You should carefully consider each of the following risk factors in conjunction with other information provided in this Annual Report on Form 10-K and in our other public disclosures.
−Removed: Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, liquidity or access to sources of financing, and consequently, the market value of our Class A common stock.
+Added: Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, liquidity or access to sources of financing, and/or the market value of our Class A common stock.
These risks could cause our future results to differ materially from historical results and from guidance we may provide regarding our expectations of future financial performance.
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We are vulnerable to changes in economic conditions, increases in food and commodity costs and consumer preferences.
−Removed: Like other companies in the restaurant industry, we are subject to volatility in food and commodity costs and availability that may be outside of our control, including general economic conditions, inflation, labor shortages, seasonal fluctuations, weather and climate conditions, energy costs, global demand, trade protections and subsidies, food safety issues, infectious diseases, possible terrorist activity, cyberattacks, transportation issues, currency fluctuations, product recalls, and government regulatory schemes.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 2
−Removed: This has affected our profitability and reputation in the past and could do so in the future.
−Removed: While a portion of our commodities are subject to contract pricing, as our contracts expire we may unable to successfully (re)negotiate terms that protect us from inflation or the portion not covered by pricing might increase unexpectedly, creating unplanned price inflation.
+Added: Like other companies in the restaurant industry, we are dependent upon food and commodity availability and their costs impact our business and results.
+Added: Food and commodity costs and availability can be volatile and are affected by factors outside of our control, including general economic conditions, inflation, labor shortages, seasonal fluctuations, weather and climate conditions, energy costs, global demand, trade protections and subsidies, food safety issues, infectious diseases, possible terrorist activity, cyberattacks, transportation issues, currency fluctuations, product recalls, and government regulations, among others.
+Added: Food and commodity cost volatility has affected our profitability and reputation in the past and could do so in the future.
+Added: While a portion of our commodities are subject to contract pricing, as our contracts expire we may unable to successfully (re)negotiate terms that protect us from inflation or the portion not covered by contract pricing might increase unexpectedly, creating unplanned price inflation.
We experienced 4.2% and 5.5% commodity price inflation for the years ended December 29, 2024 and December 31, 2023, respectively.
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These changes to our menu could negatively impact our restaurant traffic and operational results during the shortage and thereafter.
−Removed: Additionally, we may be unable to offset a portion or even all of a future cost increase through menu price increases.
−Removed: Competitive conditions may limit our menu pricing flexibility and implementing menu price increases may change our guests’ visit frequencies or purchasing patterns.
−Removed: Our industry depends on consumer discretionary spending and is affected by changes in consumer tastes, and macro- and micro-economic conditions (including economic downturns, inflation or increased food or energy costs).
+Added: Additionally, we may be unable to offset all or even a portion of a future cost increase through menu price increases.
+Added: Competitive conditions may
+Added: Portillo's Inc.
+Added: Form 10-K | 2
+Added: limit our menu pricing flexibility and implementing menu price increases may change our guests’ visit frequencies or purchasing patterns.
+Added: Our industry depends on consumer discretionary spending and is affected by changes in consumer tastes, and macro- and micro-economic conditions (including economic downturns, consumer sentiment, inflation or increased food or energy costs).
Factors such as traffic patterns, weather, fuel prices, local demographics, local regulations and the competitive landscape may adversely affect the performances of our individual locations.
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In new markets, the period before average sales stabilize is less predictable because of our limited knowledge of these markets and consumers’ limited awareness of our brand.
−Removed: In addition, our AUV and same-restaurant sales may not increase at the rates our existing restaurants have achieved over the past several years.
−Removed: Our ability to operate new restaurants profitably and increase AUV and same-restaurant sales will depend on many factors, some of which are beyond our control.
+Added: In addition, our AUVs and same-restaurant sales may not increase at the rates our existing restaurants have achieved over the past several years.
+Added: Our ability to operate new restaurants profitably and increase AUVs and same-restaurant sales will depend on many factors, some of which are beyond our control.
We employ operating and financial targets, but new restaurants may not meet these targets or may take longer than anticipated to do so.
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If we cannot fund capital expenditures using cash flows from operations, funds will need to be borrowed or otherwise obtained or capex investments will be delayed or eliminated, which could make those restaurants less attractive to guests and materially, adversely affect the business.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 3
Our same-restaurant sales may be lower than we expect in future periods.
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As our restaurant count increases and we expand into new markets, we expect to increase our marketing investment.
−Removed: If these initiatives are unsuccessful, we may incur expenses without the benefit of higher revenues, which could have a material adverse effect on our Results.
+Added: If these initiatives are unsuccessful, we may incur expenses without the benefit of higher revenues,
+Added: Portillo's Inc.
+Added: Form 10-K | 3
+Added: which could have a material adverse effect on our Results.
Our marketing efforts rely heavily on the use of social media.
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One or more food safety instances in one of our restaurants could negatively affect sales at nearby or even all our restaurants, especially if highly publicized.
−Removed: Other restaurant chains have experienced incidents related to food-borne illness incidents that have had material adverse impacts on their operations, and it’s possible we could suffer a similar impact if a similar incident occurred at one of our restaurants.
−Removed: Additionally, even if food-borne illnesses were not identified at our restaurants, our restaurant sales could be adversely affected if instances of food-borne illnesses at other restaurant chains were highly publicized.
+Added: Other restaurant chains have experienced incidents related to food-borne illness incidents that have had material adverse impacts on their operations, and it’s possible we could suffer a similar impact if one or more of our restaurants were to experience a material food safety incident.
+Added: Additionally, even if food-borne illnesses are not identified at our restaurants, our restaurant sales could be adversely affected if instances of food-borne illnesses at other restaurant chains were highly publicized.
We face significant competition for guests, and our inability to compete effectively may affect our traffic, our sales and our operating profit margins, which could have a material adverse effect on our Results.
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Our continued success also depends on the popularity of our menu and guest experience.
−Removed: Consumer tastes, nutritional and dietary trends, traffic patterns and the type, number, and location of competing restaurants often affect restaurant performance, and our competitors may react more
−Removed: Portillo's Inc.
−Removed: Form 10-K | 4
−Removed: effectively to changes.
+Added: Consumer tastes, nutritional and dietary trends, traffic patterns and the type, number, and location of competing restaurants often affect restaurant performance, and our competitors may react more effectively to changes.
In the past, some of our competitors have implemented promotional programs that provide price discounts or reward programs, and they may continue to do so in the future.
If we cannot compete effectively, our traffic, restaurant sales and restaurant operating profit margins could decline, which could have a material adverse effect on our Results.
−Removed: Should our competitors increase spending on marketing and other initiatives or our marketing expenditures decrease, or our advertising, promotions, and restaurant designs and locations be less effective than our competitors, it could have a material adverse effect on our Results .
+Added: If our competitors increase spending on marketing and other initiatives or our marketing expenditures decrease, or our advertising, promotions, and restaurant designs and locations are less effective than our competitors, it could have a material adverse effect on our Results .
Our restaurant base is geographically concentrated in the Midwestern United States, and we could be negatively affected by conditions specific to that region.
Our restaurants in the Midwestern United States represented approximately 71% of our restaurants as of December 29, 2024.
−Removed: Our restaurants in the Chicagoland area represented approximately 49% of our restaurants as of December 31, 2023.
+Added: Our restaurants in the Chicagoland area represented approximately 45% of our total restaurants and 54% of restaurants in our comparable base, as of December 29, 2024.
+Added: Our comparable restaurant base is defined as the number of restaurants open for at least 24 full fiscal periods.
Adverse changes in demographic, unemployment, economic, regulatory or weather conditions in the Midwestern United States have had, and may continue to have, material adverse effects on our Results.
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Our competitors could open additional restaurants in the Midwestern United States, which could result in reduced market share for us in this key geographic region, which could have a material adverse effect on our Results.
+Added: Portillo's Inc.
+Added: Form 10-K | 4
Damage to our reputation and negative publicity could have a material adverse effect on our Results.
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Any incident that erodes our consumer loyalty could significantly damage our business.
−Removed: We may be adversely affected by negative publicity relating to food quality, the safety, sanitation and welfare of our restaurant facilities, guest complaints or litigation, health inspection scores, integrity of our suppliers’ food processing and other policies, practices and procedures, team member relationships and welfare or other matters at one or more of our restaurants.
+Added: We may be adversely affected by negative publicity relating to food quality, the safety, sanitation and welfare of our restaurant facilities, guest complaints or litigation, health inspection scores, integrity of our suppliers’ food processing and other policies, practices and procedures, team member relationships and welfare, employment practices or other matters at one or more of our restaurants.
Furthermore, similar negative publicity or occurrences with respect to other restaurants could also decrease our guest traffic and have a similar material adverse effect on our business.
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For example, we, or other restaurant companies generally, have and could again come under criticism from animal rights and welfare activists for our business practices or those of our suppliers.
+Added: We may also face scrutiny and criticism concerning sustainability matters, environmental stewardship, and other social issues.
Such criticisms could impair our brand, our restaurant sales, our hiring, and our expansion plans.
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As the digital space continues to evolve, our technology must also evolve to stay competitive.
−Removed: If we do not maintain and innovate competitive digital systems, our digital business and sales may be adversely affected as we lose guests to competitors.
+Added: If we do not maintain and innovate competitive digital systems, including our growing use of artificial intelligence in our operations, our digital business and sales may be adversely affected as we lose guests to competitors.
We rely on third-parties for our ordering and payment platforms.
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If any third-party delivery provider we partner with experiences damage to their brand image, we may also see ramifications due to our partnership with them.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 5
We have a limited number of suppliers and distributors for certain key ingredients.
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Any prolonged disruption in the operations of our two commissaries could harm our business.
−Removed: We currently operate two commissaries in Illinois, which produce all the Italian beef, gravy and sweet peppers used in our restaurants.
+Added: We currently operate two commissaries in Illinois, which produce the Italian beef, gravy and sweet peppers used in our restaurants.
While we plan to continue investing in additional supply chain capacity in the future, as necessary, any prolonged disruption in the operations of any of our existing facilities, whether due to technical, operational or labor difficulties, product contamination, destruction or damage to the facility, limited capacity or other reasons, could adversely affect our Results.
+Added: Portillo's Inc.
+Added: Form 10-K | 5
We depend on our executive officers and certain other key team members, the loss of whom could have a material adverse effect on our business.
We rely upon the accumulated knowledge, skills and experience of our executive officers and certain other key team members.
−Removed: Our chief executive officer has been with us for more than five years and our executive officers have numerous years of experience in the food service industry.
+Added: Our chief executive officer has been with us for more than five years and many of our executive officers have numerous years of experience in the food service industry.
The loss of any of our executive officers could have a material adverse effect on our Results, as we may be unable to find suitable replacements on a timely basis, without incurring increased costs, or at all.
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Occupational Safety and Health Act, which governs worker health and safety, the U.S.
−Removed: Fair Labor Standards Act, which governs such matters as minimum wages and overtime, and a variety of federal, state and local laws that govern employment law matters like employee classifications, unemployment tax rates, workers’ compensation rates, family leave, working conditions, safety standards, immigration status, payroll taxes, discrimination, and citizenship requirements.
+Added: Fair Labor Standards Act, which governs such matters as minimum wages and overtime, and a variety of federal, state and local laws that govern employment law matters like employee classifications, unemployment tax rates, workers’ compensation rates, family leave, paid leave, working conditions, safety standards, immigration status, payroll taxes, discrimination, and citizenship requirements.
In addition, under the U.S.
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We currently participate in the “E-Verify” program, an Internet-based, free program run by the U.S.
−Removed: government to verify employment eligibility, in Arizona and Florida, which are the only states in which we operate where participation is required.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 6
+Added: government to verify employment eligibility in states where participation is required.
However, use of the “E-Verify” program does not guarantee that we will properly identify all applicants who are ineligible for employment.
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Our business is subject to the risk of litigation by team members, consumers, suppliers, shareholders or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation.
−Removed: The outcome of litigation, particularly class action and regulatory actions, is difficult to assess or quantify.
−Removed: In recent years, restaurant companies, including us, have been subject to lawsuits, including class actions, alleging violations of federal and state laws regarding workplace and employment conditions, discrimination and similar matters.
+Added: The outcome of litigation, particularly class action and regulatory actions, is difficult to predict or quantify.
+Added: In recent years, restaurant companies, including us, have been subject to lawsuits, including class actions, alleging violations of federal and state laws regarding workplace and employment conditions, discrimination, immigration status and similar matters.
Some lawsuits have resulted in substantial damage awards.
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A judgment or other liability in excess of our insurance coverage or any adverse publicity resulting from claims could have a material adverse effect on our Results.
−Removed: On April 13, 2023, certain of our team members at one of our commissaries voted in favor of being represented by a union.
−Removed: We filed objections to the election with the National Labor Relations Board on April 19th, 2023, asserting that the union and its agent's promises prevented a free and fair election.
−Removed: We have appealed to the NLRB to set aside the election results.
−Removed: Although we have not received other petitions to unionize, it is possible that additional team members may choose to be represented by labor unions in the future.
−Removed: If a significant number of our team members were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements, it could have a material adverse effect on our Results.
−Removed: In addition, a labor dispute involving some or all our team members may harm our reputation, disrupt our operations and reduce our revenues, and resolution of disputes could increase our costs.
+Added: 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.
+Added: We filed objections to the Addison 2023 election with the National Labor Relations Board ("NLRB") on April 19, 2023, asserting that the promises made by the union and its agent prevented a free and fair election.
+Added: We are actively pursuing litigation to set aside the election results.
+Added: We filed an objection to the Aurora 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.
+Added: Our objections were denied and we filed exceptions to this decision with the NLRB.
+Added: 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.
+Added: If a significant number of our team members were to become unionized and collective bargaining agreement terms were significantly different from our
+Added: Portillo's Inc.
+Added: Form 10-K | 6
+Added: current compensation arrangements, it could have a material adverse effect on our Results.
+Added: In addition, a labor dispute involving some or all our team members may harm our reputation, disrupt our operations and reduce our revenues, and resolution of labor disputes could increase our costs.
Further, if we enter into a new market with unionized construction companies, or the construction companies in our current markets become unionized, construction and build-out costs for new restaurants in such markets could materially increase.
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Revenues and profit, if any, generated at a relocated restaurant may not equal those generated at the existing restaurant.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 7
Our business is subject to risks related to our sale of alcoholic beverages.
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Goodwill & Intangible Assets in the notes to the consolidated financial statements for additional information.
+Added: Portillo's Inc.
+Added: Form 10-K | 7
Changes to estimates related to our property, fixtures and equipment and definite-lived intangible assets or operating results that are lower than our current estimates at certain restaurant locations may cause us to incur impairment charges or accelerate the amortization on certain long-lived assets, which could have a material adverse impact on our results of operations.
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In addition, we may experience increased costs to achieve our sustainability goals, which could have a material adverse impact on our Results.
−Removed: We may also experience backlash from individuals, organizations and investors who do not support such initiatives.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 8
+Added: We may also experience backlash from individuals, organizations and investors who do not support such initiatives, including those who support the enactment of “Anti-ESG” legislation or policies.
+Added: Our inability or failure to execute on a comprehensive business continuity plan at our Restaurant Support Center following a disaster or force majeure event could have a material adverse impact on our Results.
+Added: Many of our corporate systems and processes and corporate support for our restaurant operations are centralized at one location.
+Added: We have disaster recovery procedures and business continuity plans in place to address crisis-level events, including hurricanes and other natural disasters, and back up and off-site locations for recovery of electronic and other forms of data and information, and events like the COVID-19 pandemic have provided a limited test of our ability to manage our business remotely.
+Added: However, if we are unable to fully implement our disaster recovery plans, we may experience delays in recovery of data, an inability to perform vital corporate functions, tardiness in reporting and compliance requirements, a failure to adequately support field operations and other breakdowns in normal communication and operating procedures that could have a material adverse effect on our financial condition, results of operation and exposure for administrative and other legal claims.
+Added: In addition, these threats are constantly evolving, which increases the difficulty of accurately and timely predicting, planning for and protecting against such threats.
+Added: As a result, our disaster recovery procedures and business continuity plans may not adequately address all threats we face or protect us from resulting losses.
Risks Related to Our Indebtedness
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If we are unable to pay our debts on time, credit ratings agencies may downgrade our credit rating, which may make it more difficult or expensive to refinance our existing debt or to obtain additional debt or equity financings in the future.
−Removed: Events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy certain financial covenants that apply under our credit agreements and we cannot guarantee that our lenders will waive any failure to satisfy such financial covenants.
+Added: Events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy certain financial
+Added: Portillo's Inc.
+Added: Form 10-K | 8
+Added: covenants that apply under our credit agreements and we cannot guarantee that our lenders will waive any failure to satisfy such financial covenants.
Risks Related to Our Organizational Structure
The interests of Berkshire may conflict with our interests or the interests of the holders of our Class A common stock in the future.
−Removed: Berkshire Private Equity continues to own a significant percentage of our common stock.
+Added: Berkshire Partners, our largest shareholder as of December 29, 2024, continues to own a significant percentage of our common stock.
Berkshire engages in a range of investing activities, including investments in restaurants and other consumer-related companies.
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The foregoing factors, as well as the significant common stock ownership by Berkshire, could make acquisition of our Class A common stock less desirable, which, under certain circumstances, could reduce its market value.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 9
We are a holding company and our principal asset is our ownership of LLC Units in Portillo’s OpCo.
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Our Board, in its sole discretion, will make any determination from time to time with respect to the use of any such excess cash so accumulated, but we will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our shareholders.
−Removed: If we do not distribute such excess cash as dividends or otherwise undertake ameliorative actions, holders of our LLC Units (other than Portillo’s Inc.) may benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following a redemption or exchange of their LLC Units, notwithstanding that such holders of our LLC Units (other than Portillo’s Inc.) may previously have participated as holders of LLC Units in distributions by Portillo’s OpCo that resulted in such excess cash balances at Portillo’s Inc.
+Added: If we do not distribute such excess cash as dividends or otherwise undertake ameliorative actions, holders of our LLC Units (other than Portillo’s Inc.) may benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following a redemption or exchange of their LLC Units, notwithstanding that such holders of our LLC Units (other than Portillo’s Inc.) may previously
+Added: Portillo's Inc.
+Added: Form 10-K | 9
+Added: have participated as holders of LLC Units in distributions by Portillo’s OpCo that resulted in such excess cash balances at Portillo’s Inc.
Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the TRA Parties that will not benefit holders of our Class A common stock to the same extent that it will benefit the TRA Parties, including substantial cash payments.
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The amount of existing tax basis and anticipated tax basis adjustments and utilization of tax attributes, and the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of redemptions or exchanges by the pre-IPO LLC Members, the price of shares of our Class A common stock at the time of the redemptions or exchanges, the extent to which such redemptions or exchanges are taxable, the amount of gain recognized by such holders of LLC Units, the amount and timing of the taxable income allocated to us or otherwise generated by us in the future, the portion of our payments under the Tax Receivable Agreement constituting imputed interest and the federal and state tax rates then applicable.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 10
In certain cases, payments under the Tax Receivable Agreement to the TRA Parties may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement and may impair our ability to consummate change of control transactions or negatively impact the value received by owners of our Class A common stock.
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If the outcome of any such challenge would reasonably be expected to materially affect a recipient’s payments under the Tax Receivable Agreement, then we will not be permitted to settle or fail to contest such challenge without the TRA Party’s consent (not to be unreasonably withheld or delayed).
−Removed: The TRA Parties’ interests may differ from or conflict with our interests and your interests and they may exercise their consent rights in a manner adverse to our interests and your interests.
+Added: The TRA Parties’ interests may differ from or conflict with our interests and they may exercise their consent rights in a manner adverse to our interests.
Payments made under the Tax Receivable Agreement could significantly exceed any tax savings that we realize from the tax attributes that are the subject of the Tax Receivable Agreement.
1 unchanged sentence
Excess cash payments made by us to a TRA Party will be netted against any future cash payments, if any, that we might otherwise be required to make to such TRA Party under the Tax Receivable Agreement once a challenge is finally settled or determined.
+Added: Portillo's Inc.
+Added: Form 10-K | 10
+Added: Our business and operations could be negatively affected if we become the target of any securities litigation or shareholder activism efforts, which could cause us to incur significant expenses, hinder execution of our growth strategy and impact our stock price.
+Added: After periods of volatility in the market price of a company’s securities, securities class action litigation has at times been brought against the company experiencing such volatility.
+Added: Publicly-traded companies may also become the target of shareholder activism campaigns, which could take many forms or arise in a variety of situations.
+Added: Due in part to the potential volatility of our stock price, we may become the target of securities litigation or shareholder activism efforts.
+Added: Securities litigation and shareholder activism, including proxy contests, could result in substantial costs and legal fees and divert management’s and our Board of Directors’ attention and resources from our day-to-day operations.
+Added: Additionally, securities litigation and shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel.
+Added: Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism matters.
Risks Related to Intellectual Property, Information Technology, and Data Security
4 unchanged sentences
If our efforts to protect our IP are inadequate or if any third-party misappropriates, infringes, dilutes or otherwise violates our IP, the value of our IP may be harmed.
−Removed: For example, failure to enforce our trademarks, whether in print, on the Internet or through social media or other media, could prevent us from challenging third parties who use trademarks similar to ours, which may cause consumer confusion, harm the public perception of our brand, prevent our brand and branded products from achieving and maintaining market acceptance and cause a material adverse effect on our Results.
+Added: For example, failure to register or enforce our trademarks, whether in print, on the Internet or through social media or other media, could prevent us from successfully challenging third parties who use trademarks similar to ours, which may cause consumer confusion, harm the public perception of our brand, prevent our brand and branded products from achieving and maintaining market acceptance and cause a material adverse effect on our Results.
There can be no assurance that the steps we have taken to protect our IP in the United States will be adequate or will obtain or maintain any competitive advantage.
−Removed: It’s possible that third parties will assert claims of infringement, misappropriation or other violations of intellectual property against us, or assert claims that portion of our IP is invalid or unenforceable.
+Added: It is possible that third parties will assert claims of infringement, misappropriation or other violations of intellectual property against us, or assert claims that a portion of our IP is invalid or unenforceable.
Claims decided against us could invalidate or narrow our IP or allow competing uses, which could have a material adverse effect on our Results.
−Removed: Additionally, an infringement or misappropriation claim decided against us could result in our being required to pay damages, cease using our IP, develop or adopt non-infringing intellectual property or acquire a license to the third-party
−Removed: Portillo's Inc.
−Removed: Form 10-K | 11
−Removed: intellectual property that is the subject of the asserted claim.
+Added: Additionally, an infringement or misappropriation claim decided against us could result in us being required to pay damages, cease using our IP, develop or adopt non-infringing intellectual property or acquire a license to use the third-party intellectual property that is the subject of the asserted claim.
Regardless of outcome, there could be significant expenses associated with the defense of such a claim.
−Removed: We may also from time to time have to assert claims against third parties and initiate litigation in order to enforce our IP.
+Added: We may also from time to time have to assert claims against third parties and initiate litigation in order to defend our IP.
Such litigation could result in substantial costs and diversion of resources, could be protracted with no certainty of success, or could fail to achieve an adequate remedy.
Any of these occurrences could have a material adverse effect on our Results.
−Removed: Security breaches, system interruptions or a material failure of our system could disrupt our operations, compromise confidential personally identifying information, subject us to loss, harm our business, and have a material adverse impact on our business, financial condition and results of operations.
−Removed: Our information technology systems, which in some cases rely on third-party providers, have in the past, and may in the future experience service interruptions, degradation or other performance problems because of hardware and software defects or malfunctions, distributed denial-of-service and other cyberattacks, infrastructure changes, human error, earthquakes, hurricanes, floods, fires, natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses, ransomware, malware, or other events.
−Removed: Our systems also may be subject to break-ins, sabotage, theft, and intentional acts of vandalism perpetrated by criminal third parties, third parties we do business with or team members.
−Removed: Our reliance on third parties increases our exposure to such risks as we exercise less control over such persons.
+Added: Security breaches, system interruptions, material failure of our system, or complications with the implementation or usage of our new enterprise resource planning system could disrupt our operations, compromise confidential personally identifying information, subject us to loss, harm our business, and have a material adverse impact on our business, financial condition and results of operations.
+Added: Our information technology systems, which in some cases rely on third-party providers, have in the past, and may in the future, experience service interruptions, degradation or other performance problems because of hardware and software defects or malfunctions, distributed denial-of-service and other cyberattacks, infrastructure changes, human error, natural/weather disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses, ransomware, malware, or other events.
+Added: Our systems are also subject to break-ins, sabotage, theft, and intentional acts of vandalism perpetrated by criminal third parties, third parties we do business with, or team members.
+Added: Our reliance on third parties increases our exposure to such risks as we cannot exercise direct control over such persons / entities.
While we endeavor to keep all systems current, there can be no guarantee that we can update and maintain our systems at all times.
1 unchanged sentence
Any such failure could lead to website downtime, disruptions to our information technology systems, or malicious behavior by threat actors.
−Removed: Our business requires the collection, transmission, and retention of large volumes of guest and team member data, including personally identifiable information, thought information technology systems maintained by us or vendors retained by us.
−Removed: In particular, our omni-channel approach relies in large part on our information technology systems to operate successfully and allow for capabilities like mobile order and pay, third-party delivery, and digital menu boards.
−Removed: Like many other companies, we have experienced, and will continue to experience, attempts to compromise our information technology systems.
+Added: In 2024, we completed the implementation of our new ERP system, designed to accurately maintain the Company’s financial records, enhance operational functionality, and provide timely information to the Company’s management team related to the operation of the business.
+Added: The ERP system implementation process has required, and will continue to require, the investment of personnel and financial resources as we support post-implementation efforts and system functionality.
+Added: These post-implementation efforts could result in delays, increased costs, and other difficulties, and disruptions or difficulties in using our ERP system could result in harm to our business.
+Added: Additionally, if the ERP system does not operate as intended, the effectiveness of our internal controls over financial reporting could be adversely affected or our ability to adequately assess those controls could be further delayed.
+Added: We utilize technologies at our restaurants that support guest experience and transactions processes, including the processing of guest payments.
+Added: We go to great lengths to vet the security capabilities of third parties that support these services.
+Added: These services include retail technologies and related software applications.
+Added: Although vendors similarly endeavor to maintain systems in a current and secure fashion, they are subject to the same implications as noted above, and these services can as a result be denigrated, compromised or otherwise impacted in a manner that disrupts our
+Added: Portillo's Inc.
+Added: Form 10-K | 11
+Added: ability to operate.
+Added: Although we will continue to take progressive steps to assess and promote the furthering security capabilities of third parties that support our restaurant operations, compromising events such as distributed denial of service, ransomware attack and other cyber attacks, natural / weather disasters or human error (and other events as noted above) may occur that will cause disruption to our vendors' system, that in turn may impact our ability to interact and transact with guests, on and off premise.
+Added: Our business requires the collection, transmission, and retention of large volumes of guest and team member data, including personally identifiable information, through information technology systems maintained by us or vendors retained by us.
+Added: In particular, our omni-channel approach relies in large part on our information technology systems to operate successfully and allow for capabilities like kiosk transactions, mobile order and pay, third-party delivery, and digital menu boards.
+Added: Like many other companies, we have experienced, and will continue to experience, attempts to compromise our information technology systems, some of which have been successful but not material.
As we expand our business channels, our risk exposure will increase proportionately.
−Removed: The techniques and sophistication used to conduct cyberattacks, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks have occurred.
−Removed: While we continue to make significant investment in physical and technological security measures, team member training, and third-party services to anticipate cyberattacks and prevent breaches, protect our information technology networks and infrastructure, and to identify vendors and service providers that could be vulnerable to damage, disruptions, shutdowns, data loss, or breaches due to criminal conduct, team member error, negligence or malfeasance, utility failures, natural disasters or other catastrophic events, we cannot guarantee that we will be successful in preventing every possible instance of cyberattacks, breach, or data loss, any of which could disrupt our operations, resulting in inefficiencies and a loss of profits.
−Removed: Additionally, the cybersecurity and privacy requirements imposed by governmental regulations are evolving.
+Added: The techniques and sophistication used to conduct cyberattacks, as well as the sources and targets of these attacks, change frequently and may not be recognized until or after such attacks have occurred.
+Added: We continue to make significant investment in physical and technological security measures, team member training, and third-party services to anticipate cyberattacks and prevent breaches, protect our information technology networks and infrastructure, and to identify vendors and service providers that could be vulnerable to damage, disruptions, shutdowns, data loss, or breaches due to criminal conduct, team member error, negligence or malfeasance, utility failures, natural disasters or other catastrophic events, we cannot guarantee that we will be successful in preventing every possible instance of cyberattacks, breach, or data loss, any of which could disrupt our operations, resulting in inefficiencies and a loss of profits.
+Added: Additionally, the cybersecurity and privacy requirements, including the regulation of artificial intelligence, imposed by governmental regulations are evolving.
Our systems may not be able to immediately satisfy applicable requirements, and may require significant additional investment and time to do so.
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Our reputation as a brand or as an employer could be adversely affected, which could impair our ability to attract and retain guests and qualified employees.
+Added: There is also the question of interpretation of regulations that are implemented at a federal or state level, and our efforts to assess and validate the applicability of these measures, and if they apply in part or in full from a compliance standpoint.
+Added: Although we strive to comply with regulations in the most timely manner possible, there may be instances in which an assessment that we deem to be valid and necessary is being conducted, in the face of a differing perspective from a governing agency.
+Added: It is conceivable that we could be subjected to non-compliance penalties or similar circumstances, that would materially impact our Results.
+Added: The rapid development and integration of artificial intelligence ("AI") and emerging technologies into our processes poses risks to our business.
+Added: The use of AI technologies within our business processes must be implemented and managed effectively and ethically to avoid outputs that are false, biased, or inconsistent with our values and strategies.
+Added: Failure to properly manage AI and emerging technologies, could also lead to unauthorized access to sensitive information, of which could harm our reputation and competitive position.
+Added: At the same time, if we fail to keep pace with the rapid evolution of AI technologies, particularly in our industry, our competitive position and business results could suffer.
+Added: In addition, the evolving regulatory landscape for AI technologies requires continuous monitoring and adaptation to ensure compliance and mitigate potential legal and operational risks.
Failure to comply with existing and new federal and state laws and regulations relating to privacy, data protection, advertising and consumer protection, could have a material adverse effect.
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Any failure, real or perceived, by us to comply with our privacy policies, contractual commitments, or any federal or state privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders or other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in claims, proceedings or actions against us or may require us to change our practices or stop using certain data sets.
−Removed: We may be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent
−Removed: Portillo's Inc.
−Removed: Form 10-K | 12
−Removed: or unauthorized use or disclosure of data that we store or handle in our operations.
+Added: We may be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle in our operations.
Federal and state governmental authorities continue to evaluate the privacy implications inherent in the use of third-party “cookies” and other methods of online tracking for behavioral advertising and other purposes.
government has limited and may further limit the ability of companies to engage in these activities.
−Removed: Additionally, some device manufacturers and web browsers have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies or to block other tracking technologies, which, if widely adopted, could result in third-party cookies and other online tracking methods becoming significantly less effective.
+Added: Additionally, some device manufacturers and web browsers have implemented, or announced plans to
+Added: Portillo's Inc.
+Added: Form 10-K | 12
+Added: implement, means to make it easier for Internet users to prevent the placement of cookies or to block other tracking technologies, which, if widely adopted, could result in third-party cookies and other online tracking methods becoming significantly less effective.
This could increase our operating costs, including new customer acquisition costs and, consequently, have a material adverse effect on our Results.
−Removed: Various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current or enact new laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection, consumer protection, and advertising.
+Added: Various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current or enact new laws or regulations, or issue revised rules or guidance regarding privacy, data protection, consumer protection, and advertising.
Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination and security of data.
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The restaurant industry is subject to extensive federal, state and local laws and regulations, including without limitation those related to building and zoning requirements, and the preparation and sale of food.
−Removed: Such laws and regulations may change.
−Removed: Failure to comply with applicable laws and regulations could adversely affect our results of operations.
+Added: Such laws and regulations may change and failure to comply with applicable laws and regulations could adversely affect our results of operations.
Many licenses, permits and approvals must be renewed annually and may be revoked, suspended or denied renewal if governmental authorities determine that our conduct violates applicable regulations.
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We may also be subject to this type of proceeding in the future and, even if we are not, publicity about these matters (particularly against the fast casual or traditional fast-food segments) may harm our reputation and could have a material adverse effect on our Results.
−Removed: We are subject to the Americans with Disabilities Act (the "ADA"), which, among other things, requires our restaurants to meet federally mandated requirements for the disabled.
+Added: We are subject to the Americans with Disabilities Act (the "ADA"), which, among other things, requires our restaurants to meet federally mandated requirements for individuals with disabilities.
The ADA prohibits discrimination in employment and public accommodations on the basis of disability.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 13
−Removed: ADA, we could be required to modify our restaurants to provide service to, or make reasonable accommodations for the employment of, disabled persons.
+Added: Under the ADA, we could be required to modify our restaurants to provide service to, or make reasonable accommodations for the employment of, disabled persons.
Our employment practices are also subject to the requirements of the U.S.
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Compliance with all these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings.
+Added: Portillo's Inc.
+Added: Form 10-K | 13
+Added: Tariffs and other trade policies could have a substantial impact on our business.
+Added: The Company’s business is dependent upon the availability of, among other things, agricultural commodities and other raw materials.
+Added: relations with the rest of the world remain uncertain with respect to taxes, trade policies and tariffs, especially as the political landscape changes due to the recent U.S.
+Added: presidential and congressional elections.
+Added: Changes in U.S.
+Added: administrative policy may lead to significant increases in tariffs for imported goods, which may impact prices for both domestic and imported goods, such as steel, lumber, and agricultural commodities.
+Added: Imposition of tariffs may strain international trade relations and increase the risk that foreign governments implement retaliatory tariffs on goods imported from the United States.
+Added: Similarly, interest rates may continue to rise and create further uncertainty and volatility in the market which would negatively impact our Results.
+Added: These political and economic changes could have a material effect on global economic conditions and the stability of financial markets and could significantly reduce global trade.
+Added: In addition to potential increases on tariffs, wars or conflicts could affect our ability to obtain raw materials, which could have a substantial impact on the costs associated with food, beverage and packaging of our menu items, as well as building construction materials and negatively impact our results.
We can incur liabilities arising from environmental laws and compliance with environmental laws could increase our operating expenses.
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Our guests occasionally file complaints or lawsuits alleging we caused an illness or injury they suffered at or after a visit to our restaurants, or that we have problems with food quality or operations.
−Removed: We are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state securities laws or law regarding workplace and employment matters, equal opportunity, harassment, discrimination and similar matters, and we could encounter class action or other lawsuits related to these or different matters in the future.
+Added: We are also subject to a variety of other claims that could arise in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state securities laws or law regarding workplace and employment matters, equal opportunity, harassment, discrimination and similar matters, and we could encounter class action or other lawsuits related to these or different matters in the future.
In recent years, a number of restaurant companies have been subject to such claims, and some of these lawsuits have resulted in the payment of substantial damages by the defendants.
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We may need to hire more team members in the future to comply with these requirements, which will increase our costs and expenses.
−Removed: If we fail to maintain effective internal controls over financial reporting, or if our internal controls are ineffective, our ability to produce timely and accurate financial information or comply with Section 404 of the Sarbanes-Oxley Act of 2002 could be impaired.
−Removed: We are required to comply with Section 404 of the Sarbanes-Oxley Act (“Section 404”), which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting.
−Removed: In addition, our independent registered public accounting firm must attest to the effectiveness of our internal control over financial matters.
−Removed: To maintain compliance with Section 404, we will continue to employ internal resources and outside consultants to assess and document the adequacy of our internal control over financial reporting, including validating that controls are functioning as documented and maintaining a continuous reporting and improvement process for internal control over financial reporting.
−Removed: Despite our efforts, there is a risk that our internal control
+Added: If we fail to maintain effective internal controls over financial reporting, or if our internal controls are ineffective, our ability to produce timely and accurate financial information or to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could be impaired.
+Added: We are required to comply with Section 404 of the Sarbanes-Oxley Act (“Section 404”), which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal controls over financial reporting.
+Added: In addition, our independent registered public accounting firm must attest to the effectiveness of our internal controls over financial matters.
+Added: To maintain compliance with Section 404, we will continue to employ internal resources and outside consultants to assess and document the adequacy of our internal controls over financial reporting, including validating that controls are functioning as documented and maintaining a continuous reporting and improvement process for internal controls over financial reporting.
+Added: Despite our efforts, there is a risk that our internal controls over financial reporting may not comply with Section 404.
Portillo's Inc.
Form 10-K | 14
−Removed: over financial reporting may not comply with Section 404.
Failure to achieve and maintain effective internal controls could have a material adverse effect on our Results.
−Removed: If we are not able to demonstrate Section 404 compliance, or if our internal control over financial reporting is perceived as inadequate or it is perceived that we are unable to produce timely or accurate consolidated financial statements, investors may lose confidence in our business, the price of our Class A common stock could decline, we could become subject to investigations by the Nasdaq, the SEC or other regulatory agencies, or our Class A common stock may not be able to remain listed on the Nasdaq.
+Added: If we are not able to demonstrate Section 404 compliance, or if our internal controls over financial reporting are perceived as inadequate or it is perceived that we are unable to produce timely or accurate consolidated financial statements, investors may lose confidence in our business, the price of our Class A common stock could decline, we could become subject to investigations by the Nasdaq, the SEC or other regulatory agencies, or our Class A common stock may not be able to remain listed on the Nasdaq.
Although we designed our disclosure controls and procedures to provide reasonable assurance that we are complying with the Exchange Act, any disclosure controls and procedures, no matter how well-conceived and executed, can provide only reasonable, not absolute, assurance.
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or (d) action asserting a claim governed by the internal affairs doctrine.
+Added: Our current certificate of incorporation provides that, absent our written consent, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any action asserting a claim arising under the Securities Act or the rules and regulations promulgated thereunder.
+Added: Any person or entity purchasing or otherwise acquiring or holding any interest in any shares of our capital stock shall be deemed to have notice of and consented to the forum provision in our certificate of incorporation, limiting such person’s ability to bring a claim in a more favorable or
Portillo's Inc.
Form 10-K | 15
−Removed: Our current certificate of incorporation provides that, absent our written consent, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any action asserting a claim arising under the Securities Act or the rules and regulations promulgated thereunder.
−Removed: Any person or entity purchasing or otherwise acquiring or holding any interest in any shares of our capital stock shall be deemed to have notice of and consented to the forum provision in our certificate of incorporation, limiting such person’s ability to bring a claim in a more favorable or convenient judicial forum, which may discourage such lawsuits, make them more difficult or expensive to pursue and result in less favorable shareholder outcomes.
+Added: convenient judicial forum, which may discourage such lawsuits, make them more difficult or expensive to pursue and result in less favorable shareholder outcomes.
The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.
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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.