What changed in this filing

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Item 1. Business

2024-02-27 compared with 2023-03-02 · 188 added, 147 removed, 127 unchanged (73% of the section changed)

Portillo’s Inc.

(the “Company") was formed and incorporated as a Delaware corporation on June 8, 2021.

The Company was formed for the purpose of completing an initial public offering in October 2021 ("IPO") and related reorganization transactions (collectively, the "Transactions”) in order to carry on the business of PHD Group Holdings LLC and its subsidiaries (“Portillo’s OpCo”).

Following the consummation of the Transactions on October 20, 2021, the Company became the sole managing member of Portillo’s OpCo, and a s sole managing member, the Company operates and controls all of the business and affairs of Portillo's OpCo.

(the “Company") was incorporated as a Delaware corporation on June 8, 2021, in connection with our initial public offering in October 2021 ("IPO") and related reorganization transactions (collectively, the "Transactions”) in order to carry on the business of PHD Group Holdings LLC and its subsidiaries (“Portillo’s OpCo”).

Following the consummation of the Transactions on October 20, 2021, the Company became the sole managing member of Portillo’s OpCo and now operates and controls all of the business and affairs of Portillo's OpCo.

As a result, the Company consolidates the financial results of Portillo's OpCo and reports a non-controlling interest representing the economic interest in Portillo's OpCo held by the other members of Portillo's OpCo (the "pre-IPO LLC Members").

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and its subsidiaries, including Portillo’s OpCo.

Initial Public Offering and the Transactions

The Company's registration statement on Form S-1, as amended (Registration No.

333-259810), related to its IPO was declared effective October 20, 2021, and the Company's Class A common stock began trading on the Nasdaq Global Select Market ("Nasdaq") under the symbol "PTLO" on October 21, 2021.

On October 25, 2021, the Company completed its IPO of 23,310,810 shares of the Company's Class A common stock (including 3,040,540 shares sold to the underwriters pursuant to their overallotment option) at an offering price of $20.00 per share.

The Company received aggregate net proceeds of approximately $430.0 million after deducting underwriting discounts and commissions of $29.1 million and other offering expenses of approximately $7.1 million .

In connection with the IPO, we completed the following:

• We amended and restated the limited liability company agreement of Portillo’s OpCo ("Amended LLC Agreement") to, among other things, convert all outstanding equity interests (except for those redeemable preferred units which were redeemed in connection with the IPO) into LLC Units.

• We became the sole managing member of Portillo's OpCo.

Because we manage and operate the business and control the strategic decisions and day-to-day operations of Portillo’s OpCo and because we also have a substantial financial interest in Portillo’s OpCo, we will consolidate the financial results of Portillo’s OpCo, and a portion of our net income will be allocated to non-controlling interests to reflect the entitlement of the pre-IPO LLC Members who retained their equity ownership in Portillo's OpCo.

In addition, because Portillo’s OpCo was under the common control of the pre-IPO LLC Members before and after the Transactions, we measured the assets and liabilities of Portillo’s OpCo at their carrying amounts as of the date of the completion of the Transactions.

• We amended and restated our certificate of incorporation to authorize the issuance of two series of common stock:

Class A common stock and Class B common stock.

Each share of Class A common stock and Class B common stock entitles its holder to one vote per share on all matters submitted to a vote of our shareholders .

The Class B common stock is not entitled to economic interests in Portillo’s Inc.

In connection with the IPO, the Company entered into a Tax Receivable Agreement ("TRA") with certain pre-IPO LLC Members, pursuant to which the Company will be generally obligated to pay 85% of the amount of applicable cash savings, if any, in U.S.

federal, state, and local income tax that the Company actually realizes or is deemed to realize as a result of (i) our allocable share of existing tax basis in depreciable or amortizable assets relating to LLC Units acquired in the IPO, (ii) certain favorable tax attributes acquired by the Company from entities treated as corporations for U.S.

tax purposes that held LLC Units prior to the Transactions ("Blocker Companies") (including net operating losses and the Blocker Companies' allocable share of existing tax basis), (iii) increases in our allocable share of then existing tax basis in depreciable or amortizable assets, and adjustments to the tax basis of the tangible and intangible assets, of Portillo’s OpCo and its subsidiaries, as a result of (x) sales or exchanges of interests in Portillo’s OpCo (including the repayment of the redeemable preferred units) in connection with the IPO and (y) future redemptions or exchanges of LLC Units by pre-IPO LLC Members for Class A common stock and (iv) certain other tax benefits related to entering into the TRA, including payments made under the TRA.

We will retain the benefit of the remaining 15% of these tax savings.

Secondary Offerings

In the third quarter and fourth quarter of 2022, the Company completed two secondary offerings of 8,066,458 shares (including 66,458 shares sold to the underwriters pursuant to their overallotment option) and 8,000,000 shares, respectively, of the Company's Class A common stock at an offering price of $23.75 and $22.69, respectively, per share.

We used all of the net proceeds from the secondary offerings to purchase LLC Units and corresponding shares of Class B common stock from certain pre-IPO LLC Members and to repurchase shares of Class A common stock from the shareholders of the Blocker Companies at a price per LLC Unit or share of Class A common stock, as applicable, equal to the public offering price per share of Class A common stock, less the underwriting discounts and commissions.

As a result, Portillo’s did not receive any proceeds from the offering, and the total number of shares of Class A common stock and Class B common stock did not change;

however, the number of outstanding shares of Class A common stock increased by the same number of the canceled shares of Class B common stock.

As of December 25, 2022, the Company owned 67.0% of Portillo's OpCo and the pre-IPO LLC Members owned the remaining 33.0% of Portillo's OpCo.

See the consolidated financial statements included in Part II, Item 8 "Financial Statements And Supplementary Data" for more information about the above-mentioned transactions.

New Credit Agreement

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”) 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”).

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.

The Term Loan and New Revolver Facility are scheduled to mature on February 2, 2028.

The Company anticipates using the remainder of the loan proceeds for general corporate purposes and working capital needs.

Overview of Portillo's

Portillo’s serves iconic Chicago street food through high-energy, multichannel restaurants designed to ignite the senses and create a memorable dining experience.

Portillo’s serves iconic Chicago street food in high-energy, multichannel restaurants designed to ignite the senses and create memorable dining experiences.

Since our founding in 1963 in a small trailer that Dick Portillo called “The Dog House,” we have grown to become a treasured brand with a passionate (some might say obsessed) nationwide following.

Our diverse menu features all-American favorites such as Chicago-style hot dogs and sausages, Italian beef sandwiches, char-grilled burgers, chopped salads, crinkle-cut french fries, homemade chocolate cake and signature chocolate cake shake.

We create a consumer experience like no other by combining the best attributes of fast-casual and quick-service concepts with an exciting energy-filled atmosphere and restaurant model capable of generating tremendous volumes.

Nearly all of our restaurants were built with double lane drive-thrus and have been thoughtfully designed with a layout that accommodates a variety of access modes including dine-in, carryout, delivery and catering in order to quickly and efficiently serve our guests.

Our diverse menu features all-American favorites such as Chicago-style hot dogs and sausages, Italian beef sandwiches, char-grilled burgers, chopped salads, crinkle-cut fries, homemade chocolate cake and signature chocolate cake shake.

We create a consumer experience like no other by combining the best attributes of fast-casual and quick-service concepts with an exciting energy-filled atmosphere in a restaurant model capable of generating tremendous volumes.

No matter how our guests order from us, our highly productive kitchens and team members consistently serve high-quality food and deliver a memorable guest experience.

We believe the combination of our craveable food, multichannel sales model, dedication to operational excellence, and a distinctive culture driven by our team members gives us a competitive advantage.

As of December 25, 2022, we owned and operated 72 restaurants across nine states, including a restaurant owned by C&O Chicago, L.L.C.

We believe the combination of our craveable food, multichannel sales model, dedication to operational excellence, and distinctive team member-driven culture gives us a competitive advantage.

Our business, including many of the elements described below, is subject to certain risks that may materially and adversely affect our ability to achieve our desired outcomes.

For a more in-depth discussion of such risks, see Item 1A, "Risk Factors."

As of December 31, 2023, we owned and operated 84 restaurants across 10 states, including a restaurant owned by C&O Chicago, L.L.C.

("C&O") of which we own 50% of the equity .

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We capture the hearts, minds and stomachs of our guests with every meal.

Our menu features something for everyone and appeals to a broad demographic, which enables our restaurants to thrive across diverse trade areas and generate strong and balanced volumes across multiple dayparts, weekdays and occasions.

Our new restaurant openings draw massive crowds of passionate fans with lines stretching around the block.

Our menu features something for everyone and appeals to a broad demographic, which enables our restaurants to thrive and generate strong and balanced volumes across multiple dayparts, weekdays and occasions.

No matter the location, our fans are bun-believably obsessed!

Guests cake shake their way in for our Chicago-style hot dogs, Italian beef sandwiches, char-grilled burgers, cheese fries, fresh salads and famous chocolate cake.

But it's not just our menu that sets us apart.

Our new restaurant openings draw massive crowds of passionate fans with lines stretching around the block.

Energetic Restaurant Atmosphere that Engages the Senses.

While our operating model is focused on getting delicious, made-to-order food to our guests quickly, our atmosphere makes the experience even more than a delicious meal.

While our operating model is focused on getting delicious, made-to-order food to our guests quickly, our atmosphere makes the experience more than a delicious meal.

When guests walk into a Portillo’s, they get an experience completely different than a typical chain restaurant visit.

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No two Portillo’s are alike.

Each of our restaurants has its own themed décor, ranging from a 1930’s prohibition motif to a 1950’s jukebox, to a 1960’s hippie bus.

Each of our restaurants has its own themed décor, ranging from a 1930s prohibition motif to a 1950s diner to a 1960s flower-power bus, as well as a retro automotive garage theme.

The period music ties to the theme, from ragtime to doo wop to disco.

No detail is too small, be it lighting, signage or even the stars subtly sparkling on the ceiling.

Each restaurant also draws design elements from the community.

Each restaurant also draws design elements from the local community.

The layouts create spaces comfortable for individual diners, families, large groups, and even wedding parties.

Beyond the space itself, the energy of a Portillo’s is unique.

Our guests can see into our huge, open kitchens, where their meals are prepared right before their eyes.

Our guests can see into our open kitchens, where their meals are prepared right before their eyes.

The smells of burgers broiling, french fries frying, and beef simmering emanate from the kitchen.

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But the most important element of the energy is the enthusiasm of the scores of guests who are all excited to be there and enjoying their Portillo’s.

We want every guest that visits to leave with a memorable experience, a satiated appetite and a desire to return.

Our menu offers something for everyone.

We obsess over each and every ingredient and curate our menu to ensure that each item receives high marks from our guests and meets our rigorous quality standards.

We want every guest that visits to leave with good memories, a satiated appetite and a desire to return.

Our menu features unrivaled Chicago-style street food and all-American favorites — something for everyone!

We're known for our famous Chicago-style hot dogs, Italian beef sandwiches, chopped salad, cheese fries, homemade chocolate cake, and chocolate cake shake.

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Our Chicago-style hot dogs feature mustard, relish, freshly chopped onion, sliced red-ripe tomatoes, a kosher pickle and sport peppers piled high onto a perfectly steamed poppy seed bun, all finished with a few shakes of savory celery salt.

Guests also love our craveable crinkle-cut french fries that are cooked in beef tallow resulting in a perfectly salted, crispy outside with a soft inside.

Guests also love our craveable crinkle-cut french fries which are cooked in beef tallow, resulting in a perfectly salted, crispy outside with a soft inside.

Lastly, for those craving something sweet, our famous homemade fluffy chocolate cakes are baked with love each morning in every restaurant and generously iced with rich chocolate frosting.

Commitment to Quality.

Our food is prepared with fresh, high-quality ingredients, and our commitment to quality is brought to light by every item on the menu.

We obsess over each and every ingredient and recipe to ensure our food is high quality, consistently prepared and tastes great.

We have been perfecting our menu for over 50 years, and we are constantly seeking ways to further enhance the quality and selection of our offerings.

Our menu features unrivaled Chicago-style street food and all-American favorites.

With something for everyone, our expansive menu creates a “veto-proof” proposition and drives a broad set of consumer occasions.

Our made-to-order food is prepared with fresh, high-quality ingredients, and our commitment to quality can be seen in every item on the menu.

We have been perfecting our menu for 60 years, and we are constantly seeking ways to further enhance the quality and desirability of our offerings.

Menu Innovation.

Our primary strategy for menu innovation is to drive traffic through truly craveable foods that can be made with a Portillo’s spin.

New menu items are introduced when we believe they will offer superior guest satisfaction and typically coincide with the removal of an existing menu item to ensure a manageable menu size, so that our team members can maintain the operational efficiency that enables our high volumes and consistently high quality offerings.

Recent examples of new menu items include our Spicy Chicken Sandwich featuring our proprietary spicy giardiniera sauce, launched in 2021, and the Plant-based Garden Dog, launched in 2022.

We intend to drive traffic through truly craveable foods that can be made with a Portillo’s spin.

New menu items are introduced when we believe they will offer superior guest satisfaction and typically coincide with the removal of an existing menu item to ensure a manageable menu size, allowing our team members to maintain the operational efficiency that enables our high volumes and consistently high quality offerings.

Recent examples of new menu items include our Spicy Chicken Sandwich featuring our proprietary spicy giardiniera sauce, launched in 2021, the Plant-based Garden Dog, launched in 2022, and our Rodeo Burger, launched in 2023, featuring our homemade barbecue sauce and premium bacon.

The Rodeo Burger combines existing ingredients in a unique way , while highlighting our improved ingredients, such as bacon.

We also offer seasonal shakes and specialty cakes to complement our existing menu.

In 2023 , we opened our Innovation Center, a test kitchen that allows us to explore new menu items and refinements to our operational procedures.

Our teams leverage this space to efficiently explore new opportunities as we continue to grow.

Our Sales Channels

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Our restaurants are built with double lane drive-thrus staffed with engaging attendants that ensure a pleasant and efficient experience with all food made to order.

We also have locations that feature three drive-thru lanes, including one specifically for pickup of advanced orders placed on our app or website.

Our restaurant dining rooms are elaborately decorated with timeless, nostalgic designs inspired by the local community.

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Guests dining in our restaurants wait in an ordering line to place their order and walk up to a designated pick-up area when their order is called.

Guests placing a carryout order can order online or through our app.

They have the option to walk into the restaurant to pick up their order at our service counter.

We have established partnerships with multiple third-party delivery providers and have added in-house delivery capability to fulfill larger orders through our team members.

Guests placing a carryout order can order at the restaurant, on our website, through our app, or through certain third-party platforms and walk into the restaurant to pick up their order at our dedicated pickup shelves.

We have established partnerships with multiple third-party delivery providers.

Catering Offerings.

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We also sell “Take & Make” offerings – a series of catering items and packages designed for convenient, at-home preparation by our guests.

For impromptu gatherings we offer “Fast Packs,” which are convenient packages of eight of our most popular sandwiches, prewrapped and ready to top, which can be prepared and delivered quickly.

For impromptu gatherings, we offer “Fast Packs,” which are convenient packages of our most popular menu items, prewrapped and ready to top, which can be prepared and delivered quickly.

We have also added in-house delivery capability to fulfill catering orders through our team members.

Direct Shipping Offerings.

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Our Growth Strategies

Expand Our Restaurant Base .

We are in the early stages of our nationwide growth with 72 locations across nine states as of December 25, 2022, including C&O .

Expand and Strengthen Our Restaurant Base .

We are in the early stages of our nationwide growth plan, with 84 locations across ten states as of December 31, 2023, including C&O .

Since 2015, we have opened new restaurants at a compounded annual growth rate of approximately 9.2%.

Over the long term, we aim to increase our number of restaurants by approximately 10% annually.

Our near-term restaurant growth strategy is focused on leveraging our proven unit economic model primarily in markets outside Chicagoland with favorable macro-economic tailwinds where we already have a presence.

We will also add select new restaurants in the Chicagoland market.

In fiscal 2023, we opened 12 new restaurants.

Over the long term, we aim to increase our number of restaurants by approximately 12% to 15% annually.

Our near-term restaurant growth strategy is focused on leveraging our proven unit economic model primarily in markets outside

Chicagoland with favorable macro-economic tailwinds where we already have a presence.

Particularly, our short-term focus is in the Sunbelt, with growth across markets in Arizona, Texas, and Florida.

Simultaneously, we will continue to fill-in Chicagoland and adjacent markets as opportunities come available.

Over the past year, our development function has made great strides in creating scalable, repeatable processes, giving us confidence as we grow nationally.

Based on a whitespace analysis prepared in partnership with a third-party vendor in 2023, we believe we have a substantial runway for growth with a long-term opportunity to grow to more than 900 restaurants domestically and are well-positioned for global growth in the future.

Of the 900 domestic restaurants, we project 800 to be full-scale restaurants and 100 to be pick-up/walk-up models.

We see these company-operated full-scale restaurants as our largest opportunity moving forward.

At the same time, we continue to evaluate innovative operating models.

On the heels of opening a second Portillo’s Pickup location, we will continue to analyze where these, and other operating models such as urban walk-ups, airports and campuses, fit within our growth trajectory to add sales, manage cannibalization, and provide additional pipeline growth.

We are continuously evaluating evolving consumer preferences and footprint optimization of our restaurants.

In the past, our restaurants were over 10,000 square feet and had 105-foot production lines.

Restaurants built in 2023 are approximately 7,700 square feet with a 65-foot production line.

In the future, we are planning for restaurants generally in the range of 5,500 to 6,000 square feet with an approximate 47-foot production line.

Overall, we are committed to improving the experience for our guests and team members.

The evolution of our restaurants has come as a three-stage process.

Stage One focuses on retrofitting our existing restaurant base.

These retrofits involve adding a "Grab & Go" area, which includes desserts, bottled water and Portillo's retail merchandise.

This area previously housed our salad-make line, but we merged our production lines, gaining efficiencies along the way.

We also shifted our beverage stations to be self-serve for our guests.

Stage Two is what we call "Kitchen '23" and is improving the efficiency in our new builds by reducing the square footage, reducing the length of the production line, lowering equipment costs and enhancing our off-premise area with drive thru doors.

Stage Three is what we refer to as "Restaurant of the Future" which will bring the square footage down to 5,500 to 6,000 square feet and a 47-foot production line, all without compromising our ability to achieve our industry leading average unit volume ("AUV").

When we move to a box of this size, we will need less than our typically two-acre site to build, which will create more real estate possibilities.

Further, these enhancements reduce conveyance and increase productivity.

Increase Our Same-Restaurant Sales.

We aim to continue delivering an outstanding value proposition to our guests and enhance our experience to grow our volumes.

We aim to continue delivering an outstanding value proposition to our guests and enhance our guest experience to grow our volumes.

We believe the following initiatives will drive same-restaurant sales growth.

• Deliver a Consistently Outstanding Guest Experience at an Incredible Everyday Value .

Our relentless focus on operational excellence enables us to drive significant throughput in our restaurants, provide a one-of-a-kind experience and a compelling everyday value proposition to our guests and thereby drive increased customer trial and frequency.

• Deliver a Consistently Outstanding Guest Experience Across Order Channels .

Portillo’s remains committed to offering industry-leading experiences across our traditional sales channels, while continuing to grow and innovate in growth sales channels.

Dine-in provides the best Portillo’s experience, so we strive for our dine-in experience to represent the heart of Portillo’s and our company values of Family, Greatness, Energy, and Fun.

In our drive-thru, we strive to maintain top performance in the industry across speed, service, and accuracy.

In new markets, we show new guests the value and efficiency of our drive-thrus.

In our sales channels of digital pickup, delivery, and catering we have made great strides operationally that will allow us to win additional market share.

• Protect our Incredible Value Proposition.

Experience, service, and food quality define value in our brand, but maintaining a strong price point remains a high priority given how broadly we compete in the restaurant industry.

Our teams consistently monitor price points across the many segments and occasions that are relevant to our guests.

We will continue our price laggard strategy combined with a focus on operational excellence to succeed moving forward.

• Purposeful Menu Enhancements .

We are constantly studying ways to further enhance our existing offerings while thoughtfully adding new high-quality items.

We are also disciplined in maintaining the number of options on our menu, while ensuring consistency in execution, and maintaining the breadth that helps drive our industry-leading volumes.

When a new item earns its way onto our menu, we often replace an existing item to maintain our operational efficiency.

We believe this purposeful enhancement drives increased guest frequency and reinforces our everyday value proposition that is key to our success.

• Increase Brand Awareness Through Non-Traditional and Social Marketing.

We do not rely on mass media advertising or promotion to drive traffic to our restaurants.

We actively engage our fans and guests through a dynamic social media effort that includes email, Twitter, Instagram, TikTok, Facebook, and other platforms.

Our social media activity generates significant engagement with our guests and provides our most passionate fans an opportunity to share their enthusiasm with their followers.

• Enhance Our Off-Premises Guest Experience.

We have always been committed to providing our guests with our delicious food, however and whenever they want it.

We are also disciplined in maintaining the size of our menu, ensuring consistency in execution while maintaining the variety that helps drive our industry-leading volumes.

For example, in 2023, we launched our Rodeo Burger, an item that combines existing ingredients in a unique way, enhanced the guest experience, and provided a benefit to average ticket price and profit margin.

We believe this purposeful innovation drives increased guest frequency and reinforces the everyday value proposition that is key to our success.

Moving forward, we will continue to consider menu enhancements to re-invigorate our core guests while drawing in new guests.

• Drive Brand Awareness and Trial Through Marketing.

We believe the best way to market Portillo’s is to have people try our food.

We drive awareness and trial through our grassroots local restaurant marketing team, by utilizing our Beef Bus food truck to promote new restaurants, and by producing creative and engaging marketing content.

Our goal is to harness brand love and spread it far and wide.

We do so by leaning on influencers and traditional media to spread our messages.

We use a full suite of communication channels, such as email, X (formerly known as "Twitter"), Instagram, TikTok, Facebook, and other platforms to spread our message to different customer segments.

◦ In 2023, we partnered with the town of Bacon, Indiana to launch our new Rodeo Burger.

We invited digital content creators and traditional press to join us in Bacon for a “Bacon Rodeo,” featuring Bacon Burgers served out of our Beef Bus food truck.

The local “Lick Creek Band” was on hand to perform and even performed a custom Portillo’s song to commemorate the event.

This activity allowed us to produce several months’ worth of digital content, leading to a successful launch of our new burger.

◦ In the fourth quarter of 2023, we debuted a new ad campaign in Chicagoland called, “Portillo’s.

It always sounds good.” In addition to showing off our delicious food, the campaign incorporated sounds from within a Portillo’s restaurant – the sound of a saltshaker over our French fries, the crispy crunch of our onion rings, and the sound of our team members rhyming while handing out orders.

The ad campaign consisted of commercials, billboards, and partnerships with several digital media outlets, such as Barstool Sports, to reach our guests across the Chicagoland.

The campaign drove incremental traffic to our restaurants and our guests loved the creative ads.

Leverage Our Infrastructure to Drive Profitability.

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We constantly focus on restaurant-level operations while ensuring that we do not sacrifice the quality and experience for which we are known.

Our strong average unit volumes and operational focus give us the ability to manage variable costs and leverage our fixed costs.

We believe we will continue to grow revenue and system-wide profitability by executing our growth strategy and leveraging the experience of our existing general managers to lead our new restaurants to drive successful and efficient new openings.

Our investments to enhance our multichannel capabilities and drive a frictionless guest order experience are also expected to further leverage our fixed costs.

We have made significant investments at the corporate level, which we believe we will leverage in the future, exclusive of the additional costs of operating as a public company.

Our strong average unit volumes and operational focus allow us to manage variable costs and leverage fixed costs.

We believe we will continue to grow revenue and system-wide profitability by executing our growth strategy and leveraging the experience of our existing general managers to drive successful and efficient new restaurant openings.

Our investments to enhance and expand our multichannel capabilities and drive a frictionless guest order experience are also expected to further leverage our fixed costs.

In addition, we have made and continue to make significant investments at the corporate level, such as the implementation of a new enterprise resource planning system, which we will leverage in the future.

Our Team – Human Capital Management

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This included 190 Restaurant Support Center (“RSC”) team members, 439 res taurant managers, assistant general managers, and general managers, and 7,455 restaurant hourly team members in positions such as crew chief, training lead, food production and guest services.

We also have 73 hourly team members and 12 managers and above at our commissaries.

Our team members are not covered by any collective bargaining agreements.

Our executives have extensive experience in the restaurant industry.

In August 2022, we hired an industry real estate and development executive who comes to Portillo’s with achievements in scaling people, process, and systems in large organizations.

We also have 85 hourly team members, which also includes crew chiefs, and 11 managers and above at our commissaries.

Our restaurant team members are not covered by any collective bargaining agreements.

On April 13, 2023, certain of our team members at one of our commissaries voted in favor of being represented by a union.

We filed objections to the election with the National Labor Relations Board ("NLRB") on April 19, 2023, asserting that the union and its agent's promises prevented a free and fair election.

We have appealed to the NLRB to set aside the election results.

Our Board of Directors and Board committees provide oversight on certain human capital programs.

The Compensation Committee, with input from management and a third-party compensation consultant who provides benchmarked data, has responsibility for administering and approving compensation, including our incentive and equity-based plans for executive officers.

The Compensation Committee, with input from management and an independent third-party compensation consultant, has responsibility for administering and approving compensation, including our incentive and equity-based plans for executive officers.

We discuss talent and succession plans annually for key positions and levels including the executive team.

We have implemented and are executing several initiatives to support our objectives to attract, develop and retain team members.

Values-Driven, People-Centered Culture .

In 2022, Portillo’s was selected by QSR Magazine as one of the Best Brands to Work For.

In addition, we received a Best in Biz Award in the 'Best Place to Work' category.

We believe this is attributed to our conviction that our People are the Heart of Portillo’s.

We hire and train great people who can turn their obsession for our brand into a profession.

Our team members are passionate about our food, love our guests, and call their teammates “family.” And that family is both diverse and inclusive.

In 2023, Portillo’s was selected for the second year in a row by QSR Magazine as one of the Best Brands to Work For.

We believe this reflects our conviction that our people are the Heart of Portillo’s.

We attract, hire and develop great people who turn their obsession for our brand into a profession.

Our team members are passionate about our food, love our guests, and call their teammates “family.” We are proud that Portillo's family is both diverse and inclusive.

We strive to foster a sense of individuality, safety, support, belonging and fairness through inclusive practices in talent acquisition, talent management, total rewards and learning and development.

This people-centric culture is centered on working together to create a fun, energetic atmosphere while living our values:

“Family” – We work together to make everyone feel at home, and we step up when someone needs help.

“Greatness” – We are obsessed with being the best and work hard to continuously improve.

We work together to make everyone feel at home, and we step up when someone needs help.

We are obsessed with being the best and work hard to continuously improve.

Our greatness is rooted in Quality, Service, Attitude and Cleanliness (“QSAC”).

“Energy” – We move with urgency and passion, while maintaining attention to detail.

“Fun” – We entertain our guests, we connect authentically, and we make each other smile.

We move with urgency and passion, while maintaining attention to detail.

We entertain our guests, we connect authentically, and we make each other smile.

These values extend beyond our restaurants, to every Portillo's team member.

Living these values enforces the culture we’re proud to have built.

Living these values reinforces the culture we’re proud to have built.

It’s why we are passionate about attracting and selecting team members who are aligned with our purpose and values, as well as why we established an employee value proposition centered around culture.

It’s also why our team members are our best ambassadors and why we’ve seen success with our referral program.

Our culture results in top quartile industry retention for management and hourly team members.

Leadership Development.

We provide a full spectrum of resources, from skill building to leadership development, at every level in the organization.

We provide a full spectrum of resources, from skill building to leadership development, in the organization.

Our philosophy is to develop people to be ready before a position is open, as opposed to waiting for a position to be open and then training them.

We view this investment as fundamental to our growth, building a pipeline of leaders for our future.

In 2022, more than 80% of our leadership openings were filled internally.

We are committed to continuing education and providing ways for individuals to build their talents.

In 2022, Portillo’s invested in LinkedIn Learning for all hourly Crew Chiefs, Restaurant Management, Commissary Team Members and RSC Team Members.

Portillo’s has invested in LinkedIn Learning for all hourly Crew Chiefs, Restaurant Management, Commissary Crew Chiefs and RSC Team Members.

This initiative allows us to give additional learning and development opportunities above and beyond job skills or initial leadership development.

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To ensure everyone has access to our leadership program, we continue to hold quarterly career interest days in all markets, where interested team members hear about opportunities within the Company and how to apply for development programs.

In addition, we work with team members and managers to build individual development plans with training and experiences, and we hold regularly scheduled development programs throughout the year for each level of leadership.

Further, we hold bi-annual talent and succession planning to identify and support individuals with career pathing and development opportunities.

In 2022, we also leveraged our training lead program to provide a dedicated team member in each restaurant to oversee station and new initiative training.

The creation of a strong talent pipeline while retaining successful team members is a top priority.

In 2023, we restructured our annual performance review process to reflect the importance of exhibiting seven leadership traits that we expect every leader to embody to be successful in our organization.

Our growth, development, and retention strategies focus on these leadership traits to build skills to be used both professionally and personally.

We work with team members and managers to build individual development plans with training and experiences, and we hold regularly scheduled development programs throughout the year for each level of leadership.

Further, we hold bi-annual talent and succession planning summits to identify and support individuals with career pathing and development opportunities.

We encourage team members to connect with one another in an informal mentoring program to build relationships and further create the sense of belonging.

Engagement & Experience .

We aspire to provide an unrivaled experience for every team member during their journey with Portillo’s.

Creating lifelong memories for our team members and guests is paramount to the overall experience.

We believe in our team members having a voice to share their ideas, feedback and contribute to organizational success.

We continue to partner with Gallup to implement our EverEngaged survey to gather, listen to and act on the team members’ feedback.

Our engagement overall score improved in a year where the overall national score declined.

Our engagement results for our multi-unit and general managers were in the top quartile scores.

We continue to partner with Gallup to implement our EverEngaged survey to gather, listen to and act on team member feedback.

We conduct this survey annually to measure improvement and areas of focus.

In 2023, our engagement score continued to improve with statistical significance while the restaurant industry remained flat.

Our engagement results for multi-unit and general managers continue to be top quartile.

Our team members reflected that they know what is expected of them at work and strongly agree they have what they need to do their jobs.

These are both foundational to an individual’s engagement and success.

We will conduct this survey annually to measure improvement and areas of focus.

These both are foundational to an individual’s engagement and success.

In addition to the survey, we regularly hold roundtable discussions with team members and stay interviews with leaders to gain insights into ways we can cultivate an energizing, collaborative work environment.

We have also prioritized a flexible work environment, addressing work-life flexibility and balance across our different workplaces.

In 2022, we implemented a new scheduling system that allows our hourly team members to align their work schedule with their personal schedule, as well as submit schedules, trade shifts and submit all time-off requests in an easier way.

For our RSC team members, we provide the option to work remote or at the office, based on personal preference and business needs.

We still make sure to build on our culture in this flexible environment.

Additionally, we conduct an annual career aspiration survey for all RSC team members, crew chiefs, and field managers to understand their aspirations in development, career pathing, and what they need to succeed.

We have also prioritized a flexible work environment, addressing life-work flexibility and balance across our different workplaces.

Our scheduling system allows hourly team members to align their work schedule with their personal schedule, as well as submit schedules, time-off requests and trade shifts.

For our RSC team members, we provide a flexible work environment.

Quarterly, we hold engagement-focused RSC culture weeks to bring the team together for connecting, recognition and development.

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This commitment is evidenced by our investment in our compensation packages and robust suite of benefit offerings.

In 2022, we increased base hourly pay across many of our geographies and all of our restaurant management positions.

Additionally, we enhanced our benefits with parental leave and reduced healthcare premiums for our hourly team members.

In 2023, we increased hourly pay across many of our geographies and for some of our restaurant management positions.

Additionally, in 2023, we enhanced our benefits package by offering a variety of voluntary benefit options for team members to choose from including pet insurance, identity theft protection, critical illness coverage, and accident and hospital indemnity protection.

These additional offerings allow our team members the flexibility to customize their coverages to best fit their needs.

We also enhanced our dental plan offerings and expanded access to additional medical plans for our restaurant team members.

To prioritize overall well-being, we also continue to enhance our wellness platform to provide fitness and other programs that promote wellness of the whole individual.

We believe all of our team members should act like owners of the Company, and we are committed to providing all team members with an ownership opportunity.

To that end, in 2022, we implemented our Employee Stock Purchase Plan ("ESPP"), internally referred to as "Beef Stock." Eligible employees can contribute up to 15% of their gross base earnings for purchases under the ESPP through regular payroll deductions, subject to an annual maximum dollar amount.

In addition to our Beef Stock program, all restaurant team members who are newly hired or promoted to a General Manager role become eligible for our long-term equity incentive plan.

In 2023, many of our leaders will receive annual grants providing our team with opportunities to own shares, which supports retention of key team members.

In 2023, we also made enhancements to our paid leave policy.

We believe all of our team members should act like owners of the Company, and we are committed to providing all team members with an ownership opportunity through our Employee Stock Purchase Plan ("ESPP"), internally referred to as "Beef Stock." Eligible employees can contribute up to 15% of their gross base earnings for purchases under the ESPP through regular payroll deductions, subject to an annual maximum dollar amount.

In 2023, we issued 29,808 shares (net of shares withheld for taxes) under the ESPP.

In addition to our Beef Stock program, all restaurant team members who are newly hired as or promoted to General Manager become eligible for our long-term equity incentive plan.

In 2023, many of our leaders received annual grants providing our team with opportunities to own shares, which we believe supports retention of key team members.

Diversity, Equity, Inclusion and Belonging.

At Portillo’s, we embrace Diversity, Equity, Inclusion and Belonging ("DEIB") through our core values of Family, Greatness, Energy and Fun.

These values are engrained in everything we do as a company, and they guide how we support our Portillo's family.

This past year we launched our DEIB initiative.

The DEIB initiative is sponsored by two members from our executive leadership team and one sponsor from our Board of Directors.

These values are ingrained in everything we do as a company, and they guide how we support our Portillo's family.

We launched our DEIB initiative, which is sponsored by two members from our executive leadership team and one sponsor from our Board of Directors.

It is then guided by a DEIB Advisory Group, which reviews programs ideated by our 10-member DEIB committee.

This cross-company working group is building the framework for programs that support a diverse workforce.

This includes increased awareness and education of our team members, with courses such as Unconscious Bias.

This includes increased awareness and education of our team members.

We've also expanded our recruiting efforts to encourage members of underserved communities, such as military veterans, to join the Portillo's family.

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We care deeply about our people and believe that by taking care of our team members, they will in turn take care of our guests.

In June 2020, we started the “Heart of Portillo’s Fund,” an IRC section 501(c)(3) charitable fund, within the Portillo’s organization that raised over $350,000 to provide emergency assistance to team members in need in 2022 .

In 2022, t he fund awarded over 40 grants and has provided support to team members for expenses following illness or injury, the unexpected death of a family member and other financial hardships.

In 2023, the “Heart of Portillo’s Fund,” an IRC section 501(c)(3) charitable fund raised over $300,000 to provide emergency assistance to team members.

In 2023, the fund awarded over 60 grants and has provided support to team members for expenses following illness or injury, the unexpected death of a family member and other financial hardships.

Our Sourcing and Supply Chain

We are committed to maintaining our high-quality food standards leveraging the ability to acquire fresh ingredients that meet our stringent specifications.

We partner with a variety of companies that are similarly aligned with producing and providing high quality products.

We are committed to maintaining our high-quality food standards through fresh ingredients that meet our stringent specifications.

We partner with a variety of companies that are similarly focused on producing and providing high quality products.

Our supply chain approach is based on alignment with key strategic partners that are identified through a comprehensive evaluation process to ensure our standards and expectations are met on a continual basis.

This platform affords our organization the opportunity for real time performance assessments to identify any potential gaps and implement corrective measures where required.

Robust contingency platforms are reviewed and updated on a regular basis to provide assured supply of products and services for the organization.

Through a risk assessment strategy, the supply chain team will identify areas critical to supporting the restaurants and any necessary adjustments or alternate programs are undertake n.

While we are actively working to mitigate any effects of supply chain constraints, such constraints could result in higher food and beverage cost associated with general increases in input price levels as well as increased product substitutions and elevated freight costs.

While we have not experienced significant supply chain disruptions since the COVID-19 pandemic, we have experienced limited product shortages in our supply chain at certain times.

Supplier and distribution partners are managed under both a code of conduct and a pricing protocol that provides transparent insight to costing mechanisms.

This approach affords our organization the opportunity for real-time performance assessments to identify any potential gaps and implement corrective measures where required.

Robust contingency plans are reviewed and updated on a regular basis to provide a reliable supply of products and services to our business.

As part of our risk assessment strategy, the supply chain team identifies areas critical to supporting the restaurants and executes any necessary adjustments or alternate programs.

Suppliers and distribution partners are managed under both a code of conduct and a pricing protocol that provides transparent insight to costing mechanisms.

In addition, we engage directly with manufacturers to ensure compliance with negotiated contract pricing and requisite volume expectations.

Distribution.

Our distribution network is comprised of several independently operated partners aligned under the UniPro umbrella, the largest food service distribution cooperative in the United States.

This strategy affords us the opportunity to align with right-sized organizations that are dedicated to us which allows us to leverage volume and scale for a competitive advantage and exceptional customer service.

We operate two commissaries that we leverage to supply our network of restaurants with several of our most iconic products and ensure product consistency and quality.

Our commissaries produce our signature beef, peppers and gravy for our Italian beef sandwiches.

The prepared ingredients are shipped to our restaurants where our team members will finish the preparation in our kitchens to serve our guests.

Commissaries.

We operate two commissaries to supply our network of restaurants with our signature beef, peppers and gravy for our Italian beef sandwiches and ensure product consistency and quality.

These ingredients are shipped to our restaurants where our team members will finish the preparation in our kitchens to serve our guests.

Quality Systems.

Quality and food safety are paramount to protecting our brand and are treated with the utmost priority.

Our supplier and distribution partners participate in third-party audits to ensure all applicable quality system expectations are being met.

Our restaurant locations are audited for food safety and quality compliance through a combination of third-party organizations and the Portillo's managed quality and food systems team.

Our commissaries also undergo food safety and quality audits on a regular basis.

Our Competition

We compete in the highly competitive and fragmented restaurant industry.

The restaurant industry is highly competitive and fragmented.

We compete primarily with quick service and fast casual concepts, and to a lesser extent, full-service restaurants.

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Our competition in these segments includes a variety of small locally owned restaurants, medium-sized regional restaurant concepts, and larger national restaurant concepts that provide some combination of dine-in, carry-out, drive-thru and delivery services to their guests.

We believe competition with these restaurants is based primarily on food quality, taste, ambiance, convenience, service speed, price and value.

We believe competition with these restaurants is based primarily on quality and innovation in the food products offered, price and perceived value, quality of service experience (including technological and other innovations), speed of service, personnel, advertising and other marketing efforts, brand identification, restaurant location, and image and attractiveness of the restaurants.

The restaurant industry is often affected by changes in consumer tastes;

national, regional or local economic conditions;

demographic trends;

traffic patterns;

the type, number and location of competing restaurants;

and consumers’ discretionary purchasing power.

We compete within each market with national and regional chains and locally-owned restaurants for guests, management and hourly personnel and suitable real estate sites.

In addition, expanding product offerings at fast casual and quick-service restaurants and the convenience of home delivery services, together with negative economic conditions, could cause consumers to choose less expensive alternatives or reduce the frequency of their restaurant visits.

We expect intense competition to continue in all of these areas.

Our Intellectual Property

Our intellectual property includes our trademarks and service marks registered with the United States Patent and Trademark Office (including Portillo’s ® and other names used by our restaurants), the trade dress of our restaurants, our websites and domain names (including our website at portillos.com and other websites and domain names used by our restaurants) and other unregistered intellectual property.

We take steps to enforce and maintain our intellectual property, but infringement, validity challenges and other risks may adversely affect or even eliminate our intellectual property.

Governmental Regulation and Environmental Matters

Regulation and Compliance

We are subject to extensive federal, state and local government regulation, including those relating to, among others, public health and safety, nutritional content labeling, zoning and fire codes, environmental protection, and employment regulations.

Failure to obtain or retain food or other licenses and registrations or exemptions would adversely affect the operations of restaurants.

Additionally, any difficulties, delays or failures in obtaining licenses, permits, registrations, exemptions, or approvals could delay or prevent the opening of, or adversely impact the viability of, a restaurant in a particular area.

The development of additional restaurants will be subject to compliance with applicable regulations, including those relating to zoning, land use, water quality and retention, and environment.

We believe federal and state environmental regulations have not had a material effect on operations, but more stringent and varied requirements of local government bodies with respect to zoning, land use and environmental factors, among others, could delay construction and increase development costs for new restaurants.

We are also subject to the Fair Labor Standards Act, the Immigration Reform and Control Act of 1986 and various federal, state and local laws governing such matters as minimum wages, exempt versus non-exempt, overtime, unemployment tax rates, workers’ compensation rates, citizenship requirements and other working conditions.

Our team members are all paid more than the applicable minimum wage in the area where they work, and increases in federal or state minimum wages or unemployment benefits may result in increases in the wage rates paid.

We are also subject to the Fair Labor Standards Act, the Immigration Reform and Control Act of 1986 and various federal, state and local laws governing such matters as minimum wages, exempt versus non-exempt, overtime, unemployment tax rates, paid leave, workers’ compensation rates, citizenship requirements and other working conditions.

Our team members are typically paid more than the applicable minimum wage in the area where they work, and increases in federal or state minimum wages or unemployment benefits may result in increases in the wage rates paid.

We are also subject to the Americans with Disabilities Act (the “ADA”), which prohibits discrimination on the basis of disability in public accommodations and employment, which may require us to design or modify our restaurants to make reasonable accommodations for disabled persons.

For a discussion of the various risks we face from regulation and compliance matters, see Part I, Item 1A "Risk Factors."

Our business is subject to seasonal fluctuations in that our revenues are typically nominally higher during the second, third and fourth quarters of the fiscal year.

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As a result of these factors, our financial results for any single quarter or for periods of less than a year are not necessarily indicative of the results that may be achieved for a full fiscal year.

Initial Public Offering

The Company's registration statement on Form S-1, as amended (Registration No.

Secondary Offerings

In the first quarter of 2023, the Company completed a secondary offering of 8,000,000 shares of the Company's Class A common stock at an offering price of $21.05 per share.

On April 5, 2023, the Underwriter exercised its overallotment option in part, to purchase an additional 620,493 shares of the Company's Class A common stock at an offering price of $21.05 per share (collectively the "Q1 2023 Secondary Offering and

Overallotment Option").

We used all of the net proceeds from the Q1 2023 Secondary Offering and Overallotment Option to purchase LLC Units and corresponding shares of Class B common stock from certain pre-IPO LLC Members and to repurchase shares of Class A common stock from the shareholders of the entities treated as corporations for U.S.

tax purposes that held LLC Units prior to the Transactions ("Blocker Companies") at a price per LLC Unit or share of Class A common stock, as applicable, equal to the public offering price per share of Class A common stock, less the underwriting discounts and commissions.

The proceeds from the Q1 2023 Secondary Offering and Overallotment Option were used to (i) purchase 2,269,776 existing shares of Class A common stock from the shareholders of the Blocker Companies and (ii) redeem 6,350,717 LLC Units held by the pre-IPO LLC Members.

In connection with the redemption, 6,350,717 shares of Class B common stock were surrendered by the pre-IPO LLC Members and canceled and the Company received 6,350,717 newly-issued LLC Units, increasing the Company's total ownership interest in Portillo's OpCo.

As a result, Portillo’s did not receive any proceeds from the offering, and the total number of shares of Class A common stock and Class B common stock did not change;

however, the number of outstanding shares of Class A common stock increased by the same number of the canceled shares of Class B common stock.

As of December 31, 2023, the Company owned 76.1% of Portillo's OpCo and the pre-IPO LLC Members owned the remaining 23.9% of Portillo's OpCo.

See the consolidated financial statements included in Part II, Item 8 "Financial Statements And Supplementary Data" for more information about the above-mentioned transactions.

Available Information

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We also make certain corporate governance documents available on our investor relations website, including our corporate governance guidelines, board committee charters, and code of business conduct.

Our code of business conduct applies to all team members, officers and directors.

Any future amendments or waivers from our code of business conduct for our principal executive officer, principal financial officers, principal accounting officer or controller, or persons performing similar functions will be disclosed on our website promptly following the date of such amendment or waiver.

The contents of our website are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

Portillo's Inc.

Form 10-K | 2

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What changed 10-K

Item 1. Business