Portillo targets 600 units after its $ 405 million IPO
The past 18 months have been a wild race for Portillo CEO Michael Osanloo and his team. Between pandemic-induced restaurant closures and social unrest in Chicago and Minneapolis after George Floyd’s death, business has seen its ups and downs.
On Thursday, with the start of its initial public offering on the Nasdaq, the company will end the year on a high note. Its stock price, which started at $ 20, closed at $ 29. The company offered more than 20 million shares leading to an IPO of $ 405 million, but with a 30-day option to buy an additional 3 million shares, the maximum aggregate offer price offered by Portillo could reach $ 466 million.
Portillo’s joins a growing list of restaurant brands that have gone public this year, including Dutch Bros Coffee, Krispy Kreme and First Watch. Sweetgreen has filed its first documents, but has yet to submit a public S-1 showing its IPO price.
While many restaurants Struggling with growth in 2020, Portillo’s ended a disruptive year in a position of strength. During the pandemic, the company adapted to off-site channels and trained its team members and ended up increasing drive-thru sales from $ 3.4 million per restaurant in 2019 to $ 4.6 million. per restaurant in 2020, according to the company’s S-1 filing. Its restaurants had dual drive-thru lanes and large parking lots that enabled it to handle large volumes.
Portillo’s also increased revenue to approximately $ 138 million in the third quarter ending September 26 from $ 119.7 million for the third quarter ending September 27, 2020. For the 12 months ending June 27, average unit volumes at the Company’s restaurants were $ 7.9. million euros with an EBITDA margin of 28.6%.
Given its strong financial position and the popularity of its value-driven foods – the average customer spends around $ 9.60 – the company felt it was time to think about its ownership and capital structure and to the benefits it would reap from its IPO, Osanloo said..
As a public company, Portillo’s will significantly reduce its debt, withdraw certain preferred shares, withdraw a second lien and refinance his first lien, Osanloo said. This will free up more cash to invest in growing the business, he said.
“We are excited about the investor base we have, and I think our action was well received from day one,” said Osanloo. “It’s day one, but you have to start somewhere and it’s a good start.”
Going forward, the company has ambitious growth plans. It currently has 67 units and plans to grow to 600 in the United States over the next decade through two expansion paths. The first is to continue to expand in the Midwest and expand in states near Illinois. The company has a strong brand in Chicago, so it’s only natural that it will expand further into Wisconsin, Indiana, and Michigan, where it currently has a handful of locations each. In 2023, the company will enter Ohio.
The second growth plan will target the Sunbelt area, including Texas, Arizona and Florida. He already has four locations in Arizona and three in Florida, but currently has none in Lone Star State. Many Chicagoans tire of the city’s winters and retreat to these states, which has created a high natural demand for Portillo’s. Texas is also already the best state by Portillo ships his food to, Osanloo noted. Its popularity spawned dedicated Facebook pages asking the hot dog chain to expand into Texas.
“Our goal is to make everyone in these states truly happy over the next few decades,” Osanloo said.
While most of Portillo’s new units will be traditional locations, the company is experimenting with non-traditional stores as well. Restaurant has ghost cuisine in Chicago to help alleviate some of the pressure from its dense urban areas and opens a drive-thru concept only in Joliet, Illinois, said Osanloo. Portillo’s will monitor the performance of this concept and see if it could be applied to other markets.
The company’s ambitious growth plan will also benefit new and existing team members. Every time a restaurant opens, this unit creates jobs and career advancements since Portillo’s locations do not open unless there is an experienced general manager at the helm, Osanloo said. Each Portillo’s employee will also receive an IPO grant, which will also make them partial owners of the company. Hourly employees who have been with the company for 10 years or more will also receive a bonus.
“An IPO in my mind is not a destination for us, it’s just a start of what we’re trying to accomplish,” he said. “We will be measured by how we perform as a company over the next 10 to 12 quarters.… We will celebrate today and tomorrow we will get back to work.”