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Additionally, we may be unable to offset all or even a portion of a future cost increase through menu price increases.
−Removed: Competitive conditions may
−Removed: Portillo's Inc.
−Removed: Form 10-K | 2
−Removed: limit our menu pricing flexibility and implementing menu price increases may change our guests’ visit frequencies or purchasing patterns.
+Added: Competitive conditions may limit our menu pricing flexibility and implementing menu price increases may change our guests’ visit frequencies or purchasing patterns.
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).
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A decline in traffic at these locations for a sustained period could have a material adverse effect on our business, financial condition and results of operations (collectively, "our Results").
+Added: Portillo's Inc.
+Added: Form 10-K | 2
We may fail to open new restaurants or establish new markets or our new restaurants may not perform as well as anticipated, may not be profitable, or may close.
Opening and profitably operating new restaurants in existing and new markets is key to our growth.
−Removed: Over the long term, we aim to increase our number of restaurants by approximately 12% to 15% annually.
−Removed: We may struggle to identify target markets, we may not be able to open our planned new restaurants within budget or on a timely basis, and our new restaurants may not perform as well as anticipated.
−Removed: New restaurant success is affected by several factors, many of which are beyond our control, including our ability to secure enough appropriate and attractive sites, and complete construction in a timely and cost-efficient manner.
+Added: We remain focused on disciplined growth and development, building new restaurants designed for strong unit economics, attractive four-wall returns, and efficient capital deployment that will fuel long-term growth.
+Added: As part of that process, we may struggle to identify target markets, we may not be able to open our planned new restaurants within budget or on a timely basis, and our new restaurants may not perform as well as anticipated.
+Added: New restaurant success is affected by several factors, many of which are beyond our control, including our ability to secure a sufficient pipeline of appropriate and attractive sites, and to complete construction in a timely and cost-efficient manner.
We may open restaurants in geographic markets where we have little or no prior operating experience.
Moreover, consumer recognition of our brand has been important to the success of our existing restaurants, and our concept may have limited appeal in new markets.
−Removed: Restaurants in new markets may take longer to reach expected sales and profit and may have higher construction, occupancy and operating costs than existing restaurants.
+Added: Restaurants in new markets may take longer to reach expected sales and profit targets and may have higher construction, occupancy and operating costs than existing restaurants.
New restaurants in or near markets with existing restaurants could have a material adverse effect on sales at these existing restaurants.
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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 AUVs and same-restaurant sales may not increase at the rates our existing restaurants have achieved over the past several years.
+Added: In addition, our AUVs and same-restaurant sales may not increase to the same levels achieved by our existing restaurants over the past several years.
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.
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If our new restaurants do not perform as planned, it could have a material adverse effect on our Results.
−Removed: Further, our existing restaurant management systems, financial and management controls and information systems (collectively, our “Infrastructure”) may be inadequate to support our planned expansion.
−Removed: We may not enhance our Infrastructure quickly enough or effectively hire, train and retain team members, which could have a material adverse effect on our Results.
−Removed: If we experience a decline in financial performance, we may limit, delay or discontinue restaurant openings, or we may decide to close unprofitable restaurants.
Our growth plans and ongoing capital expenditure ("capex") needs require us to spend capital, which may not be readily available.
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As our restaurants mature, they require capital expenditures to remain competitive and maintain our brand standard.
−Removed: 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.
+Added: If we cannot fund capital expenditures using cash flows from operations, we will need to borrow or otherwise obtain funds or capex investments will be delayed or eliminated, which could make those restaurants less attractive to guests and materially, adversely affect the business.
Our same-restaurant sales may be lower than we expect in future periods.
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Our marketing programs and any limited time or seasonal offerings may be unsuccessful and could fail to meet expectations, and our new menu items, advertising campaigns, heavy reliance on social media and restaurant designs and remodels may not generate increased sales or profits.
−Removed: We incur costs and expend other resources on marketing efforts for new and seasonal menu items, advertising campaigns, and restaurant designs and remodels to raise brand awareness and attract and retain guests.
−Removed: 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,
−Removed: Portillo's Inc.
−Removed: Form 10-K | 3
−Removed: which could have a material adverse effect on our Results.
−Removed: Our marketing efforts rely heavily on the use of social media.
−Removed: Many of our competitors are expanding their use of social media, and new social media platforms are rapidly being developed, potentially making more traditional social media platforms obsolete.
−Removed: We must continuously evolve our social media strategies to maintain customer mindshare and brand relevance, particularly given the rise in digital focus among customers.
−Removed: We also invest in other marketing initiatives across digital channels and build customer awareness of, engagement with, and loyalty to our brand.
+Added: We incur costs and expend other resources on marketing efforts for new and seasonal menu items, advertising campaigns, loyalty programs, and restaurant designs and continuously evolve our digital and social media strategies to maintain customer mindshare and brand relevance, particularly given the importance of the digital experience among customers.
+Added: We also invest in other marketing initiatives across paid and organic channels to help build customer awareness of, engagement with, and loyalty to our brand.
These initiatives may not be successful, resulting in expenses incurred without higher sales or increased brand recognition.
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An increase in the use of social media for product promotion and marketing may increase our costs, including those related to compliance, and increase the risk that such materials could contain problematic product or marketing claims or violate applicable regulations.
−Removed: Incidents involving food-borne illness and food safety could have an adverse effect.
+Added: Portillo's Inc.
+Added: Form 10-K | 3
+Added: Food safety concerns and incidents involving food-borne illness could have an adverse effect on our business.
Food safety is a top priority and we dedicate substantial resources to help ensure that our guests enjoy safe, quality food products.
However, food-borne illnesses and other food safety issues have occurred in the past and could occur in the future.
−Removed: Incidents or reports of food-borne or water-borne illness or other food safety issues, food contamination or tampering, team member hygiene and cleanliness failures, improper team member conduct, or guests spreading illness while at our restaurants could lead to product liability or other claims.
+Added: Incidents or reports of food-borne or water-borne illness or other food safety issues, food contamination or tampering, team member hygiene and cleanliness failures, improper team member conduct, or guests spreading illness while at our restaurants could lead to product liability or other legal claims.
Such incidents or reports could negatively affect our brand and reputation and could have a material adverse effect on our Results.
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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.
−Removed: 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.
+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 occur and are 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.
The restaurant industry is intensely competitive.
−Removed: We compete directly and indirectly with national, regional and local limited-service (e.g., quick service or fast casual) and full-service restaurants on food quality, brand recognition, service, price and value, convenience, design and location.
+Added: We compete directly and indirectly with national, regional and local limited-service (e.g., QSR or fast-casual) and full-service restaurants on food quality, brand recognition, service, price and value, convenience, design and location.
Some competitors have significantly greater financial, marketing, personnel and other resources, and many are well-established in our target markets.
Many of our competitors have greater name recognition locally, regionally, or nationally in these target markets.
−Removed: Our continued success also depends on the popularity of our menu and guest experience.
+Added: Our continued success also depends on the popularity of our menu and overall guest experience.
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.
−Removed: 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.
+Added: In the past, some of our competitors have implemented promotional programs that offer 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: 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 .
+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 those of 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.
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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.
−Removed: Portillo's Inc.
−Removed: 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, employment practices 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 upkeep 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.
In addition, the volume of restaurant commentary has increased dramatically with the proliferation of social media platforms.
−Removed: Negative publicity may adversely affect us or some or all of our restaurants, regardless of whether allegations are valid, and we may not be able to respond effectively.
−Removed: 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: Negative publicity may adversely affect us or some or all of our restaurants, regardless of whether the allegations are valid, and we may not be able to
+Added: Portillo's Inc.
+Added: Form 10-K | 4
+Added: respond effectively.
+Added: For example, we, or other restaurant companies generally, have and could again come under criticism from animal rights and welfare activists in regard to for our business practices or those of our suppliers.
We may also face scrutiny and criticism concerning sustainability matters, environmental stewardship, and other social issues.
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A significant increase in the number of these claims or an increase in the number of successful claims could have a material adverse effect on our Results.
−Removed: The digital and delivery business, and expansion thereof, is uncertain and subject to risk.
−Removed: We believe digital investments to be a critical differentiator for our business, driving greater and more frequent engagement with new and existing customers.
+Added: The digital and delivery business, and expansion thereof, is uncertain and subject to inherent risk.
+Added: We believe that thoughtful investments in restaurant technology, digital engagement and the food delivery experience is a critical differentiator for our business, driving greater and more frequent engagement with new and existing customers.
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, 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.
+Added: If we do not maintain and innovate competitive digital systems, including our growing use of AI in our operations, our 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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Additionally, as with any third-party handling food, such delivery services increase the risk of food tampering while in transit.
−Removed: We developed sealed packaging to provide some deterrence against such potential food tampering, but some risk remains.
+Added: We developed and implemented sealed packaging protocols to provide some deterrence against such potential food tampering, but some risk remains.
Third-party food delivery services are competitive.
If our delivery partners fail to effectively compete with other third-party delivery providers, our delivery business may suffer, resulting in a loss of sales.
−Removed: 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.
+Added: If any third-party delivery provider with whom we partner experiences damage to their brand image, we may also see ramifications due to our partnership with them.
We have a limited number of suppliers and distributors for certain key ingredients.
If our suppliers or distributors do not fulfill their contractual obligations, we could encounter supply shortages and incur higher costs.
−Removed: Due to the concentration of our suppliers and distributors (“our vendors”), the cancellation, disruption, delay or inability of these suppliers to deliver these products to our restaurants for any reason may materially and adversely affect our operations until we establish an alternative.
+Added: Due to the concentration of our suppliers and distributors (“ vendors”, or "suppliers"), the cancellation, disruption, delay or inability of these suppliers to deliver these products to our restaurants for any reason may materially and adversely affect our operations until we establish an alternative.
We do not control our vendors’ operations and our efforts to monitor their performance may be unsuccessful.
−Removed: If our vendors fail to comply with food safety or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted and we may not be able to engage replacement suppliers on commercially reasonable terms or a timely basis, if at all.
+Added: If our vendors fail to comply with food safety or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted and we may not be able to engage replacement suppliers on commercially reasonable terms or on a timely basis, if at all.
If our vendors do not fulfill their contractual obligations or we cannot identify alternative sources, we could encounter supply shortages and incur higher costs, which could have a material adverse effect on our results of operations.
−Removed: We have developed contingency plans to mitigate risks related to secondary supply, floor stocking arrangements, product diversification and inventory management, but there can be no assurance that we can obtain commercially reasonable terms or alternative product of equivalent quality.
+Added: We have developed contingency plans to mitigate risks related to secondary supply, floor stocking arrangements, product diversification and inventory management, but we cannot ensure that we can obtain commercially reasonable terms or alternative product of equivalent quality.
Any prolonged disruption in the operations of our two commissaries could harm our business.
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Form 10-K | 5
−Removed: We depend on our executive officers and certain other key team members, the loss of whom could have a material adverse effect on our business.
−Removed: 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 many of our executive officers have numerous years of experience in the food service industry.
−Removed: 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.
+Added: We depend on our executive officers and certain other key team members.
+Added: Our failure to retain such key personnel or manage the transition associated with senior leadership changes, including the recent departure of our CEO, and appointment of our new CEO, could have a material adverse effect on our business.
+Added: From time to time, we may experience loss of key personnel, including as a result of the departure of our former President and Chief Executive Officer, Michael Osanloo.
+Added: Our inability to retain our existing senior leadership team or continue to attract and retain qualified new personnel could have a material adverse effect on our business.
+Added: In addition, a leadership transition and any related uncertainty regarding our future business direction may be disruptive to our business and our relationships with employees and customers.
+Added: Further, we rely upon the accumulated knowledge, skills and experience of our executive officers and certain other key team members.
+Added: Most of our executive officers including our newly appointed President and Chief Executive Officer, have numerous years of experience in the food service industry.
+Added: The loss of any of our current 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.
There is a high level of competition for experienced, successful executive personnel in our industry.
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Failure to maintain our corporate culture as we grow could have a material adverse effect on our business.
−Removed: We believe that our corporate culture and values have been a critical component to our success.
−Removed: We have made substantial investments in our team.
+Added: We believe that our corporate culture and values are a critical component to our success and we must preserve, enhance and leverage our brand, including our corporate purpose, mission and values.
As we continue to grow, it may be difficult to maintain the innovation, teamwork, passion and focus on execution that are important to our culture.
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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, paid 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 lawful residency requirements.
In addition, under the U.S.
−Removed: Patient Protection and Affordable Care Act (“ACA”), we must provide affordable coverage, as defined in ACA, to eligible team members, or make a payment per team member based on ACA's affordability criteria.
+Added: Patient Protection and Affordable Care Act (“ACA”), we must provide affordable coverage, as defined in the ACA, to eligible team members, or make a payment per team member based on the ACA's affordability criteria.
Additionally, some state and local laws mandate certain levels of health benefits by some employers.
−Removed: Significant additional government regulations and new laws, including mandated increases in minimum wages, changes in exempt and non-exempt status, paid leave, or increased mandated benefits such as health care and insurance costs could have a material adverse effect on our business, financial condition and results of operations.
+Added: Significant additional government regulations and new laws, including mandated increases in minimum wages, changes in exempt and non-exempt classification status, worker privacy, paid leave, or increased mandated benefits such as health care and insurance costs could have a material adverse effect on our business, financial condition and results of operations.
In addition, changes in federal or state workplace regulations could adversely affect our ability to meet our financial targets.
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government to verify employment eligibility in states where participation is required.
−Removed: However, use of the “E-Verify” program does not guarantee that we will properly identify all applicants who are ineligible for employment.
+Added: However, use of the “E-Verify” program does not guarantee that we will properly identify all applicants who claim to have work authorization but are ineligible for employment.
Unauthorized workers are subject to deportation and we may be subject to fines or penalties if any of our workers are found to be unauthorized.
−Removed: Termination of a significant number of team members who lack work authorization may disrupt our operations, cause temporary increases in our labor costs as we train new team members and result in adverse publicity.
+Added: Termination of a significant number of team members who lack valid work authorization may disrupt our operations, cause temporary increases in our labor costs as we train new team members and result in adverse publicity.
We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration compliance laws.
−Removed: As a result of such events, we could experience adverse publicity that may negatively impact our brand and may make it more difficult to hire and keep qualified team members.
+Added: As a result of such events, we could experience adverse publicity that may negatively impact our brand and make it more difficult to hire and retain qualified team members.
These factors could materially adversely affect our Results.
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 predict 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, immigration status and similar matters.
+Added: The outcome of litigation, particularly class action and regulatory matters, 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 wage and hour regulations and employment conditions, discrimination, retaliation and similar matters.
Some lawsuits have resulted in substantial damage awards.
−Removed: Similar lawsuits have been instituted from time to time alleging violations of various federal and state wage and hour laws regarding, among other things, employee meal deductions, overtime eligibility of managers and failure to pay for all hours worked.
−Removed: Whether or not claims against us are valid or whether we are found liable, claims may be expensive to defend and may divert time and money away from our operations and result in increases in our insurance premiums.
−Removed: In addition, they may generate negative publicity, which could reduce guest traffic and sales.
+Added: Similar proceedings have been instituted from time to time alleging violations of various federal and state wage and hour laws regarding, among other things, employee meal deductions, meal and rest periods, overtime eligibility and failure to pay for all hours worked.
+Added: Whether or not claims against us are valid or whether we are found liable, claims may be expensive to defend, may divert time and money away from our operations and may result in increases in our insurance premiums.
+Added: In addition, they may generate negative publicity, which
+Added: Portillo's Inc.
+Added: Form 10-K | 6
+Added: could reduce guest traffic and sales.
Although we believe we maintain adequate levels of insurance, insurance may not be available at all or in sufficient amounts to cover all potential liabilities with respect to these or other matters.
−Removed: 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.
+Added: A judgment or other liability significantly in excess of our insurance coverage or any adverse publicity resulting from claims could have a material adverse effect on our Results.
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.
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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.
−Removed: If a significant number of our team members were to become unionized and collective bargaining agreement terms were significantly different from our
−Removed: Portillo's Inc.
−Removed: Form 10-K | 6
−Removed: current compensation arrangements, it could have a material adverse effect on our Results.
+Added: 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.
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.
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Our success depends upon our ability to attract, motivate and retain enough qualified team members to meet the needs of our new and existing restaurants.
−Removed: Competition for qualified team members in some areas could require higher wages and greater benefits.
+Added: Competition for qualified team members in some areas could require higher wages and enhanced benefits.
Our team members are typically paid more than the applicable minimum wage where they work.
Increases in federal or state minimum wages, unemployment benefits, higher team member turnover rates, unionization of restaurant workers, or increases in the federally-mandated or state-mandated minimum wage, change in exempt and non-exempt status, or other employee benefits costs (including costs associated with health insurance coverage or workers’ compensation insurance) may also increase wage rates.
−Removed: We invest significant time and money in the qualification and training of our personnel, so failure to retain team members will increase costs without improving Results.
−Removed: Inability to recruit or retain team members could also delay new restaurant openings, could adversely impact existing restaurants, or result in higher team member turnover in existing restaurants, increasing our labor costs and adversely affecting our Results.
−Removed: We may be unable to increase our menu prices in order to pass future increased labor costs on to our guests, in which case our operating margins would be negatively affected.
+Added: We invest significant time and money in the qualification and training of our personnel, so failure to retain team members will increase costs without improving our Results.
+Added: Inability to recruit or retain team members could also delay new restaurant openings, adversely impact existing restaurants, or result in higher team member turnover in existing restaurants, increasing our labor costs and adversely affecting our Results.
+Added: We may be unable to increase our menu prices to pass future increased labor costs on to our guests, in which case our operating margins would be negatively affected.
If we increase menu prices to cover increased labor costs, the higher prices could adversely affect demand for our menu items, resulting in lower sales.
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Generally, our leases also require us to pay our share of the costs of real estate taxes, utilities, building operating expenses, insurance and other charges and may include rent escalations.
−Removed: If we close a restaurant, our lease obligations may remain, requiring, among other things, payment of the rent and other costs through the lease term.
+Added: If we close a restaurant, our lease obligations may remain, requiring, among other things, payment of the rent and other costs through the remainder of the lease term.
In addition, as leases expire for restaurants that we continue to operate, we may be unable to negotiate renewals on commercially acceptable terms or at all.
−Removed: As a result, we may close or relocate the restaurant, resulting in unanticipated construction costs, the delay or failure by the landlord to timely deliver the new restaurant location to us, and unfavorable commercial, residential or infrastructure development near our new restaurant location, among other costs and risks.
+Added: As a result, we may need to close or relocate the restaurant, resulting in unanticipated construction costs, the delay or failure by the landlord to timely deliver the new restaurant location to us, and unfavorable commercial, residential or infrastructure development near our new restaurant location, among other costs and risks.
Revenues and profit, if any, generated at a relocated restaurant may not equal those generated at the existing restaurant.
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Alcoholic beverage control regulations generally require our restaurants to apply to a state authority and, in certain locations, county or municipal authorities for an annual license that may be revoked or suspended for cause at any time.
−Removed: Alcoholic beverage control regulations impact many parts of restaurant operations, including minimum age of team members, advertising, trade practices, wholesale purchasing, inventory control and handling, storage and dispensing of alcoholic beverages and training.
+Added: Alcoholic beverage control regulations impact many parts of restaurant operations, including minimum age of team members, advertising, trade practices, wholesale purchasing, inventory control and handling, storage and dispensing of alcoholic beverages and team member training.
Failure to comply with these regulations and obtain or retain licenses could have a material adverse effect on our Results.
−Removed: We are also subject to “dram shop” statutes in certain states, which provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.
−Removed: We carry liquor liability coverage as part of our existing comprehensive general liability insurance;
+Added: We are also subject to “dram shop” statutes in certain states, which provide an individual injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.
+Added: We carry liquor liability coverage as part of our existing comprehensive general liability insurance program;
however, litigation against restaurant chains has resulted in significant judgments and settlements under these statutes.
These cases often seek punitive damages, which may not be covered by insurance, and such litigation could have a material effect on our Results.
−Removed: Regardless of whether any claims against us are valid or whether we are found liable, claims may be expensive to defend and may divert time and money away from operations, hurting our financial performance.
+Added: Regardless of whether any claims against us are valid or whether we are found liable, claims may be expensive to
+Added: Portillo's Inc.
+Added: Form 10-K | 7
+Added: defend and may divert time and money away from operations, hurting our financial performance.
A judgment significantly in excess of our insurance coverage or not covered by insurance could have a material adverse effect on our Results.
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Goodwill & Intangible Assets in the notes to the consolidated financial statements for additional information.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 7
−Removed: Changes to estimates related to our property, fixtures and equipment and definite-lived intangible assets or operating results that are lower than our current estimates at certain restaurant locations may cause us to incur impairment charges or accelerate the amortization on certain long-lived assets, which could have a material adverse impact on our results of operations.
+Added: Changes to estimates related to our property, fixtures and equipment and definite-lived intangible assets or operating results that are lower than our current estimates at certain restaurant locations may cause us to incur impairment charges or accelerate the amortization on certain long-lived assets, which could have a material adverse impact on our Results.
Natural disasters, unusual weather conditions, pandemic outbreaks, political events, war and terrorism could disrupt our business and result in lower sales, increased operating costs and capital expenditures.
−Removed: Our Restaurant Support Center, restaurants, and their respective facilities, as well as certain of our vendors and customers, are located in areas that have been and could be subject to natural disasters such as floods, drought, hurricanes, tornadoes, fires or earthquakes.
+Added: Our Restaurant Support Center, restaurants, and their respective facilities, as well as certain of our vendors and customers, are located in areas that have been and could be subject to natural disasters such as snowstorms, floods, drought, hurricanes, tornadoes, fires or earthquakes.
Because our restaurants are concentrated in the Midwestern United States and parts of the “Sunbelt,” adverse weather conditions or changes in weather patterns, including those that may result in electrical and technological failures, may disrupt our business and may adversely affect our sales and operations.
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Any of these factors, or any combination thereof, could have a material adverse effect on our Results.
−Removed: The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation, and adversely impact our Results.
+Added: The focus on environmental sustainability and social initiatives could increase our costs, harm our reputation, and adversely impact our Results.
Investors, environmental activists, the media and governmental and nongovernmental organizations remain focused on a variety of environmental, social and other sustainability matters, including energy, water, and food and packaging waste management, food safety, nutritional content, labor practices, and supply chain and management food sourcing.
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If we are not effective in addressing environmental, social and other sustainability matters affecting our industry, or setting and meeting relevant sustainability goals, our brand image may suffer.
−Removed: In addition, we may experience increased costs to achieve our sustainability goals, which could have a material adverse impact on our Results.
+Added: In addition, we may experience increased costs to achieve sustainability goals, which could have a material adverse impact on our Results.
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.
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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.
−Removed: 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: However, if we are unable to fully implement our disaster recovery plans, we may experience delays in data recovery, 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 operations and exposure for administrative and other legal claims.
In addition, these threats are constantly evolving, which increases the difficulty of accurately and timely predicting, planning for and protecting against such threats.
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.
+Added: Portillo's Inc.
+Added: Form 10-K | 8
Risks Related to Our Indebtedness
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and (vi) exposing us to risks inherent in interest rate fluctuations, including higher interest rate expense, because our borrowings are at variable interest rates.
−Removed: We may not generate sufficient cash flow to repay our indebtedness when due and meet our other cash needs.
+Added: We may not generate sufficient cash flow to repay our indebtedness when due and to meet our other cash needs.
If this occurs, we may be required to pursue one or more alternative strategies, such as selling assets, refinancing or restructuring our indebtedness or selling additional debt or equity securities.
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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
−Removed: Portillo's Inc.
−Removed: Form 10-K | 8
−Removed: 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 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
−Removed: 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 Partners, our largest shareholder as of December 29, 2024, continues to own a significant percentage of our common stock.
−Removed: Berkshire engages in a range of investing activities, including investments in restaurants and other consumer-related companies.
−Removed: In the ordinary course of its business activities, Berkshire may engage in activities where its interests conflict with our interests or those of our shareholders.
−Removed: Our amended and restated certificate of incorporation provides that our directors and shareholders, including Berkshire, do not have any obligation to offer us an opportunity to participate in business opportunities presented to them even if the opportunity is one that we might reasonably have pursued (and therefore may be free to compete with us in the same business or similar businesses) and that, to the extent permitted by law, such directors and shareholders will not be liable to us or our shareholders for breach of any duty by reason of any such activities.
−Removed: Accordingly, the interests of Berkshire may supersede ours, causing them or their affiliates to compete against us or to pursue opportunities instead of us, for which we have no recourse.
−Removed: Such actions on the part of Berkshire and inaction on our part could have a material adverse effect on our Results.
−Removed: In addition, Berkshire may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment in us, even though such transactions might involve risks to us, such as debt-financed acquisitions.
Delaware law and our organizational documents, as well as our existing and future debt agreements, may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium for their shares.
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Our credit facilities impose, and we anticipate future facilities may impose, limitations on our ability to enter into change of control transactions, the occurrence of which could constitute an event of default.
−Removed: 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.
+Added: The foregoing factors, could make acquisition of our Class A common stock less desirable, which, under certain circumstances, could reduce its market value.
We are a holding company and our principal asset is our ownership of LLC Units in Portillo’s OpCo.
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See "Risks Related to Our Indebtedness" above.
+Added: Portillo's Inc.
+Added: Form 10-K | 9
In certain circumstances, Portillo’s OpCo will be required to make distributions to us and the other holders of LLC Units, and those distributions may be substantial.
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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
−Removed: Portillo's Inc.
−Removed: Form 10-K | 9
−Removed: have participated as holders of LLC Units in distributions by Portillo’s OpCo that resulted in such excess cash balances at Portillo’s Inc.
−Removed: 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.
−Removed: Under the Tax Receivable Agreement, we are required to make cash payments to certain of our pre-IPO LLC Members (the "TRA Parties") equal to 85% of the income tax benefits, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (i) our allocable share of existing tax basis in depreciable or amortizable assets related to LLC Units acquired in our IPO, (ii) certain favorable tax attributes we acquired from entities treated as corporations for U.S.
−Removed: tax purposes that held LLC Units prior to the Transactions ("Blocker Companies") (including net operating losses and the Blocker Companies’ allocable share of existing tax basis), (iii) increases in our then allocable share of existing tax basis in depreciable or amortizable assets, and adjustments to the tax basis of the tangible and intangible assets of Portillo’s OpCo and its subsidiaries, as a result of (x) sales or exchanges of interests in Portillo’s OpCo (including repayment of the redeemable preferred units) in connection with our IPO and (y) future exchanges of LLC Units by pre-IPO LLC Members for Class A common stock and (iv) certain other tax benefits related to entering into the Tax Receivable Agreement, including payments made under the Tax Receivable Agreement.
−Removed: The Company’s payment obligations under the Tax Receivable Agreement may be significant.
−Removed: Any payments made under the Tax Receivable Agreement will not be available for reinvestment in our business and will reduce our overall available cash flow.
−Removed: Tax Receivable Agreement payments are not conditioned on the TRA Parties’ continued ownership of our shares.
−Removed: Furthermore, our obligations under the Tax Receivable Agreement could make us a less attractive target for an acquisition, particularly if an acquirer cannot use some or all of the tax benefits under the Tax Receivable Agreement.
−Removed: 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: 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.
−Removed: The Tax Receivable Agreement provides that upon a “Change of Control” (which is defined to include, among other things, a 50% change in control of Portillo’s Inc., the approval of a complete plan of liquidation or dissolution of Portillo’s Inc., the disposition of all or substantially all of Portillo’s Inc.’s direct or indirect assets or a change of a majority of the Board of Directors without approval of at least two-thirds majority of the then-existing Board members), upon a breach of any of our material obligations under the Tax Receivable Agreement or if, at any time, we elect an early termination of the Tax Receivable Agreement, then our payment obligations under the Tax Receivable Agreement will accelerate.
−Removed: Such accelerated payments will be calculated by reference to the present value (at a discount rate equal to the lesser of (i) 6.5% per annum and (ii) one year LIBOR (or its successor rate) plus 100 basis points) of all future payments that holders of LLC Units or other recipients would have been entitled to receive under the Tax Receivable Agreement, and such accelerated payments and any other future payments under the Tax Receivable Agreement will utilize certain valuation assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.
−Removed: In the case of certain changes of control, payments under the Tax Receivable Agreement will be accelerated and may significantly exceed the actual benefits we realize.
−Removed: We expect that the payments that we may make under the Tax Receivable Agreement in the event of a change of control will be substantial.
−Removed: As a result, our accelerated payment obligations and/or the assumptions adopted under the Tax Receivable Agreement in the case of a change of control may impair our ability to consummate change of control transactions or negatively impact the value received by owners of our Class A common stock in a change of control transaction, or require us to incur substantial costs to consummate such a transaction.
−Removed: We will not be reimbursed for any payments made to the TRA Parties under the Tax Receivable Agreement in the event that any tax benefits are disallowed.
−Removed: Payments under the Tax Receivable Agreement will be based on our tax reporting positions, and the U.S.
−Removed: Internal Revenue Service (the "IRS") or a state taxing authority may successfully challenge all or part of the tax benefits we claim in connection with such tax positions.
−Removed: 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 they may exercise their consent rights in a manner adverse to our interests.
−Removed: 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.
−Removed: We will not be reimbursed for any cash payments previously made to the TRA Parties under the Tax Receivable Agreement if any tax benefits initially claimed by us and for which payment has been made to a TRA Party are ultimately disallowed.
−Removed: 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.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 10
+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 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: Our organizational structure, including the Tax Receivable Agreement ("TRA"), introduces complexity into our business.
+Added: Under the TRA, which primarily benefits certain pre-IPO LLC Members (“TRA Parties”) and may not equally benefit holders of our Class A common stock, we must make substantial cash payments—equal to 85% of certain tax benefits we realize or are deemed to realize—which could significantly reduce our available cash flow and are not contingent on the TRA Parties’ continued ownership of our shares.
+Added: These payments may be accelerated in certain circumstances, such as a “Change of Control” (which is defined to include, among other things, a 50% change in control of Portillo’s Inc., the approval of a complete plan of liquidation or dissolution of Portillo’s Inc., the disposition of all or substantially all of Portillo’s Inc.’s direct or indirect assets or a change of a majority of the Board of Directors without approval of at least two-thirds majority of the then-existing Board members), and could exceed actual tax benefits realized.
+Added: The TRA could make us a less attractive target for an acquisition, particularly if an acquirer cannot use some or all of the tax benefits, and could negatively impact shareholder value.
+Added: Additionally, if tax benefits are disallowed or challenged by taxing authorities, we will not be reimbursed for prior payments, and the TRA Parties’ consent rights in such disputes may conflict with our interests.
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.
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Due in part to the potential volatility of our stock price, we may become the target of securities litigation or shareholder activism efforts.
−Removed: 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: Securities litigation and shareholder activism campaigns, 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 and execution of our strategic plan.
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.
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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 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.
+Added: For example, failure to register or enforce our trademarks, whether in print, on the Internet or through digital or social media or other channels, 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, having 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.
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.
−Removed: Claims decided against us could invalidate or narrow our IP or allow competing uses, which could have a material adverse effect on our Results.
+Added: Claims decided against us could invalidate or narrow our IP or allow competing uses, which
+Added: Portillo's Inc.
+Added: Form 10-K | 10
+Added: could have a material adverse effect on our Results.
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.
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Any of these occurrences could have a material adverse effect on our Results.
−Removed: 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: Security breaches, system interruptions, material failure of our system, or complications with the implementation or usage of our new systems 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.
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.
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Any such failure could lead to website downtime, disruptions to our information technology systems, or malicious behavior by threat actors.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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: Further, our existing restaurant management systems, financial and management controls and information systems (collectively, our “Infrastructure”) may be inadequate to support our expansion plan.
+Added: We may not enhance our Infrastructure quickly enough or effectively hire, train and retain team members, which could have a material adverse effect on our Results.
+Added: If we experience a decline in financial performance, we may limit, delay or discontinue restaurant openings, or we may decide to close unprofitable restaurants.
+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 and in 2025, we completed the implementation of the our new Human Capital Management ("HCM") system.
+Added: The ERP and HCM system implementation processes 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 and HCM systems could result in harm to our business.
+Added: Additionally, if the ERP or HCM 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.
We utilize technologies at our restaurants that support guest experience and transactions processes, including the processing of guest payments.
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These services include retail technologies and related software applications.
−Removed: 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
−Removed: Portillo's Inc.
−Removed: Form 10-K | 11
−Removed: ability to operate.
−Removed: 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: 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 ability to operate.
+Added: Although we will continue to take progressive steps to assess and promote enhanced 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.
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.
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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.
−Removed: 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, including the regulation of artificial intelligence, imposed by governmental regulations are evolving.
+Added: We continue to make significant investments 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.
+Added: However, we cannot guarantee that these efforts will prevent 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 AI, 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.
−Removed: A significant theft, loss or misappropriation of, or unauthorized access to, our guests’ data or other proprietary data could result in fines, legal claims or proceedings, regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation and expose us to claims from guests and team members, any of which could have a material adverse effect on our Results.
+Added: A significant theft, loss or misappropriation of, or unauthorized access to, our guests’ data or other proprietary data could result in fines, legal claims or
+Added: Portillo's Inc.
+Added: Form 10-K | 11
+Added: proceedings, regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation and expose us to claims from guests and team members, any of which could have a material adverse effect on our Results.
Our cyber insurance and business interruption insurance may not be sufficient to cover all losses that may result from a cybersecurity incident.
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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.
−Removed: 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.
−Removed: 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: There is also the challenge of interpreting new regulations implemented at a federal or state level, and determining whether they apply to us in whole or in part from a compliance standpoint.
+Added: Although we strive to comply with regulations in a prompt manner possible, there may be instances in which we must first fully assess whether the regulations apply to and are enforceable against us, even where a governing agency holds a different perspective.
It is conceivable that we could be subjected to non-compliance penalties or similar circumstances, that would materially impact our Results.
−Removed: The rapid development and integration of artificial intelligence ("AI") and emerging technologies into our processes poses risks to our business.
+Added: The rapid development and integration of AI and emerging technologies into our processes poses risks to our business.
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.
−Removed: 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: This includes the use of platforms that are expressly known as an AI service (such as Microsoft CoPilot), or AI agents or similar secondary services that are incorporated into third party systems to augment performance.
+Added: Failure to properly manage AI and emerging technologies, could also lead to unauthorized access to sensitive information, which could harm our reputation and competitive position.
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.
−Removed: In addition, the evolving regulatory landscape for AI technologies requires continuous monitoring and adaptation to ensure compliance and mitigate potential legal and operational risks.
+Added: In addition, the evolving regulatory landscape for AI technologies requires continuous monitoring and adaptation to ensure compliance and mitigate potential legal, financial 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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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
−Removed: Portillo's Inc.
−Removed: Form 10-K | 12
−Removed: 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 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 for marketing purposes.
This could increase our operating costs, including new customer acquisition costs and, consequently, have a material adverse effect on our Results.
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Risks Related to Legal and Regulatory Matters
−Removed: We are subject to many federal, state and local laws with which compliance can be both costly and complex.
−Removed: 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 and failure to comply with applicable laws and regulations could adversely affect our results of operations.
−Removed: 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.
−Removed: Difficulties or failure to obtain or maintain the required licenses, permits and approvals could adversely affect our existing restaurants and delay or result in our decision to cancel new restaurant openings, which could have a material adverse effect on our Results.
−Removed: The development and operation of our restaurants depend, to a significant extent, on the selection of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations and requirements.
+Added: Increasing regulatory and legal complexity may result in costly compliance efforts.
+Added: The restaurant industry is subject to federal, state and local laws and regulations, including without limitation those related to building and zoning
+Added: Portillo's Inc.
+Added: Form 10-K | 12
+Added: requirements, and the preparation and sale of food.
+Added: Such laws and regulations may change and failure to comply with applicable laws and regulations could adversely affect our Results.
+Added: Many licenses, permits and approvals must be renewed annually and may be revoked, suspended or denied for renewal if governmental authorities determine that our conduct violates applicable regulations.
+Added: Difficulties in or failure to obtain or maintain the required licenses, permits and approvals could adversely affect our existing restaurants and delay or result in our decision to cancel new restaurant openings, which could have a material adverse effect on our Results.
+Added: The development and operation of our restaurants depend, to a significant extent, on the selection of suitable sites, which are subject to zoning, land use, environmental, traffic, accessibility, and other regulations and requirements.
We are also subject to licensing and regulation by state and local authorities relating to health, sanitation, safety and fire standards.
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For example, the FDA Food Safety Modernization Act (“FSMA”), signed into law in January 2011, granted the U.S.
−Removed: Food and Drug Administration new authority regarding the safety of the entire food system, including through increased inspections and mandatory food recalls.
−Removed: We anticipate that the requirements may impact our industry.
+Added: Food and Drug Administration new authority regarding the safety of the entire food system, including through increased inspections and mandatory food recalls, which have impacted our industry.
Additionally, our suppliers may initiate or otherwise be subject to food recalls that impact product availability, result in adverse publicity or require us to take costly actions or otherwise impact our business.
3 unchanged sentences
Compliance with current and future laws and regulations including those regarding permitted ingredients and disclosure of nutritional and allergen content may be costly and time-consuming.
−Removed: If we fail to comply with existing or future laws and regulations, we may be subject to governmental or judicial fines or sanctions or to litigation.
+Added: If we fail to comply with existing or future laws and regulations, we may be subject to governmental or judicial fines or sanctions or exposed to litigation.
The risks and costs associated with nutritional disclosures on our menus could also impact our operations, particularly given differences among applicable legal requirements and practices within the restaurant industry with respect to testing and disclosure, ordinary variations in food preparation among our own restaurants and the need to rely on the accuracy and completeness of nutritional information obtained from third-party suppliers.
−Removed: We may not be able to effectively respond to changes in consumer health perceptions, comply with further nutrient content disclosure requirements or adapt our menu offerings to trends in eating habits, which could have a material adverse effect on our Results.
+Added: We may not be able to effectively respond to changes in consumer health perceptions, comply with further nutritional content disclosure requirements or adapt our menu offerings to trends in eating habits, which could have a material adverse effect on our Results.
In addition, the restaurant industry has been subject to a growing number of claims based on the nutritional content of food products sold and disclosure and advertising practices.
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 individuals with disabilities.
+Added: We are subject to the Americans with Disabilities Act (the "ADA"), which, among other things, requires our restaurants to meet federally mandated access requirements for individuals with disabilities.
The ADA prohibits discrimination in employment and public accommodations on the basis of disability.
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Our employment practices are also subject to the requirements of the U.S.
−Removed: Citizenship & Immigration Service ("USCIS") relating to citizenship and residency.
−Removed: The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and other costs of doing business and could have a material adverse effect on our Results.
−Removed: Failure to comply with the laws and regulatory requirements of federal, state and local authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability.
+Added: Citizenship & Immigration Service ("USCIS") relating to lawful residency and work authorization requirements.
+Added: The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and operational costs and could have a material adverse effect on our Results.
+Added: Failure to comply with federal, state or local regulations could result in, among other things, license revocations, administrative enforcement actions, fines and civil and criminal liability.
Compliance with all these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 13
Tariffs and other trade policies could have a substantial impact on our business.
The Company’s business is dependent upon the availability of, among other things, agricultural commodities and other raw materials.
−Removed: 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.
−Removed: presidential and congressional elections.
+Added: relations with the rest of the world remain uncertain with respect to taxes, trade policies and tariffs.
Changes in U.S.
1 unchanged sentence
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.
−Removed: Similarly, interest rates may continue to rise and create further uncertainty and volatility in the market which would negatively impact our Results.
+Added: Similarly, interest rates may continue to rise and create further uncertainty and volatility in the market which could negatively impact our Results.
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.
−Removed: 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.
+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
+Added: Portillo's Inc.
+Added: Form 10-K | 13
+Added: materials, which could and negatively impact our Results.
We can incur liabilities arising from environmental laws and compliance with environmental laws could increase our operating expenses.
−Removed: We are subject to federal, state and local laws, regulations and ordinances that govern activities or operations that may have adverse environmental effects, such as waste handling and disposal practices for solid and hazardous wastes, discharges to water and air and odor control and also impose liability for the costs of cleaning up, and damage resulting from, sites of past spills, disposals or other releases of hazardous materials.
+Added: We are subject to federal, state and local laws, regulations and ordinances that govern activities or operations that may have adverse environmental effects, such as waste handling and disposal practices for solid and hazardous wastes, water discharge and air and odor control.
+Added: These laws impose liability for the costs of cleaning up, and damage resulting from, sites of past spills, disposals or other releases of hazardous materials.
In particular, under applicable environmental laws, we may be responsible for remediation of environmental conditions and may be subject to associated liabilities, including liabilities for clean-up costs and personal injury or property damage, relating to our restaurants and the land on which our restaurants are located, regardless of whether such environmental conditions were created by us or another party.
−Removed: Third parties also may make claims for personal injuries and property damage associated with releases of, or actual or alleged exposure to, such hazardous or toxic substances at, on or from our restaurants.
+Added: Third parties also may make claims for personal injuries and property damage associated with release of, or actual or alleged exposure to, such hazardous or toxic substances at, on or from our restaurants.
Some of our leases provide for indemnification of our landlords for environmental contamination, clean-up or owner liability.
1 unchanged sentence
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 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.
−Removed: 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.
−Removed: Regardless of whether any claims against us are valid, or whether we are ultimately held liable, claims may be expensive to defend and may divert time, attention, and money away from our operations.
−Removed: A judgment in excess of our insurance coverage for any claims could have a material adverse effect on our Results.
+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 laws 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: In recent years, a number of restaurant companies, including us, have been subject to such claims, and some of these lawsuits have resulted in the payment of substantial damages by the defendants.
+Added: Regardless of whether any claims against us are determined to be valid, or whether we are ultimately held liable, claims may be expensive to defend and may divert time, attention, and money away from our operations.
+Added: A judgment significantly in excess of our insurance coverage for any claims could have a material adverse effect on our Results.
Allegations may also result in adverse publicity and negatively impact our reputation.
5 unchanged sentences
Our management and other personnel devote a substantial amount of time to these compliance initiatives.
−Removed: As a result, management’s attention may be diverted from other business concerns, which could harm our business and results of operations.
+Added: As a result, management’s attention may be diverted from other business concerns, which could harm our Results.
We may need to hire more team members in the future to comply with these requirements, which will increase our costs and expenses.
3 unchanged sentences
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.
−Removed: Despite our efforts, there is a risk that our internal controls over financial reporting may not comply with Section 404.
−Removed: Portillo's Inc.
−Removed: Form 10-K | 14
+Added: Despite our efforts, there is a risk that our internal controls over financial reporting may not fully comply with Section 404.
Failure to achieve and maintain effective internal controls could have a material adverse effect on our Results.
2 unchanged sentences
Judgments can be faulty and breakdowns can occur because of simple error or mistake.
−Removed: Additionally, controls can be circumvented by the individuals, by collusion of two or more people or by an unauthorized override of the controls.
+Added: Additionally, controls can be circumvented by individuals, by collusion
+Added: Portillo's Inc.
+Added: Form 10-K | 14
+Added: of two or more people or by an unauthorized override of the relevant controls.
Because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected and could materially adversely affect our Results.
8 unchanged sentences
Throughout the year there could be ongoing variability in our quarterly tax rates as events occur and exposures are evaluated.
−Removed: Our effective tax rate in a given financial reporting period may be materially impacted by a variety of factors including changes in the mix and level of earnings, varying jurisdictional tax rates, tax effects of equity-based compensation, changes in tax laws, regulations or interpretations thereof, cost related to intercompany restructuring, fluctuations in the valuation allowance or by changes to existing accounting rules or regulations.
+Added: Our effective tax rate in a given financial reporting period may be materially impacted by a variety of factors including changes in the mix and level of earnings, varying jurisdictional tax rates, tax effects of equity-based compensation, changes in tax laws, regulations or interpretations thereof, costs related to intercompany restructuring, fluctuations in the valuation allowance or by changes to existing accounting rules or regulations.
Further, new or revised tax legislation may be enacted in the future, which could negatively impact our current or future tax structure and effective tax rates.
5 unchanged sentences
Generally accepted accounting principles in the United States of America ("GAAP") are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the American Institute of Certified Public Accountants, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
−Removed: A change in these principles or interpretations could have a significant effect on our financial condition and results of operations, and could affect the reporting of transactions completed before the implementation of a change.
+Added: A change in these principles or interpretations could have a significant effect on our Results, and could affect the reporting of transactions completed before the implementation of a change.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions that may be initiated by our shareholders, and designates the federal district courts of the United States as the sole and exclusive forum for claims arising under the Securities Act, which, in each case could limit our shareholders’ ability to obtain a favorable judicial forum for certain disputes.
4 unchanged sentences
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
−Removed: Portillo's Inc.
−Removed: Form 10-K | 15
−Removed: convenient judicial forum, which may discourage such lawsuits, make them more difficult or expensive to pursue and result in less favorable shareholder outcomes.
+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 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.
If a court were to find the choice of forum provisions in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse effect on our Results.
+Added: Portillo's Inc.
+Added: Form 10-K | 15
Our annual and quarterly results of operations may fluctuate, and if our operating and financial performance in any given period does not meet the guidance that we have provided to the public or the expectations of our investors and securities analysts, the trading price of our Class A common stock may decline.
9 unchanged sentences
Fluctuations in our performance may cause our results to fall below our public guidance or the investor and analyst expectations, which could cause the trading price of our Class A common stock to decline.
−Removed: Fluctuations in our results could also cause other problems, including but not limited to analysts or investors changing their valuation models for our shares, experiencing short-term liquidity issues, diminishing ability to retain or attract key personnel or other unanticipated issues.
+Added: Fluctuations in our results could also cause other problems, including but not limited to, analysts or investors changing their valuation models for our shares, experiencing short-term liquidity issues, diminishing our ability to retain or attract key personnel or other unanticipated issues.
Quarterly results of operations may vary in the future and period-to-period comparisons may not be meaningful.
1 unchanged sentence
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.