, financial condition and results of operations.
+Added: Labor quality, labor shortages or increased labor costs could have a material adverse effect on our business, financial condition and results of operations.
Labor is a primary component in the cost of operating our restaurants.
+Added: Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified team members to meet the needs of our existing restaurants and to staff new restaurants.
+Added: A sufficient number of qualified individuals to fill these positions may be in short supply in some communities.
+Added: Competition in some geographic areas for qualified team members could require us to pay higher wages and provide greater benefits.
+Added: We place a heavy emphasis on the qualification and training of our personnel and spend a significant amount of time and money on training our team members.
+Added: Inability to recruit or retain new team members could also delay the planned openings of new restaurants and could adversely impact our existing restaurants.
+Added: Although we have not yet experienced any significant problems in recruiting team members, our ability to recruit and retain such individuals may delay the planned openings of new restaurants or result in higher team member turnover in existing restaurants, which could increase our labor costs and have a material adverse effect on our business, financial condition and results of operations.
If we face labor shortages, such as in connection with a pandemic such as COVID-19, or increased labor costs because of increased competition for team members, federal or state unemployment benefits, higher team member-turnover rates, unionization of restaurant workers, or increases in the federally-mandated or state-mandated minimum wage, change in exempt and non-exempt status, or other employee benefits costs (including costs associated with health insurance coverage or workers’ compensation insurance), our operating expenses could increase and our growth could be adversely affected.
−Removed: As a result of wage pressures, our team members are all paid more than the applicable minimum wage in the area where they work.
+Added: Our team members are all paid more than the applicable minimum wage in the area where they work.
Increases in federal or state minimum wages or unemployment benefits may also result in increases in the wage rates paid.
1 unchanged sentence
If menu prices are increased by us to cover increased labor costs, the higher prices could adversely affect demand for our menu items, resulting in lower sales.
−Removed: In addition, our success depends in part upon our ability to attract, motivate and retain a sufficient number of well-qualified restaurant operators, management personnel and other team members.
−Removed: Qualified individuals needed to fill these positions can be in short supply in some geographic areas.
−Removed: Competition for these team members could require us to pay higher wages, which could also result in higher labor costs.
−Removed: In addition, limited service restaurants have traditionally experienced relatively high employee turnover rates.
−Removed: Although we have not yet experienced any significant problems in recruiting team members, our ability to recruit and retain such individuals may delay the planned openings of new restaurants or result in higher team member turnover in existing restaurants, which could increase our labor costs and have a material adverse effect on our business, financial condition and results of operations.
+Added: Portillo's Inc.
+Added: Form 10-K | 12
We are exposed to risks associated with leasing property subject to long-term and non-cancelable leases and may be unable to renew leases at the end of their terms.
Many of our restaurant leases are non-cancelable and typically have initial terms of 10 to 20 years, providing for four renewal options of five years each as well as rent escalations.
−Removed: Generally, our leases are triple-net leases that require us to pay our share of the costs of real estate taxes, utilities, building operating expenses, insurance and other charges in addition to rent.
+Added: Generally, our leases require us to pay our share of the costs of real estate taxes, utilities, building operating expenses, insurance and other charges in addition to rent.
We generally cannot cancel these leases, and additional sites that we lease are likely to be subject to similar long-term non-cancelable leases.
8 unchanged sentences
Any future failure to comply with these regulations and obtain or retain licenses could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 14
We are also subject in certain states to “dram shop” statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.
13 unchanged sentences
Goodwill & Intangible Assets in the notes to the consolidated financial statements for additional information.
−Removed: Changes to estimates related to our property, fixtures and equipment and definite-lived intangible assets or operating results that are lower than our current estimates at certain restaurant locations may cause us to incur impairment charges or accelerate the amortization on certain long-lived assets, which may adversely affect our results of operations.
+Added: Changes to estimates related to our property, fixtures and equipment and definite-lived intangible assets or operating results that are lower than our current estimates at certain restaurant locations may cause us to incur impairment charges or accelerate the amortization on certain long-lived assets, which could have a material adverse impact on our results of operations.
+Added: Portillo's Inc.
+Added: Form 10-K | 13
Natural disasters, unusual weather conditions, pandemic outbreaks, political events, war and terrorism could disrupt our business and result in lower sales, increased operating costs and capital expenditures.
9 unchanged sentences
If we are not effective in addressing environmental, social and other sustainability matters affecting our industry, or setting and meeting relevant sustainability goals, our brand image may suffer.
−Removed: In addition, we may experience increased costs in order to execute upon our sustainability goals and measure achievement of those goals, which could have an adverse impact on our business and financial condition.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 15
+Added: In addition, we may experience increased costs in order to execute upon our sustainability goals and measure achievement of those goals, which could have a material adverse impact on our business, financial condition and results of operations.
Risks Related to Our Indebtedness
1 unchanged sentence
The total principal amount of debt outstanding under our credit facilities, excluding finance lease liabilities and financing obligations, as of December 25, 2022 was approximately $322.4 million.
+Added: On February 2, 2023, PHD Intermediate LLC, a Delaware limited liability company (“Holdings”), Portillo’s Holdings, LLC, a Delaware limited liability company (the “Borrower”), the other Guarantors party thereto from time to time, each lender party thereto from time to time and Fifth Third Bank, National Association, as Administrative Agent, L/C Issuer and Swing Line Lender entered into a Credit Agreement ("New Credit Agreement") with Fifth Third Bank, National Association, as administrative agent, and the other lenders party thereto which provides for a Term A Loan ("Term Loan") in an initial aggregate principal amount of $300.0 million and initial Revolving Credit Commitments in an initial aggregate principal amount of $100.0 million (the “New Revolver Facility”).
+Added: The proceeds under the Term Loan and New Revolver Facility, along with cash on hand, were used to repay outstanding indebtedness under the First Lien Credit Agreement and to pay related transaction expenses.
+Added: Subsequent Events for additional details.
Our i ndebtedness could have significant effects on our business, such as:
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• placing us at a competitive disadvantage compared with our competitors that have less debt;
+Added: Portillo's Inc.
+Added: Form 10-K | 14
• exposing us to risks inherent in interest rate fluctuations because our borrowings are at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates.
2 unchanged sentences
We may not be able to refinance our debt or sell additional debt or equity securities or our assets on favorable terms, if at all, and if we must sell our assets, it may negatively affect our financial condition and results of operations.
−Removed: Pursuant to the First Lien Credit Agreement (as defined herein), if the revolving credit exposure exceeds 35% of the aggregate amount of revolving credit commitments as of the last day of any fiscal quarter (which calculation shall exclude letter of credit obligations that have been cash collateralized or backstopped in full and obligations with respect to other letters of credit in an aggregate amount not to exceed $5.0 million), the Borrower (as defined herein) must maintain a ratio of consolidated first lien net debt to consolidated EBITDA (with certain adjustments as set forth in the First Lien Credit Agreement) of no greater than 6.50 to 1.00, to be tested as of the last day of each fiscal quarter and determined on the basis of the four most recently ended fiscal quarters of the Borrower for which financial statements have been delivered pursuant to the First Lien Credit Agreement.
−Removed: Events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy the financial covenant.
−Removed: We cannot assure you that we will satisfy the financial covenant in the future, or that our lenders will waive any failure to satisfy the financial covenant.
−Removed: Further, a portion of our indebtedness bears interest at fluctuating interest rates based on the London interbank offered rate (“LIBOR”), and the financial authority that regulates LIBOR has announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2023.
−Removed: If LIBOR ceases to exist, we may need to renegotiate certain loan documents and we cannot predict what alternative index would be negotiated with our lenders.
−Removed: As a result, our interest expense could increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be adversely affected.
+Added: Pursuant to the New Credit Agreement, the Borrower is subject to a leverage covenant and an interest coverage ratio, together the Financial Covenants.
+Added: The leverage covenant requires the Borrower to maintain the consolidated total net rent adjusted leverage ratio greater than 5.50 to 1.00 with steps to 5.25 to 1.00 on or around June 30, 2025, and 5.00 to 1.00 for each period ending thereafter, to be tested for the four consecutive fiscal quarters of the Borrower's most recently issued financial statements.
+Added: The interest coverage covenant requires the Borrower to maintain the consolidated cash interest coverage ratio to be less than 1.75 to 1.00 with steps to 1:85 to 1.00 on or around June 30, 2025 and 2.00 to 1.00 or each period ending thereafter, to be tested for the four consecutive fiscal quarters of the Borrower's most recently issued financial statements.
+Added: Events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy the financial covenants.
+Added: We cannot assure you that we will satisfy the financial covenant in the future, or that our lenders will waive any failure to satisfy the financial covenants.
We may be unable to generate sufficient cash flow to satisfy our debt service obligations or experience a downgrade in our credit ratings, which would have a material adverse effect on our business.
4 unchanged sentences
Our failure to comply with the covenants under the credit facilities or to have sufficient liquidity to make interest and other payments required by our debt could result in a default of such debt and acceleration of our borrowings, which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 16
Our debt is rated by credit rating agencies.
2 unchanged sentences
A downgrade of our credit ratings could, among other things, increase our cost of borrowing, limit our ability to access capital, result in more restrictive covenants in agreements governing the terms of any future indebtedness that we may incur, including restrictions on our ability to pay dividends or repurchase shares, or require us to provide collateral for future borrowings, and thereby adversely impact our business, financial condition and results of operations.
+Added: Portillo's Inc.
+Added: Form 10-K | 15
Risks Related to Our Organizational Structure
The interests of Berkshire may conflict with our interests or the interests of the holders of our Class A common stock in the future.
−Removed: Berkshire Private Equity engages in a range of investing activities, including investments in restaurants and other consumer-related companies.
−Removed: In the ordinary course of its business activities, Berkshire may engage in activities where its interests conflict with our interests or those of our stockholders.
−Removed: Our amended and restated certificate of incorporation provides that our directors and stockholders, including Berkshire, do not have any obligation to offer us an opportunity to participate in business opportunities presented to them even if the opportunity is one that we might reasonably have pursued (and therefore may be free to compete with us in the same business or similar businesses) and that, to the extent permitted by law, such directors and stockholders will not be liable to us or our stockholders for breach of any duty by reason of any such activities.
+Added: Berkshire Private Equity continues to own a significant percentage of our common stock.
+Added: Berkshire engages in a range of investing activities, including investments in restaurants and other consumer-related companies.
+Added: In the ordinary course of its business activities, Berkshire may engage in activities where its interests conflict with our interests or those of our shareholders.
+Added: Our amended and restated certificate of incorporation provides that our directors and shareholders, including Berkshire, do not have any obligation to offer us an opportunity to participate in business opportunities presented to them even if the opportunity is one that we might reasonably have pursued (and therefore may be free to compete with us in the same business or similar businesses) and that, to the extent permitted by law, such directors and shareholders will not be liable to us or our shareholders for breach of any duty by reason of any such activities.
Accordingly, the interests of Berkshire may supersede ours, causing them or their affiliates to compete against us or to pursue opportunities instead of us, for which we have no recourse.
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Delaware law and our organizational documents, as well as our existing and future debt agreements, may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium for their shares.
−Removed: We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change of control would be beneficial to our existing stockholders.
+Added: We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change of control would be beneficial to our existing shareholders.
In addition, provisions of our amended and restated certificate of incorporation and bylaws may make it more difficult for, or prevent a third party from, acquiring control of us without the approval of our Board.
Among other things, these provisions:
−Removed: • do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;
+Added: • do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of shareholders to elect director candidates;
• delegate the sole power of a majority of the Board to fix the number of directors;
• provide the power of our Board to fill any vacancy on our Board, whether such vacancy occurs as a result of an increase in the number of directors or otherwise;
−Removed: • authorize the issuance of “blank check” preferred stock without any need for action by stockholders;
−Removed: • eliminate the ability of stockholders to call special meetings of stockholders;
−Removed: • establish advance notice requirements for nominations for election to our Board or for proposing matters that can be acted on by stockholders at stockholder meetings;
−Removed: • limit the ability of stockholders to act by written consent after Berkshire no longer holds 50% of our common stock.
+Added: • authorize the issuance of “blank check” preferred stock without any need for action by shareholders;
+Added: • eliminate the ability of shareholders to call special meetings of shareholders;
+Added: • establish advance notice requirements for nominations for election to our Board or for proposing matters that can be acted on by shareholders at shareholder meetings;
+Added: • limit the ability of shareholders to act by written consent.
In addition, our credit facilities impose, and we anticipate that documents governing our future indebtedness may impose, limitations on our ability to enter into change of control transactions.
Thereunder, the occurrence of a change of control transaction could constitute an event of default permitting acceleration of the indebtedness, thereby impeding our ability to enter into certain transactions.
−Removed: The foregoing factors, as well as the significant Class A common stock ownership by Berkshire, could impede a merger, takeover, or other business combination, or discourage a potential investor from making a tender offer for our Class A common stock, which, under certain circumstances, could reduce the market value of our Class A common stock.
+Added: The foregoing factors, as well as the significant common stock ownership by Berkshire, could impede a merger, takeover, or other business combination, or discourage a potential investor from making a tender offer for our Class A common stock, which, under certain circumstances, could reduce the market value of our Class A common stock.
Portillo's Inc.
9 unchanged sentences
We will also incur expenses related to our operations, and will have obligations to make payments under the Tax Receivable Agreement.
−Removed: As the sole managing member of Portillo’s OpCo, we intend to cause Portillo’s OpCo to make distributions to the holders of LLC Units (including us) in amounts sufficient to (i) cover all of the income taxes payable on our and the other LLC Unit holders’ respective allocable shares of the taxable income of Portillo’s OpCo, (ii) allow us to make any payments required under the Tax Receivable Agreement we entered into as part of the Transactions in connection with our IPO, (iii) fund dividends to our stockholders in accordance with our dividend policy, to the extent that our Board declares such dividends and (iv) pay our expenses.
+Added: As the sole managing member of Portillo’s OpCo, we intend to cause Portillo’s OpCo to make distributions to the holders of LLC Units (including us) in amounts sufficient to (i) cover all of the income taxes payable on our and the other LLC Unit holders’ respective allocable shares of the taxable income of Portillo’s OpCo, (ii) allow us to make any payments required under the Tax Receivable Agreement we entered into as part of the Transactions in connection with our IPO, (iii) fund dividends to our shareholders in accordance with our dividend policy, to the extent that our Board declares such dividends and (iv) pay our expenses.
Deterioration in the financial condition, earnings or cash flow of Portillo’s OpCo and its subsidiaries for any reason could limit or impair their ability to pay such distributions.
Additionally, to the extent that we need funds and Portillo’s OpCo is restricted from making such distributions to us under applicable law or regulation, as a result of covenants in its debt agreements or otherwise, we may not be able to obtain such funds on terms acceptable to us, or at all, which could have a material adverse effect on our liquidity and financial condition.
+Added: See "Risks Related to Our Indebtedness" above.
In certain circumstances, Portillo’s OpCo will be required to make distributions to us and the other holders of LLC Units, and the distributions that Portillo’s OpCo will be required to make may be substantial.
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or any combination of the foregoing.
−Removed: We will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders.
+Added: We will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our shareholders.
To the extent that we do not distribute such excess cash as dividends on our Class A common stock or otherwise undertake ameliorative actions between LLC Units and shares of Class A common stock and instead, for example, hold such cash balances, holders of our LLC Units (other than Portillo’s Inc.) may benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following a redemption or exchange of their LLC Units, notwithstanding that such holders of our LLC Units (other than Portillo’s Inc.) may previously have participated as holders of LLC Units in distributions by Portillo’s OpCo that resulted in such excess cash balances at Portillo’s Inc.
34 unchanged sentences
As a result, payments made under the Tax Receivable Agreement could be significantly in excess of any tax savings that we realize from the tax attributes that are the subject of the Tax Receivable Agreement.
−Removed: If we were deemed to be an investment company under the 1940 Act, as a result of our ownership of Portillo’s OpCo, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
+Added: If we were deemed to be an investment company under the Investment Company Act of 1940 (the "1940 Act"), as a result of our ownership of Portillo’s OpCo, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding, or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S.
7 unchanged sentences
If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that we would be unable to enforce contracts with third parties, and that third parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company.
−Removed: If we were required to register as an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
+Added: If we were required to register as an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations.
Portillo's Inc.
6 unchanged sentences
If our efforts to maintain and protect our intellectual property are not adequate (including by way of confidentiality or other contractual restrictions we impose on third parties), or if any third-party misappropriates, infringes, dilutes or otherwise violates our intellectual property, the value of our intellectual property may be harmed.
−Removed: For example, failure to protect or enforce or trademarks, whether in print, on the Internet or through social media or other media, could prevent us from challenging third parties who use trademarks similar to our trademarks and who, as a result, could cause consumer confusion, harm the public perception of our brands, prevent our brands and branded products from achieving and maintaining market acceptance and cause a material adverse effect on our business, financial condition and results of operations.
+Added: For example, failure to protect or enforce our trademarks, whether in print, on the Internet or through social media or other media, could prevent us from challenging third parties who use trademarks similar to our trademarks and who, as a result, could cause consumer confusion, harm the public perception of our brands, prevent our brands and branded products from achieving and maintaining market acceptance and cause a material adverse effect on our business, financial condition and results of operations.
There can be no assurance that all the steps we have taken to maintain and protect our intellectual property in the United States will be adequate or will permit us to obtain or maintain any competitive advantage.
−Removed: Security breaches, system interruptions or a material failure of our system could negatively impact our business by causing disruption to our operations, a compromise of confidential guest information, or confidential team member information, and could subject us to loss and harm our business.
−Removed: Our business requires the collection, transmission and retention of large volumes of guest and team member data, including credit and debit card numbers and other personally identifiable information, in various information technology systems that we maintain and in those maintained by third parties with whom we contract to provide services.
+Added: Security breaches, system interruptions or a material failure of our system could disrupt our operations, compromise confidential guest information or confidential team member information, subject us to loss, harm our business, and have a material adverse impact on our business, financial condition and results of operations.
+Added: We rely on computer systems and information technology to conduct our business.
+Added: We have instituted controls, including information security governance controls, intended to protect our computer systems, our POS systems, and our information technology systems and networks.
+Added: We also adhere to payment card industry data security standards and limit third party access for vendors that require access to our restaurant networks.
+Added: We also have business continuity plans that attempt to anticipate and mitigate failures.
+Added: However, we cannot control or prevent every cybersecurity risk.
+Added: Our business requires the collection, transmission, and retention of large volumes of guest and team member data, including personally identifiable information, in various information technology systems that we maintain and in those maintained by third parties with whom we contract to provide services.
The integrity and protection of that guest and team member data is critical to us.
3 unchanged sentences
While we continue to make significant investment in physical and technological security measures, team member training, and third party services, designed to anticipate cyber-attacks and prevent breaches, our information technology networks and infrastructure, or those of our third party vendors and other service providers could be vulnerable to damage, disruptions, shutdowns, data loss, or breaches due to criminal conduct, team member error, negligence or malfeasance, utility failures, natural disasters or other catastrophic events.
−Removed: Due to these scenarios we cannot provide assurance that we will be successful in preventing such cyber-attacks, breaches or data loss.
−Removed: Additionally, the information security and privacy requirements imposed by governmental regulation are evolving and we are expected to fulfill such requirements.
−Removed: Our systems may not be able to satisfy these requirements and expectations or may require significant additional investments or time in order to do so.
−Removed: Efforts to hack or breach security measures, failures of systems or software to operate as designed or intended, viruses, operator error or inadvertent releases of data all threaten our and our service providers’ information systems and records.
+Added: Due to these scenarios, we cannot provide assurance that we will be successful in preventing every possible instance of cyber-attacks, breaches, or data loss.
+Added: Additionally, the information security and privacy requirements imposed by governmental regulation are evolving and we are required to comply with said requirements.
+Added: Our systems may not be able to immediately satisfy these requirements, and may require significant additional investment and time to do so.
+Added: Efforts to hack or breach security measures, failures of systems or software to operate as designed or intended, viruses, operator error or inadvertent releases of data can all threaten our and our service providers’ information systems and records.
A breach in the security of our information technology systems, or those of our service providers, could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits.
−Removed: Additionally, a significant theft, loss or misappropriation of, or unauthorized access to, our guests’ data or other proprietary data or other breach of our information technology systems could result in fines, legal claims or proceedings, regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation and expose us to claims from guests and team members, any of which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Our omni-channel approach will in large part rely on our information technology systems to operate successfully, including the implementation of our delivery strategy.
−Removed: As we expand our delivery business channels, our exposure to such risks will increase.
+Added: Additionally, a significant theft, loss or misappropriation of, or unauthorized access to, our guests’ data or other proprietary data could result in fines, legal claims or proceedings, regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation and expose us to claims from guests and team members, any of which could have a material adverse effect on our business, financial condition and results of operations.
Portillo's Inc.
Form 10-K | 20
+Added: Our omni-channel approach will in large part rely on our information technology systems to operate successfully and allow for capabilities like mobile order and pay, third party delivery, and digital menu boards.
+Added: As we expand our delivery business channels, our exposure to such risks will correspondingly increase.
Our systems, which in some cases rely on third-party providers, may experience service interruptions, degradation or other performance problems because of hardware and software defects or malfunctions, distributed denial-of-service and other cyber-attacks, infrastructure changes, human error, earthquakes, hurricanes, floods, fires, natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses, ransomware, malware, or other events.
−Removed: Our systems also may be subject to break-ins, sabotage, theft, and intentional acts of vandalism as a result of criminal third parties (including state-sponsored organizations with significant financial and technological resources), third parties we do business with and team members.
−Removed: Our reliance on third parties increases our exposure to such risks as we exercise a lesser degree of control over such persons.
+Added: Our systems also may be subject to break-ins, sabotage, theft, and intentional acts of vandalism because of criminal third parties (including state-sponsored organizations with significant financial and technological resources), third parties we do business with or team members.
+Added: Our reliance on third parties increases our exposure to such risks as we exercise less control over such persons.
Our cyber insurance and business interruption insurance may not be sufficient to cover all of our losses that may result from interruptions in our service as a result of systems failures and similar events.
−Removed: As a result, if we experience any outsized material impacts from a failure of our systems, our business, financial condition and results of operations could be materially and adversely effected.
−Removed: While we endeavor to keep all systems current, there can be no guarantee that we can reliably update and maintain our systems.
−Removed: In instances where we are unable to do so, the mitigating controls we put in place to reduce the risk may fail.
−Removed: Any such failure could lead to website downtime, disruptions to our information technology systems and systems vulnerability exposure to cyber-criminals.
+Added: As a result, if we experience any outsized material impacts from a failure of our systems, our business, financial condition and results of operations could be materially and adversely affected.
+Added: While we endeavor to keep all systems current, there can be no guarantee that we can update and maintain our systems at all times.
+Added: In instances where we are unable to do so, the mitigating controls in place to reduce the risk may fail.
+Added: Any such failure could lead to website downtime, disruptions to our information technology systems, or systems vulnerability exposure to cyber-criminals.
+Added: In addition, our reputation as a brand or as an employer could be adversely affected, which could impair our ability to attract and retain qualified employees.
Failure to comply with existing and new federal and state laws and regulations relating to privacy, data protection, advertising and consumer protection, could have a material adverse effect.
9 unchanged sentences
The regulation of the use of these cookies and other current online tracking and advertising practices or a loss in our ability to make effective use of services that employ such technologies could increase our costs of operations and limit our ability to acquire new customers on cost-effective terms and, consequently, have a material adverse effect on our business, financial condition and results of operations.
+Added: Portillo's Inc.
+Added: Form 10-K | 21
In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection, consumer protection, and advertising.
2 unchanged sentences
In addition, any such changes could compromise our ability to develop an adequate marketing strategy and pursue our growth strategy effectively, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 22
Litigation with respect to intellectual property, if decided against us, may result in competing uses or require adoption of new, non-infringing intellectual property, which may in turn adversely affect sales and revenues.
17 unchanged sentences
We are also subject to licensing and regulation by state and local authorities relating to health, sanitation, safety and fire standards.
+Added: Portillo's Inc.
+Added: Form 10-K | 22
There is also a potential for increased regulation of certain food establishments in the United States, where compliance with a Hazard Analysis and Critical Control Points (“HACCP”) approach would be required.
13 unchanged sentences
An unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritional content of our menu items could negatively influence the demand for our menu offerings.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 23
Compliance with current and future laws and regulations regarding the ingredients, nutritional and allergen content of our menu items may be costly and time-consuming.
6 unchanged sentences
In addition, our employment practices are subject to the requirements of the Immigration and Naturalization Service relating to citizenship and residency.
−Removed: Further, a new presidential and legislative administration recently took office, and it is not yet known what changes the new administration will make to economic or tax policies and how those policies will impact the economy or consumer discretionary spending.
The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and other costs of doing business and could have a material adverse effect on our business, financial condition and results of operations.
2 unchanged sentences
Compliance with all these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings.
+Added: Portillo's Inc.
+Added: Form 10-K | 23
We could be party to litigation that could distract management, increase our expenses or subject us to material monetary damages or other remedies.
Our guests occasionally file complaints or lawsuits against us alleging we caused an illness or injury they suffered at or after a visit to our restaurants, or that we have problems with food quality or operations.
−Removed: We are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state law regarding workplace and employment matters, equal opportunity, harassment, discrimination and similar matters, and we could encounter class action or other lawsuits related to these or different matters in the future.
+Added: We are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state securities laws or law regarding workplace and employment matters, equal opportunity, harassment, discrimination and similar matters, and we could encounter class action or other lawsuits related to these or different matters in the future.
In recent years, a number of restaurant companies have been subject to such claims, and some of these lawsuits have resulted in the payment of substantial damages by the defendants.
4 unchanged sentences
We may also be subject to this type of proceeding in the future and, even if we are not, publicity about these matters (particularly directed at the fast casual or traditional fast food segments of the industry) may harm our reputation and could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 24
We can incur liabilities arising from environmental laws and compliance with environmental laws could increase our operating expenses.
4 unchanged sentences
If we fail to maintain effective internal controls over financial reporting, or if our internal controls are not effective, our ability to produce timely and accurate financial information or comply with Section 404 of the Sarbanes-Oxley Act of 2002 could be impaired, which could have a material adverse effect.
−Removed: We are required to comply with Section 404 of the Sarbanes-Oxley Act (“Section 404”), which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report after our IPO.
+Added: We are required to comply with Section 404 of the Sarbanes-Oxley Act (“Section 404”), which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting.
In addition, under Section 404 our independent registered public accounting firm will also need to attest to the effectiveness of our internal control over financial in the future to the extent that we are no longer an emerging growth company or a smaller reporting company.
2 unchanged sentences
The failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business, financial condition and results of operations.
−Removed: In the event that we are not able to demonstrate compliance with Section 404, or if our internal control over financial reporting is perceived as inadequate or it is perceived that we are unable to produce timely or accurate consolidated financial statements, investors may lose confidence in our results of operations, the price of our Class A common stock could decline, we could become subject to investigations by the stock exchange on which our Class A common stock is listed, the SEC or other regulatory agencies, which could require addition financial and management resources, or our Class A common stock may not be able to remain listed on such exchange.
+Added: In the event that we are not able to demonstrate compliance with Section 404, or if our internal control over financial reporting is perceived as inadequate or it is perceived that we are unable to produce timely or accurate consolidated financial statements, investors may lose confidence in our results of operations, the price of our Class A common stock could decline, we could become subject to investigations by the stock exchange on which our Class A common stock is listed, the SEC or other regulatory agencies, which could require additional financial and management resources, or our Class A common stock may not be able to remain listed on such exchange.
+Added: Portillo's Inc.
+Added: Form 10-K | 24
We designed our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
2 unchanged sentences
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.
−Removed: Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected and could materially adversely affect our business, liquidity, financial condition or results of operations.
+Added: Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected and could materially adversely affect our business, financial condition or results of operations.
As a public company, we are subject to additional reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the listing standards of the Nasdaq.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 25
General Risks
−Removed: Our management does not have experience managing a public company and our current resources may not be sufficient to fulfill our public company obligations.
−Removed: We are sub ject to various regulatory requirements, including those of the SEC and Nasdaq.
−Removed: These requirements include record keeping, financial reporting and corporate governance rules and regulations.
−Removed: Our management team does not have experience in managing a public company and, historically, has not had the resources typically found in a public company.
−Removed: Our internal infrastructure may not be adequate to support our increased reporting obligations and we may be unable to hire, train or retain necessary staff and may be reliant on engaging outside consultants or professionals to overcome our lack of experience or team members.
−Removed: If our internal infrastructure is inadequate, we are unable to engage outside consultants at a reasonable rate or attract talented team members to perform these functions or are otherwise unable to fulfill our public company obligations, it could have a material adverse effect on our business, financial condition and results of operations.
Fluctuations in our tax obligations, and effective tax rate and realization of our deferred tax assets may result in volatility of our results of operations.
2 unchanged sentences
We record tax expense based on our estimates of future payments, which may in the future include reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets.
+Added: Significant judgement is required in determining our provision for income taxes, deferred tax assets (DTAs) and in evaluating our tax positions in various U.S.
+Added: jurisdictions.
At any one time, many tax years may be subject to audit by various taxing jurisdictions.
1 unchanged sentence
We expect that throughout the year there could be ongoing variability in our quarterly tax rates as events occur and exposures are evaluated.
−Removed: In addition, our effective tax rate in a given financial reporting period may be materially impacted by a variety of factors including, but not limited to, changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which we operate, fluctuations in the valuation allowance or by changes to existing accounting rules or regulations.
+Added: In addition, our effective tax rate in a given financial reporting period may be materially impacted by a variety of factors including, but not limited to, changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which we operate, tax effects of equity-based compensation, changes in tax laws, regulations or interpretations thereof, cost related to intercompany restructuring, fluctuations in the valuation allowance or by changes to existing accounting rules or regulations.
Further, new or revised tax legislation may be enacted in the future, which could negatively impact our current or future tax structure and effective tax rates.
−Removed: For example, President Joe Biden and Congress have set forth tax proposals that would, if enacted, make significant changes to U.S.
−Removed: Such proposals include, but are not limited to, (i) an increase in the U.S.
−Removed: income tax rate applicable to corporations, (ii) an increase in the maximum U.S.
−Removed: federal income tax rate applicable to individuals, (iii) a minimum book income tax on certain large corporations, (iv) the modification or replacement of the minimum tax on global intangible low-taxed income and base erosion and anti-abuse tax and (v) an increase in the U.S.
−Removed: federal income tax rate for long-term capital gain for certain taxpayers with income in excess of a threshold amount.
−Removed: It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could take effect.
−Removed: The passage of any legislation as a result of these proposals and other similar changes in U.S.
−Removed: federal income tax laws could adversely affect our or Portillo’s OpCo’s business and future profitability.
−Removed: If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
−Removed: The trading market for our Class A common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.
−Removed: If no securities or industry analysts commence coverage of us, the trading price for our Class A common stock would be negatively impacted.
−Removed: If we obtain securities or industry analyst coverage and if one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
−Removed: Moreover, if our results of operations do not meet the expectations of the investor community, or one or more of the analysts who cover our company downgrade our stock, our stock price could decline.
−Removed: As a result, you may not be able to sell shares of our Class A common stock at prices equal to or greater than the IPO price.
Our insurance may not provide adequate levels of coverage against claims.
2 unchanged sentences
Such losses could have a material adverse effect on our business, financial condition and results of operations.
+Added: Changes in accounting principles applicable to us could have a material adverse effect on our business, financial condition and results of operations.
+Added: Generally accepted accounting principles in the United States of America ("GAAP") are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the American Institute of Certified Public Accountants, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
+Added: A change in these principles or interpretations could have a significant effect on our financial condition and results of operations, and could affect the reporting of transactions completed before the implementation of a change.
Portillo's Inc.
Form 10-K | 25
−Removed: Changes in accounting principles applicable to us could have a material adverse effect.
−Removed: Generally accepted accounting principles in the United States of America ("GAAP") are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the American Institute of Certified Public Accountants, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
−Removed: A change in these principles or interpretations could have a significant effect on our financial condition and results of operations, and could affect the reporting of transactions completed before the announcement of a change.
−Removed: Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions that may be initiated by our stockholders, and designates the federal district courts of the United States as the sole and exclusive forum for claims arising under the Securities Act, which, in each case could limit our stockholders’ ability to obtain a favorable judicial forum for certain disputes.
+Added: Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions that may be initiated by our shareholders, and designates the federal district courts of the United States as the sole and exclusive forum for claims arising under the Securities Act, which, in each case could limit our shareholders’ ability to obtain a favorable judicial forum for certain disputes.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware (or if the Court of Chancery lacks jurisdiction, a state court located within the State of Delaware or the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (a) derivative action or proceeding brought on our behalf;
−Removed: (b) action asserting a claim of breach of a fiduciary duty owed by or other wrongdoing by any current or former director, officer, employee, agent or stockholder to us or our stockholders;
+Added: (b) action asserting a claim of breach of a fiduciary duty owed by or other wrongdoing by any current or former director, officer, employee, agent or shareholder to us or our shareholders ;
(c) action asserting a claim arising under any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws (as either may be amended from time to time), or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware;
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To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in any shares of our capital stock shall be deemed to have notice of and consented to the forum provision in our amended and restated certificate of incorporation.
−Removed: This choice of forum provision may limit a stockholder’s ability to bring a claim in a different judicial forum, including one that it may find favorable or convenient for a specified class of disputes with us or our directors, officers, other stockholders or employees, which may discourage such lawsuits, make them more difficult or expensive to pursue and result in outcomes that are less favorable to such stockholders than outcomes that may have been attainable in other jurisdictions.
−Removed: By agreeing to this provision, however, stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
+Added: This choice of forum provision may limit a shareholder ’s ability to bring a claim in a different judicial forum, including one that it may find favorable or convenient for a specified class of disputes with us or our directors, officers, other shareholders or employees, which may discourage such lawsuits, make them more difficult or expensive to pursue and result in outcomes that are less favorable to such shareholders than outcomes that may have been attainable in other jurisdictions.
+Added: By agreeing to this provision, however, shareholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.
8 unchanged sentences
We may need to hire more team members in the future to comply with these requirements, which will increase our costs and expenses.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 27
Our management team and other personnel devote a substantial amount of time to compliance initiatives and we may not successfully or efficiently manage our transition to a public company.
To comply with the requirements of being a public company, including the Sarbanes-Oxley Act, we will need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff or outsourcing certain functions to third parties, which could have a material adverse effect on our business, financial condition and results of operations.
+Added: Portillo's Inc.
+Added: Form 10-K | 26
Our annual and quarterly results of operations may fluctuate, and if our operating and financial performance in any given period does not meet the guidance that we have provided to the public or the expectations of our investors and securities analysts, the trading price of our Class A common stock may decline.
17 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.