On this episode of the Action Alerts PLUS Podcast, lead portfolio manager Chris Versace welcomes Michael Osanloo, the CEO of fast-casual Chicago street food company Portillo's (PTLO) .
While not yet a household name, consensus revenue forecasts have the company serving up revenue of $683 million this year, up from $587 million in 2022 -- and up from $479 million in 2019 -- as it continues to expand its footprint and win over diners.
Osanloo attributes the success of Portillo's to its "crave-able" yet affordable menu that has an average check per consumer of $10. As he shares, the menu is not only recession-proof it is also veto-proof with items that appeal to vegetarians, vegans and "flexatarians" as well as meat eaters.
"A hard menu to execute" no doubt, as Osanloo points out, but it appears to be working.
The company recently enacted a 3% price increase, which layered on top of the 3.5% increase taken last year and paired with productivity improvements is shaping up to drive margin improvement as food costs improve. Despite those price increases, Osanloo explains that the company is intent on continuing to offer family friendly prices, which could help in a recession.
Like other restaurants, Portillo's is contending with higher wages, however, Osanloo explains how the management team invests in and leverages its employees, using them to carry the company culture to new locations.
Portillo's plans to add a total of nine locations in 2023, up from seven last year, with more on tap in the coming years given plans to eventually have a national footprint.
Coming into May, the company had 76 locations, clustered in Chicago and Indianapolis with other locations in Milwaukee, and Detroit. Targeted areas of growth match with growing population levels, especially in Texas, Central Florida, and Arizona. Unlike other companies, because of the strong cash flow associated with its restaurants, Portillo's doesn't need to tap equity or debt markets to fund its build-out. In our view, that should allow for a more thoughtful and disciplined build-out, but also fuel consistent growth over the coming years.
We will now add PTLO shares to the AAP Bullpen.