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Item 1. Business

2025-02-25 compared with 2024-02-27 · 185 added, 188 removed, 127 unchanged (75% of the section changed)

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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").

Unless the context otherwise requires, references to "we," "us," "our," "Portillo's," the "Company" and other similar references refer to Portillo's Inc.

Portillo’s Inc.

Class A common stock trades on the Nasdaq under the symbol "PTLO." Unless the context otherwise requires, references to "we," "us," "our," "Portillo's," the "Company" and other similar references refer to Portillo's Inc.

and its subsidiaries, including Portillo’s OpCo.

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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 fries, homemade chocolate cake and signature chocolate cake shake.

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

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 to quickly and efficiently serve our guests.

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 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."

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

As of December 29, 2024, we owned and operated 94 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 .

As of December 29, 2024 , the Company owned 85.6% of Portillo's OpCo and the pre-IPO LLC Members owned the remaining 14.4% of Portillo's OpCo.

We relish the opportunity to create lifelong memories by igniting the senses with unrivaled food and experiences.

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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.

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

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

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 more than a delicious meal.

While our operating model is focused on getting delicious, made-to-order food to our guests quickly, we believe 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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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.

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

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

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

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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.

Our Italian beef is slow-roasted for four hours, thinly sliced, and served on freshly-baked French bread.

Then, it's dipped in hot gravy made with our homemade blend of seasonings that we've been perfecting for 60 years.

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 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 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.

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

Our restaurants are thoughtfully designed for both their variety of access modes and the overall guest experience.

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.

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

Our dining areas feature a variety of flexible seating arrangements designed to accommodate single diners, couples, families and large groups.

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 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.

Our catering offerings include buffet-style packages of our ready-to-eat favorites like Italian beef, sausages and meatballs, gourmet salads, pastas and whole cakes.

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 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.

Our direct shipping offerings include some of our most popular menu items, including Italian beef (8 sandwich or 20 sandwich pack), Chicago-style hot dogs (10 or 50 pack), sausages, chocolate cake and tamales.

Our Growth Strategies

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%.

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 guest experience to grow our volumes.

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

• 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.

Our strategic plan is comprised of four pillars, which guide our short-term objectives and form the basis for growth:

• Run World-Class Operations

• Innovate and Amplify the Portillo’s Experience

• Build Restaurants with Industry-Leading Returns

• Take Great Care of Our Teams

We believe that by focusing on the components of each of these simple, but focused, strategies we feed a virtuous cycle in which we take care of our team members, our team members take care of our guests, and our guests reward our shareholders.

Run World-Class Operations.

We believe that delivering a consistently exceptional guest experience, including having guests try our delicious food is one of the most effective forms of marketing.

By running world class operations, we will fuel Portillo’s same-restaurant sales growth.

The core tactics we use in this strategy are:

• Flexing our Multichannel Muscle :

Portillo’s aims to offer 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.

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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.

• Greatness in Drive-Thru :

Portillo’s pioneered a winning drive-thru model beginning in the 1980s, combining speed and hospitality via outside order takers, food runners, and multi-lane drive-thrus.

Our teams are focused on continuously improving and innovating the drive-thru experience to improve throughput and order accuracy.

All new restaurants are opened with drive-thru doors to aid our runners and improve the guest experience.

We have also started a camera vision test in select restaurants to provide operators with real-time actionable insights.

• Unrivaled Value in Fast Casual:

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 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.

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

To succeed moving forward, we will continue our pricing strategy combined with a focus on operational excellence and aim to remain an unrivaled value compared to fast casual competitors.

Innovate and Amplify the Portillo's Experience.

We believe one of the most effective ways to market Portillo’s is by having people experience our food firsthand.

Our efforts in field marketing, social media, digital engagement, advertising, and menu innovation support the following aspirations:

• Craveable & Fresh For Everyone :

Our industry-leading AUVs are bolstered by a broad menu that offers something truly craveable for everyone.

We constantly research our menu, our guests, and our competition to keep the menu fresh and relevant while also balanced to ensure operational efficiency.

◦ In 2024 we launched two new salads, our Chicken Pecan Salad with Bacon to appeal to health-driven foodies and our Spicy Chicken Chopped Salad, a new twist on a Portillo’s classic to increase visits from longtime fans.

Both items added excitement and variety to the menu while enhancing average ticket.

To celebrate the launch, we unveiled a limited-time brown paper bag with green stripes.

Similar to its predecessor, the new bag is 100% recyclable, bleach-free, and is made from fibers certified by the Sustainable Forestry Initiative.

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

◦ We enhance our menu with seasonal shakes and specialty cakes, offering something special throughout the year.

In Fall 2024, we launched our first new cake flavor in 20 years:

the Salted Caramel Spice Cake.

To celebrate, September 2024 became "Spice-Tember", in which we sold our new cake for $1 a slice with the purchase of an entree.

In October 2024, we also partnered with former Chicago Bear, Anthony "Spice" Adams, to create energetic and entertaining content, spotlighting the Salted Caramel Spice Cake in a fun and engaging way.

• Local & Experiential :

Whether it’s an influencer night for a launch of new menu items, hosting a community fundraiser, partnering with local and national sport teams, or a visit from our mobile food truck, lovingly dubbed “The Beef Bus,” we aim to create lifelong memories via grassroots field-marketing efforts.

In each of our markets we employ field marketing managers who partner with local restaurant General Managers to personalize a marketing plan and introduce Portillo’s to the local area.

We believe this approach creates a personal and emotional connection with the communities in which we operate and creates incremental returns on our marketing investments.

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.

Our attractive business model generates strong operating margins and cash flow.

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 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.

When a compelling opportunity arises, Portillo’s also utilizes traditional advertising in Chicagoland to drive frequency and outside Chicagoland to drive trial and awareness.

Below are a few advertising and marketing highlights of the fiscal year ended December 29, 2024 ("fiscal 2024") :

◦ We launched an ad campaign in Arizona in the first quarter of 2024 to drive trial and awareness.

◦ In April, we re-launched our Famous Five combo meal menu that features a classic entree, side, and drink.

◦ We re-launched our advertising in the Chicagoland market.

Our comprehensive advertising campaign coincided with the start of the NFL season.

We continued the theme of "Portillo’s.

It always sounds good.” 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 area.

• Digitally Engage Guests:

Our guests increasingly interact with Portillo’s in the digital space, whether engaging with us on social media, learning about us through digital advertising, or placing an order on our app or in one of our new self-order kiosks.

Kiosks have been a resounding success, adding incrementality to the check and providing a stellar guest experience.

In 2025 we are launching our "Portillo's Perks” TM loyalty program to drive and reward repeat visits and make the Portillo’s experience even more engaging for our longtime fans.

Build Restaurants with Industry-Leading Returns.

En route to our current goal of over 900 US restaurants (see “Our Growth” below for more details) we continue to innovate our business model in ways that meet a rapidly changing economic and consumer environment while delivering outstanding returns to investors.

• Best-In-Class AUVs :

The average Portillo’s generates per-restaurant sales that sit far atop the fast-casual and limited-service restaurant segments.

A key element of our strong restaurant-level adjusted EBITDA margin, we aim to keep our average unit volumes ("AUVs") high via discerning market and site selection.

• Optimize Capital Investments :

We are continuously refining our restaurant prototypes while investing in existing restaurants to drive great guest experiences and great returns.

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

Restaurants built in 2023 were approximately 7,700 square feet with a 65-foot production line all while capable of generating an equivalent AUV.

In 2024 we opened two restaurants with our “Restaurant of the Future” prototype, a 6,250 square foot restaurant with a 47-foot production line that is more efficient to build and also better reflects the way consumers interact with our brand today.

Our teams will continue to make strides in this space to further reduce our build costs and achieve attractive returns.

• Scale Quickly:

Having scale in markets creates brand awareness, drives sales, and expands profit margins.

We aim to have minimum efficient scale (6-8 restaurants) in new markets within 24 months of our first opening.

Our entry into the Dallas-Fort Worth, Texas market is a great example of this strategy, where our first restaurant opened in January of 2023 and our 7th restaurant opened in December 2024.

• Replicable Processes :

Scaling quickly requires standardizing leases and deal structures, leveraging select general contractors and vendors, and standardizing the base of our prototypes.

With these scalable and predictable processes, we will be able to adhere to or beat a target 18-month development cycle time and be more meticulous in our market penetration strategies.

Take Great Care of Our Teams.

Our team members put in the hard work to help create happy guests (and value for our shareholders).

To attract, train, retain, and engage the best team members we strive to offer great rewards, talent management, learning, development, and people technology programs that drive obsession with Portillo's.

Identifying, developing, and placing internal talent fuels our increasing rate of growth.

• Meaningful Work Environment:

We cultivate an environment where every individual feels valued, empowered to share ideas, and actively engaged in their work.

We prioritize clear expectations and communication while providing our team with the necessary tools and resources for success.

This creates a work environment that enhances overall experience and productivity for our team members resulting in happy guests and industry-leading retention.

• Total Rewards that Matter :

Delivering competitive compensation, benefit, and recognition programs attracts great talent and helps create happy, long-term team members.

We will continue to evolve rewards, specifically those that differentially drive retention.

We continuously evaluate our wages with the goal of paying above market in our restaurants.

• Igniting Talents and Careers:

Identifying, nurturing, and developing talent is critical to our growth strategy as we aim to open each new restaurant with an experienced Portillo’s manager.

Our Ignite development programs identify high potential individuals to become hourly supervisors, restaurant managers, assistant general managers ("AGMs"), general managers ("GMs"), and multi-unit Market Managers and develops their skills via off-site leadership development and in-field shoulder-to-shoulder coaching.

These programs demonstrate a clear and enticing career path for our team members and keeps our talent pipeline robust.

At the end of 2024, we have 70+ team members in-line for future restaurant management positions.

• Enhanced Digital Workplace Experience:

Just as consumers engage with their favorite brands digitally so do team members.

In 2024 we launched Portillo’s Connect, an all-in-one communications platform that allows team members and managers to receive critical communications, engage with one another via social media, access resources such as recipes and standard operating procedures, and much more.

This strategy allows individuals to connect with the people they work with, support their growth and development, and enhance their well-being and sense of belonging.

We are in the early stages of our nationwide growth plan, with 94 locations across ten states at the end of fiscal 2024, including C&O.

In fiscal 2024, we opened 10 new restaurants, representing 12% unit growth.

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 current focus is in the Sunbelt, with growth across markets in Arizona, Texas, and Florida.

We are also actively sourcing sites in Georgia, Colorado, Nevada, North Carolina, and South Carolina.

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, including, a long-term opportunity to grow to more than 900 restaurants domestically and we are well-positioned for global growth in the future.

Of the 900 domestic restaurants- to which we aspire, we currently 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 third 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.

Our Team – Human Capital Management

Our team member base, as of December 29, 2024, consisted of 8,512 team members.

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 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.

This included 216 Restaurant Support Center (“RSC”) team members, 482 restaurant managers, AGMs, and GMs, and 7,714 restaurant hourly team members in positions such as crew chief, training lead, food production and guest services.

We also have 88 hourly team members, which also includes crew chiefs, and 12 salaried team members, which includes managers and senior managers, at our commissaries.

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

Certain of our team members at our commissaries in Addison, IL and Aurora, IL voted on April 13, 2023 and April 30, 2024, respectively, in favor of being represented by a union.

We filed objections to the 2023 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.

We are actively pursuing litigation to set aside the election results.

We filed an objection to the 2024 election with the NLRB on May 7, 2024, asserting that the promises made by the union and its agents prevented a free and fair election.

Although we have not received other petitions to unionize, it is possible that additional team members may seek to be represented by labor unions in the future.

See our risk factor “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” identified in Part I, Item 1A of this Form 10-K.

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

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 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 have implemented and are executing several initiatives to support our objectives to attract, develop and retain team members, including at the executive level.

Values-Driven, People-Centric Culture .

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:

We aim to 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 reflects the communities in which we operate.

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

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

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

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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.

We believe these values extend beyond our restaurants, to every Portillo's team member.

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.

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

Leadership Development.

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We have also partnered with Better Up Coaching to give our leaders feedback and opportunities for personal growth.

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.

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.

Our leadership program, Ignite, continues to be a stronghold in our growth and development strategy.

The creation of a strong talent pipeline while retaining our high performing team members continues to be our mission.

Talent management continues to be a top priority with our yearly performance review process focused on Portillo’s seven leadership traits to be successful in the organization.

Our growth, development, and retention strategies align 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 experience, and we hold regularly scheduled development programs throughout the year for each level of leadership.

We host webinars, workshops, and conferences each year on a variety of topics that are accessible to all team members.

Further, we continue to 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 solidify their sense of belonging.

Engagement & Experience .

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

In 2024, we launched a digital engagement platform, Portillo’s Connect, to engage team members at all levels across the Company.

This forum allows our teams to recognize each other, celebrate their wins, and share information and ideas.

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.

In 2024, we maintained our team member engagement in alignment with the restaurant industry at large.

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 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.

Our team members reflected they know what is expected of them at work and they have the necessary materials to do their jobs well, which both strongly influence overall engagement.

Our team members also reflected they understand how Portillo’s values impact how they do their jobs.

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

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

For our RSC team members, we provide a hybrid work environment, with our teams coming in to the office for collaboration three days a week.

In the spirit of continuing education, we also have a "no meeting" policy for Friday afternoons.

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From Memorial Day through Labor Day, team members can also take this time for personal use and get an early start to the weekend.

In 2024, we hosted our annual General Manager Summit, bringing together our restaurant leaders from across the country to align on company priorities, share best practices, and celebrate achievements.

This event underscores our commitment to leadership development, operational excellence, and fostering a culture of collaboration.

We also introduced our inaugural RSC Summit, designed to strengthen connections between corporate and restaurant teams.

This event focused on enhancing cross-functional collaboration, improving support for our operations, and driving innovation to achieve our long-term strategic goals.

The Summits are critical initiatives for strengthening leadership, fostering teamwork, and achieving business objectives.

Total Rewards.

The physical, financial, and mental well-being of our team members remains our top priority, and we continue to invest in their success.

The physical, financial, and mental well-being of our team members remains a top priority, and we continue to invest in their success.

We believe in a total rewards philosophy of providing top quartile pay in our restaurants, especially across our leadership positions.

We remain focused on compensating our team members equally across gender and race/ethnicity.

We remain focused on compensating our team members fairly and equitably based on their roles and responsibilities.

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

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.

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

In 2024, we completed a comprehensive benchmark analysis for our positions and made pay adjustments to preserve our competitive edge.

We also enhanced our benefits package by transitioning our 401(k) plan to a new vendor that offers our team members a more streamlined experience and additional financial education resources and opportunities.

During 2024, we enhanced existing benefits and offered new ones.

We upgraded all medical, dental, and vision plans with the introduction of four coverage tiers, to offer greater flexibility.

Our new benefits in 2024 include a commuter program for parking and transit expenses and expanded discount programs, including BenefitsHub for exclusive savings on cars, restaurants, and more.

We also integrated OnePass which offers fitness and meal service discounts.

Finally, we enhanced educational opportunities through partnerships and our Portillo’s Greatness Scholarship Program, reinforcing our commitment to helping our team members achieve personal and professional goals.

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 2024, we issued 46,959 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 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.

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

Heart of Portillo's Foundation.

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

In 2024, many of our leaders received annual equity award grants, providing our team with opportunities to own Portillo's shares, which we believe supports retention of key team members and further drives engagement.

Heart of Portillo's.

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.

Our core values of Family, Greatness, Energy and Fun are the “Heart of Portillo’s” and are ingrained in everything we do as a company.

They guide how we support our Portillo's family, from our recruiting efforts, to the education of our team members, to making sure our Portillo’s family is an accurate reflection of the communities in which we operate.

It is our goal to make sure everyone across Portillo’s knows they are an important part of our company.

In 2024, the “Heart of Portillo’s Fund,” an IRC section 501(c)(3) charitable fund, raised over $200,000 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.

In 2024, 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, negative impact from a natural disaster, and other financial hardships.

Our Sourcing and Supply Chain

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

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 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.

Portillo’s strongly believes in engaging with supplier partners who share a similar approach to our corporate values and practices.

We align with key strategic partners that are identified through an evaluation process t o ensure they can satisfy our standards and expectations.

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

We review and update our contingency plans 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 makes any necessary adjustments or institutes alternate programs.

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

We expect all suppliers to meet rigorous standards set forth in the code, which cover areas such as human rights, business integrity, and environmental management.

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.

Our main line 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.

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.

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

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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.

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.

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 safety team.

Our commissaries also undergo food safety and quality audits on a regular basis and are regulated by the U.S.

Department of Agriculture ("USDA") and Food and Drug Administration ("FDA").

Our Competition

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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.

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 rights.

Governmental Regulation and Environmental Matters

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

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, paid leave, workers’ compensation rates, citizenship requirements and other working conditions.

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 the environment.

We believe federal and state environmental regulations have not had a material effect on our 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 classification, 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.

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.

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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.

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.

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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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.

What changed 10-K

Item 1. Business