Portillo's (PTLO) 7 May 242024 Q1 Earnings call transcript

Greetings and welcome to the Portillo's First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Barbara Noverini, Portillo's, Director of Investor Relations. Thank you.

You may begin.

Thank you, operator. welcome First and Call. XXXX everyone, morning, to Quarter our Earnings Good

by Michael conditions statements Chief XX-K supplemental Chief results on With do is: guarantees and press which of Financial law. the President performance. are today Our here release investors.portillos.com. Officer.Any presentation forward-looking We commentary are earnings Michelle Officer; unless and based Executive and about posted made at call Osanloo, Hook, and our are expectations not future on update are forward-looking these not required and business statements, management's current future me

GAAP risk in may financial Reconciliations materially non-GAAP call this measures non-GAAP Our included factors XX-K most of to statements.Today's make results will our measures, vary which identifies GAAP these these earnings measures. forward-looking counterparts their that are to to morning's cause are to actual comparable materials. not reference posted from alternative an

we questions.Now over the Osanloo, Portillo's. after prepared open Executive Officer lines we call the will turn of your remarks, for to and me Chief our deliver President Finally, Michael let

you, Thank joining First for our at Call. you XXXX exciting Good everyone. Earnings Thank us Quarter Portillo's. It's for an morning, Barb. time

we plenty quickly of we're quarter, building sales achieved few quarter, our for Scottsdale total room of be and fifth Dallas to our there we the then happy first with we us We're seventh in XX.X%. Sunbelt, to area. ago, restaurant scale the restaurant-level just in the first During restaurant grew opened in Phoenix a days in opened X.X% market; continues the grow.Now, the how where margins and

line base them are top This cold said, the snap. our still That the miserable the recall, the the of base we've comp means seen improve have second Midwest. slow quarter. Midwest. to please XX restaurants start as XX X.X% negative trends going weather Our we comp was of of impact off got felt and that And a due the some across into majority in comp to we in

So positive April, our efforts deliver new comp, mitigated XX% our least single-digit and still year transaction at into comp ability have single the declines the low we're in full X XX% and margins back opened restaurants. restaurant-level in low XXXX, far digits.For confident to has settled to of

our reviews to with you to Michelle QX performance, Before a moment like strategy. take I'd our share

that Our strategy X long-term for is quality the for goals predicated as on and guideposts pillars serve near-term provide growth. foundation

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made centered salads and of so these month, coaching based on down a Our scores and a to pillar but speed our down is and those were the that landscape. Each through launch at and of these marketing Simply salads. a Pecan of Portillo's time campaign service critical Spicy ready-to-order their real-time demographics, It of all these awareness displacing and highlighting conjunction our engagement. of campaign. any salads been transaction experience brand some XX-second we the Chicago, it.Starting improvement point signs menu amplifying feedback We margin the our in that last in menu with accelerated avenues leaders slowed that the a awareness and comp, the by do of full early efforts without on the we a channels, where over our speed double QX, At years, X nimbleness know Salad a in only win. these through initial service other we on And overall outside already, Salad. to salads appeals has the on see variety consumer They this of We've clearly digital At key satisfaction campaign have also Chicken new to from they small Arizona, during day.Our digital They Up" month, new positive by X Chopped improvement really to QX, tested continue the scale. region bit highest we metrics pleased guests the this some empowering house-made sales the end our on that's are a in and marketing by menu you'll launches organization. also to market to an drive-thru investment of we are A of can marketing freshness had restaurant as a our a so advertising seen veto-proof. innovating range tests brand we delicious. of are end drive-thru reaches impact of amplify Portillo's and good, better. in of we behind Chicken second make mix give They've have in traditional points items. equates of with more the even raises "Mix with new of put, feedback our fresh testament add lower innovation, the the tools

the to quarter.We'll estimated of cash still innovate by restaurants each approach. foot This our to in same we're and our Restaurant of on proven of Chicagoland role Portillo's tactic least most amplifying that on still awareness. it them delivery third-party million more we In like and be also play build Given of increased a success excited digital it expect is as costs. continue And advertising, efficiencies. building Keith our focused planning to in puts us when generate as and our in scale trial maintaining we We're advertising will to sites of Portillo's. and the will we round the another QX. also will early assimilate QX, and cost brand. in to also remember, quickly a advertising doing $X lowering third Future processes. innovation. we Portillo's.Our industry-leading the optimizing They we're Texas business range reduction, with to success have Restaurant member that Future Technology built-in is general bids this experienced leadership, and raise continue of importantly, in lean on format an of a we'll guest in reminder, local our returns.Now the ordering Chief some smaller look the build Restaurant advertising build, produce outside our impact restaurant share optimization led experience.Our in continue position well looking create these AUVs our on has joined to we're a new brand in to I'm stakeholders we're square particular, other million. markets. prototype enhance on new advance cash the Correia Chicagoland all We're Under driver on contractor track team suggests restaurants Officer. Keith to And looking the guest our with open at restaurants. testing And industry-leading signature at feel comes is the footprint through to to value how $X.X strategic and pillar Future million executive, AUVs embracing enviable our first partnering planning The as be actively in industry app, experience we're Portillo's $X.X on improve Keith's that California as new with replicable of to the and third a X,XXX our a IT of a They new throughout business in the our development of industry-leading will identify our within while the A team that digital is will and importantly, kiosks and a very saves opportunities technology GM; long-time for our ways first will in at returns. even Portillo's markets in with as experiences. that We're personality. Information

pipeline, experiences which We're year, our It great has and meaningful rest. they serve to or pay the built member we final a matter the We're and focused of do. a for member online excited pathway We especially maybe few a points memorable tremendous of this previous to taking years. about the development Development have Program confident Portillo's our our fresh, to that of work continued been We've wouldn't create better care members. most what pace runway ability our averaged a at built guest amazing expand our and industry-leading we in know a providing feel faster to one, Ignite and food teams. development. than important proud is have team strategic possible and of in-house. team We on a retention, in Restaurants We're growth.Our our team be Future coming that's clear professional pillar, our XX for benefits totally to than proud environment, percentage we're see really without continue long

share that of a a As we of experienced you having know, deep because bench. Ignite, proud new have an I'm to leadership restaurant General critical Manager. success component is

most growth. Ignite the built for all through GMs We and of They the quarter those confident We're of that raised have exciting the talent. program, than first long-term XXXX XXXX, Portillo's we to have went this future organization who we support sure the for beyond team that's envision with to the be across our experience see promoted In careers we us, And Portillo's who want coming Manager members the it. our hands to members Portillo's. part pipeline team Michelle. the how they be members to a on General Nearly thrilled pipeline potential experienced already. folks graduates.I'm part more to many their level, in-house with growth. Ignite are back well continuing all develop XXXX of over focused GMs our and and making talent me have that, as in want team who identified we keeps we're of of hand guests for our create pipeline it as of ever It's XX the that can what let deliver.With

everyone. you, Thank and Michael, good Great. morning,

I offering. our to recent quarter Before want results, first discuss recap we secondary our

Class million X $XX.XX A of price offering shares of the completed common company's stock share. offering the of at we per quarter, an This

firm sold of owned Partners, Portillo's A by XXXX. to in acquired Class shares the that our in sponsored shares proceeds the the IPO from the offering used purchase and pre-IPO Berkshire B shares XXXX, equity represented We and members. subsequently private All in

the outstanding Class Class million Berkshire's represented the X shares remaining of for XX.X IPO, this XX.X% Since QX, XX% beneficial the of our time Over X, transactions, secondary ownership As and there collectively time, total approximately restaurants. XXXX, of turning by more quarter. the the revenue A float.Now at of the have of company shares. B opening XX.X% than May IPO. which the from represent the the doubled XX.X% have first reduced been shares to we've driven In growth to was new in public results over

year. X.X% During quarter, of were $XXX.X or reflecting increase to million, million revenues the last an $X.X compared first

by certain transactions product restaurants higher by New X.X% offset and a same-restaurant mix. sales approximately X-year million, XXXX, partially in driven This offset decrease partially this offset same-restaurant consumer subsequently was a in restaurant by check impacted severe in The was transactions first during period by impacted increase weather ongoing spans to by transactions Same an in primarily in sales. uncertainty decrease prices, average were $XX.X stack of which by average particular, same-restaurant In was quarter's Comp approximate greater weeks basis revenues QX declined increase check several quarter performance. driven menu X.X%, an digits. X.X%.Strong positively of a X.X% context of X%. This weather sales by Midwest. improved. was the sales give of heavily by X.X% winter growth which transactions the double on and in

mentioned, Michael initiatives As transactions environment. continues focused to what we're a choppy to in on be several drive consumer

single-digit We improved results. happy transactions versus sales same-restaurant are and low in our these first that efforts growth supported April quarter

XXXX of to decreased and are of increase third-party delivery in beef, offset Food, single-digit by year, first our primarily on packaging increase XX.X% partially beverage the For decrease was the costs due still first sales This experienced low our costs. produce the we percentage commodity commodity prices. lower and and quarter pressures X.X% as a to an estimating XXXX. from during commissions, revenue quarter. quarter the full first revenues to pork a We same-restaurant in in on XX.X% of growth.Moving in

first XX.X% inflation XXXX. still XXXX are XXXX. revenues The variable-based our XXXX X.X% wage of labor XX.X% primarily quarter quarter of increases lower by Hourly our the versus mid-single a to as rate was year the Labor transactions quarter in We were and check average commodity increase of members, and partially in the percentage period. first up in of in the driven the offset from first increases digits incremental in by rates increased prior for team lower estimating compensation. in

estimating was the operating XXXX, by inflation in million restaurants. or currently new $X.X in first opening are driven of quarter mid-single to of increased quarter which expenses compared X.X% XXXX.Other first labor the We in the XXXX primarily digits of the

or remained driven by of first expenses increased opening XXXX the Occupancy compared operating percentage quarter first of other $X.X new of XX% XX.X% to compared primarily revenues, a restaurants. quarter As at million expenses year. prior XXXX, flat the the to the in of

As the a first were to quarter in $XX.X increased to margins XXXX. XX.X% percentage compared X.X% points quarter. QX of new X a quarter prior adjusted reflects and despite adjusted of has first historically sales decline of occupancy revenues, our addition first expenses in million XX adjusted XX.X% the modest and of quarter of EBITDA that lowest XXXX. quarter X.X% of the year.Restaurant-level been in Restaurant-level only XXXX. softer XXXX increased basis versus of This restaurants restaurant-level Note since the revenue first EBITDA margin the EBITDA

currently estimating during on primarily range pressures in in X to take the be actions XX% the food cost pricing restaurant-level are inflationary adjusted margins we offset XXXX.To XX% our did to EBITDA and the above, We quarter. noted labor, of

today. the March. connection price effective California QX we and sale each decision actions which increase pricing made increased Act off pricing These X.X% of of the would January us the approximately end lapping and launch, we prices effective combined actions, of first increase During X% of an of at of the offset the in implementation price we accelerated put at quarter. FAST Subsequently, X% have in at X% in the of of pricing by our with week, in rolled to with last an approximately the March, period. us another end puts end certain menu of the new prior just year previous at To

in of by million -- to first to increase XXXX. in an rate decisions as quarter executed quarter annual professional general revenue The advertising of lower by decreased monitor XXXX. quarters.Our marketing consumer inform well $X.X in offset and expenses of equity-based increases expenses expenses. attributable continue the to partially number and and wages as due decreased in X.X% was XX.X% the cost in executive administrative XX% $X.X in our to from compensation the of driven will million increases decrease pressures, quarter Preopening X.X% timing openings. to variable-based quarter of well first restaurant landscape was and The XXXX We the our the compensation, XXXX competitive first fees, decrease new as pricing the to from in sentiment first coming primarily and of planned by lower the as

This $XX.X EBITDA between first million expect this to XXXX, EBITDA costs an basis million expenses in mind period. million expense in $X in also to million to the the as preopening versus adjusted quarter XXXX. first to reminder, continue associated during prior or improved revolver We of in as margin the Below was XXXX expenses quarter opening.All prior preopening which of XX.X% expense quarter of to refinanced Adjusted decrease our led first the by was incurred Please million February well $X points term a first of rent keep XXXX, of the includes the $X.X of to restaurant's and versus XX.X%. XX with terms in quarter of interest actual was increase facility, the decrease XXXX be lending as primarily first the our deferred a line, quarter $X.X reported loan EBITDA in XXXX. of that million driven improved noncash XXXX. $XX.X from

million. under today, revolver borrowings $XX are our of our outstanding As

was Our quarter rate first in of XXXX effective versus X.X% was the as interest tax term benefit for XXXX. the on million and $X.X X.X% facility of XXXX loan revolver XXXX.Income

was interest. an in quarter the Our our driven change effective ownership negative allowance, in was by valuation the company's tax which by partially first increase rate XX%, a for offset

best ]. Our exercised fluctuate increases ownership tax awards Class equity are future and as as and rate A will [ effective equity-based

ended approximately operations XX%. to cash. in in year-over-year the increased XX.X% expect million We million to full quarter We $X.X with Cash rate year the from $XX.X quarter. by the to be XX% tax

confident brand are strength it deliver to that our the operational back algorithm.Thanks Michael. will time. execution with And I'll that, of long-term to our for continue growth turn We and on our your

Thanks, Michelle.

experience, our As our I day guests. It's close, than X,XXX single culture provide the people and for these hard It's we're is to building amplifying execute of that returns you that teams. operations we'll how transactions. how future. Portillo's we'll us the grow running more our our you. how winning great executing experience committed strategy the let that for We're against a the world-class I to grow and to just plan This how who our investors.Thank creates work against. want industry-leading to it's that, for we'll our with in to It's turn operator. and innovating great to every restaurants so in strategy our comp, and thank on our care great industry-leading the excited share update deliver it formula. pillars taking I'm back With returns me we'll to with

with [Operator comes Instructions] question of Baird. the Tarantino first Our David line from

starts for with that comp question the the units My not performance base. the are in

our last cycling just wanted that last how seeing you're your look comment when And quite it to very but year, at I what first relative from big openings those some why year. performance, recent your happened? a performing know, down the quarter And openings? I you're bit perhaps So on expectations? are on you thoughts the to I looks versus know estimates, by on can

Yes, David. the question. Thanks for

say, year specifically there came typically So have the I mind, of restaurants and was there's curve X strong. in We One, obviously, about. restaurants, is the mentioned The bit talked the definitely that our into things. we XXXX we would get honeymoon with the of as in you nail those you that keep gate out that X called performing. how Colony head hit out when early certain on a

are coming we've in And sales, curve. in terms dip so before as those of are restaurants that X to mentioned that year into with going that

the keep comp also, second are So first the restaurants thing that does would in that's in would on out.The mind thing not weather an point base. I impact I say is have that

X that Chicagoland new core that quarter. were restaurants And the our in fourth so, we in did have in open did

pressured those Absolutely. by were so And weather?

And would so going on of that dynamics out there specifically. were couple call those I

of the to targets relative for the for adjust class would And of some how openings new I have guess, Michelle, you XXXX you factors, those you that when units? characterize,

late I'd as restaurants. David, the terms happy, class, say total very did Keep of know, we're the X you of which, open those in in XXXX. X with mind, is performance in

So expectations restaurants, they're it's David, but us a say, above performing I terms still class. our at those would early in innings, or as of assessing

of Our comes line next question Zackfia Sharon the with from Blair. William

June. negative of Does guess text. into I unclear lesser to improving that flipping lesser clarify you're the have trends mean positive to ahead sorry, traffic gotten June that I'm traffic? into Does seeing quarter. wanted into I mean that or you're a on flattish the to was kind I'm on back you're -- seeing April. the bit declines or you seeing I

Yes.

we're you at when out data. specifics, by Black Box use coming Sharon, we're ] as transaction we X%. sitting still and both mentioned, industry when think, pressured I impacts. the and at currently I'd We right, pricing still I [ we look were look at say as mix

data as you're better We're industry, see So in can a data. territory industry we that of to gotten quite the think seeing haven't but when still trends those negative the we well. I'd metrics. performing X positive you at say

there, high business a in income pressure, know volumes, business. more heard lot -- traditional channel from doing on I'm that in maybe some I of perspective. kind say, is the excluding first lower the and of that drive-thru channel mix you're of others in terms Kind -- of the been just Maybe your delivery? performing consumer. the interested of quarter? impact you'd things you've QSR how the in extremely a weather your also, Can about from kind different than out you do in talk multichannel? I'd I We've you is see mean, more also

It's QSR. a us, little drive-thru pressured, largely when same story Most us they QSR more end is the is consumer business. which the little consumer drive-thru is -- a going where it's the to a for in bit Sharon, tends the bit impact of a lower of are it when -- to continuation

in being the focus quick, important drive-thru, speed incredibly that's drive-thru. is and on that's generating for efficient, throughput us, and so in fast, So the is why why the

is, well, rooms dining Our catering continue very, us. for third-party still it to is and crazy and very as strong perform relatively

next UBS. the of line question Our comes with Dennis from Geiger

ask more, maybe mix, little you to wanted on a bit I additional provide. any Michelle color could

was mix a the drag on menu go mix there. check any how then color level? mix forward, maybe the quarter of that sort you're it year through was a about But in at additional the the high think I thinking and

Absolutely, Yes. Dennis.

so bit the seeing And business. less pressure still items the versus more we're per transaction, dine-in little in still seeing a drive-thru

mentioned, believe consumer more bit feeling little drink attachments we channel bit when the both would is more lower specifically, that challenged. pressured Michael business. As we're call there, a and that more seeing out drive-thru a income within gets dine-in pressure a I

doing mix that that can with combat that relaunched we April, is we our that recently did believe side, drink our terms because the version well. specifically of as some things Five, meals More and that to help we Famous we're highlighting fry feature our a that. in which bundled So a a in of of meal.And a

for. our menu menu consumers for known is items also in those of I in trying so terms towards Portillo's some to our awareness, And that what April. relaunched on boards just outer markets we're And think drives of specifically the in it drive digital

we're come to how at the and some in we're are the to in that's we're short-term looking the terms things that seeing, specific doing future, there thinking least but about combat of More those what in things at So it. of mix. how

scores, that That's additional I'm thinking, curious been right forward which and have your through thinking where positioning solid, if are on the as the other that. very where line and kind curious value about just earlier, think kind you helpful. pricing, very commentary on in think response price now? around just of of the Michelle, to observations customer go any those price is response just value points the to any of I sort customer of still

the In January the took the took we've that. March, X of X.X% in which, Dennis. resistance as then we seen I took, we pricing at mentioned other on X.X% pricing little and Yes, end actions

the for I of of too, take reason I levers mentioned depth what our you're and specifically end of think Dennis, our us launch of in ability for of the breadth our when that's price March to the think of one taking the and is categories, you seeing. price different salads. at part menu was the that

specifically able -- pricing were some where and price, And in X market.When California, there labor restaurants the categories; flexibility to salads so we take to look that around take the price to our on the in we you have combat take it's ability inflation at we have at whether mentioned the and lot I chicken category, our of channel, our I price the our beef, our think sides, taking burgers, on and When look delivery channel salads. we channels pricing. optionality in to catering a that

I think we still continue to have that as we move forward.

we're price. the lever see landscape. or We're move pricing a way so taking price to how at has, offset year. pricing continue of a going little within another first continued look to that going to to I've we've taking say, boiling to And the But as to so not one the getting we've or seen consumer we Michael that actions But not committed within couple inflationary this taken we're view how it. And point, to understand That's continue is resistance to and we speak. to the things pressures. to

take how to very we surgical have we be on price. So

next Chris from the with O'Cull Stifel. question comes Our line of

X% confidence on traffic of had that improvement a that versus a more and pricing just the was level continuing color hoping low more give maybe quarter-to-date should how I of the with the could I single up we and bit about quick on level you little contribution Michelle, comp, sort price recently? off digit the rolling follow be thinking

just Sharon, saw We quarter. We Yes, specifically and saw we're answered event that as mix. Patrick. on that. and going we transactions. still intra X%. mean, the both over April we We on March, some improvements And transactions pressures impacts seeing definitely improvements we looking quarterly comp, then January, as improvements on were see at from into saw weather specifically saw and the I to down you the had in from we I that. moved traffic, on and into question did But in February

we're have So pricing, those today, those and Michael here flipped definitely we X% mitigated, necessary, at sit positive mentioned. not as which but as it's

feel because mentioned. we good since we're to the strategies continue place, have we we've ability April.So mitigate trends so QX half and what the Michael into some improve really seeing, point in And in of seen that as latter those trends about our into January to

in our investment are a to bit Chicagoland in Arizona. in We of advertising We made invest going QX in market little quarter. into third the

continuing we're we the toolkit so those that weeds, from just impacts seeing use macro we're out still there whole. combat still to the of So the some as trends And environment a in speak. our are not tools But today. to seeing we're to

And key That's key least at year, mentioned Michael, helpful. one the pillars. in the excellence of the pillars drive-thru or strategic of I know of as one you Great. then, the strategic underlying points this

that for result them So, I guys that can mean, Is that now on in identified have focus that drive-thru are points drive-thru, focus you in what of and right GMs are in key are those areas better the going your periods? improve real it the on what to you pinch believe you that allow in to really throughput the a channel? training? and throughput something you center Is it else have

Yes.

yourself, focus on the actually answered training. a is it question You which is

being order scores. is getting little them. carefully in see that person how are very and think got We're our drive-thrus we when slow to a an you next the we in them. and guest reality monitor on as little slow based food performing on that taker. what's well in deploying But a I We're complacent a going outside little satisfaction being actually

teams our as possible. making And the really like that staffing expectations appropriately of and for in we're sure is what it throughput, know getting people So and drive-thrus quickly our the that and the as are. Make folks looks does great what with begin out focus sure

of Our Bank Sara from next question Senatore the with of comes America. line

X I clarifications. I wanted -- to guess,

wide year? overall should said normalization lot growth meaningful. you gap be the is growth, the and over year revenue you unit of between that are room the that noted context? a contemplate that trying is you're second Sunbelt? in pretty that year what pretty know, how specifically, and course that in growth first understand The the of but I you then to perhaps the that normalization growth seeing for comp expecting And we Should to seeing that, remain between second

Yes.

X I that Sara, at honeymoon it's when in -- restaurants. metrics and year to you for I'd given sense year some in curve of performs for how we've curve going how that how that past dips. comp the get the there's mind only think, metrics X this terms that and you class Keep enter those before in -- to base. X of restaurants are year for to a a point look dips

one in then and comp the under one And we under base QX, have comp have one we'll We'll had QX. the comp in base so QX. base the under in

honeymoon still, curve. be have that noncomp be speaking, going So going that largely to that to to going class are that in we're a in restaurants of window, are

out in dip that that restaurants think I to outside the dynamic would revenue But point Midwest, of are the going exists. that outperform of point continue extremely the those the prior of moving terms versus honeymoon dynamics be the to there's the know, with say in that the about what's I'd restaurants performance and be terms as so to as we of noncomp curve.In numbers the performance. Sunbelt, And still And we've you forward in comp mentioned Chicagoland. happy I those in the terms of generally before you

bullish and be in continue forward exist, we and continues Arizona we So to extremely Florida. on that as dynamic to move still restaurants Texas,

Yes.

at that Sara, The an outrageous like number. it restaurant open towards was time Texas, only too, last was the recall and this Colony in trending year, Just

after of so was million this awareness, that's I well, Colony. it's it's much to said a And which what it's got curve. have to it that DFW time. first of a awareness and part is that restaurant coming start. us. we earth restaurant, the going next out to a performance. It great towards, sustain because why -- trial the come was That which X was trial it an $XX never it going but trending it's quoted back never because generating at so It not The the a of to It's reason was to enormous natural was for fantastic think number. and you had amounts -- in I fantastic But performed down unsustainable closer to going be market is opening restaurants was

you honeymoon instead at Colony, helpful. percentage? new sort Okay. And should transfer to going to the percentages these issue is for curve opens into I and look down or like, something down Or XX we the sales you restaurants? little plus to just That's goes similar at a previous data opening that as and about bit and dollar X.X, presentations. it further of of at you the like drill be as thinking values, opposed a intentional honeymoon guess have so that. Michelle, the so, X.X said have

percentage to Now, of mentioned I Sara, it, are I know best vary, The as think is restaurants as class. I decline, way it you the about but to think best would percentage that for say Colony, decline way the is specifically obviously going the class. Michael a to about that individual think as

comes question of Harbour next with Stanley. Brian from Our the Morgan line

sort from kind Michelle, to but we're kind in I saw similar is as a we or first similar be you'd week perspective the that lapping you'd in margin -- something move the Is change think lumpiness expect quarter, like we should know, fourth in be to to about? something the quarter. of margin that we expect any of of extra

specifically, out call I'd nothing Brian. There's

bit degradation. before, natural But that more in continue quarter-to-quarter base as to than comp as called margin Through that I impacted I restaurants. expect the We yes, we any naturally about margin restaurants alone, that, call compare, expect would only along commodity pressure are wouldn't have though, digits the we've in a thing we've in feel as I range. talking we little to out I you quarter full that terms we just to do call than that more your some the we -- out still think, think go yes. based of see mid-single might specific and profiles mentioned. costs lumpiness Outside year, that out. been should input of but we're I'd that on going be is get XX% that QX, another.The side, beyond you but not confident that lower the quarter, XXXX not We anything that on with those as -- be other significant XX% I've in come nothing as for the each

the Is Okay. in increase on third fair? you assume maybe but more G&A, I year-over-year quarter. the of still that expect then track, And

because dollars in advertising. pressure to we Chicagoland to we are do to G&A in of to going $XX advertising, that million $XX here Correct spend expect, be year. quarter, that and those sit in some net on start still we again, as that third as we will in specifically for that today, But quarter range the

comes with Our the from line Andy Barish next of Jefferies. question

Just Fives. a clarification on Famous the

quarter thing? I you were think, pairings looking Portillo's Is different at the last remembering you value I Or that there? basically something about at, some that talked test. same am

inside brought had guests, trying our bad menu duos news. an and got the ordered. Good news is Portillo's good pairings to items No, how the it ordered. we you're year bad effect great restaurant. down news ended boards correctly. specifically that We on outside for and it that number $XX. they having year And close mix using of news, is The were guests on The remembering under to highlight you the last

our the is with us think which the little better Portillo's we're absolute up we a and that accretive mix. best we so to picks think well, also hopefully off bit guests work Five And better dishes, Famous really highlighting

bit point, value, So are higher $XX but price a little than maybe? those that

they with the them have did beverage not. pairings Yes. typically Yes, where and a

be so those out? XX remodels where think a this that the there XX Yes. of Chicagoland year or I year? plan you it Or Perfect. in Have time And those earnest? to roll kitchen begun far to thus in then area. are is you another were different going

our half Yes, of gotten and year, for on majority most And of started. be say those retrofits they the those so this last haven't as of come in I'd well -- rolled year, out vast come in Andy. some The year. We had back half. will the will done but most vast those tap yet. will back underway. core, we -- in the markets of fully of XX lot the in those It's outer a the XX it's have as of our

is of I a long-term this then probably think to be let And set, -- of level me going bit it. Got everything it. just below the would I kind Got low-teens, with a to just growth XX-week right of adding yes, the EBITDA little way in wanted up, get year's what kind to thinking especially go lap? environment, Maybe -- it I the it's tough algo. consumer a but like to to have guess,

I to think we push continue got top growth, to line Andy.

you be bottom I on think incremental to look, flow-through line. on know, powerful you as the is when the obviously, revenue very that Xgoing

outside efficiencies think look I within of that, for our continuing to kitchens.

of labor for in retrofits of just some the benefit. year, provide do the general. form something mentioned, that. back continue do I look DNA continue to in The But that. in that's to as as That's half our we We then

to to focus Michael that to top drive the as throughput has we a be growth. line think, ability transaction the drive-thru that that drive continues mentioned, I through believe growth

believe believe -- going to benefit. could I that that we continue, we incremental top would a to as believe would organization. our happen.We that, that cut be way mentioned, drive we're you greatness. that We we're But have as so to me, what as line, we're And don't to know, provide growth don't to

going things to the I to of are business decisions some those would to that call we're So invest continue the to forward. in business. continue make But to We're good out. drive this going

so, G&A. obviously, But you're don't I still revenue-driving to trying I -- and -- if And we need absolutely be in spending We're know we're Yes. And committed how at we -- mind, we getting I G&A got smart I generating like have to right? I you but leverage, It's in is -- spend. mean, just transaction-driving G&A have Michelle leveraging think, and be are that activities. goals G&A. things to to in

us, to can so So attractive the really to marginal Michelle our growth we focused is extra so But dine-in investors that's to be need right, the contribution for from the get us area revenue on. that an or that's we guests that for through our best is that continue is that be drive-thru margins. -- through way attractive expand to

the Brian from line Mullan with Piper comes question Sandler. next of Our

to below? follow-up drive-thru understand, your clarification before? don't trying the Or of and you're to but service this, Just just, high believe of kind you a this belabor better? is long a It's other a speed at you you're today in conversely, Just to that commentary. data on see watermark is opportunities in than running on history? that. there's think of want than able that drive-thru being do you just just Portillo's about to there's get So know some the not times slower I slower just

slower. No, slower it's It's back undeniably factually XXXX. It's slower. it's I XXXX, we in than -- when to look were

drive-thrus would are in so moving what bit can as mind. make goals that confidence and get that our we to. what us them as us little And we gives a That's gives swagger our that's sure back like quickly

want I Okay. Understood. about And business. then to catering ask just the

You Chicagoland, going highlighted outside maybe were invest something an resources that particularly you to of opportunity, as behind. call area last of

this now? with you that time? And plan that build starting the how do over for you envision to year? are where What's just So

a Yes, team reaching we deployed both inbound doing customers. fully that's sales, have but out now catering outbound also to

team ordered ordered who haven't from people ordered, Mother's last doing interested you "Hey, calls past doing around that. in we're saying, Are Day, sales something?" they're example, For in year. So getting our the who you

markets, I is a for In almost generating X flavors outer awareness. Catering think it great trial performance. lot that. takes on of of it's and

acclimated much And is making more that that fantastic. is bigger people is execute we're flawlessly. them sure to reminding we so order Chicagoland, the facilitate that -- about customers getting we for win Portillo's and But that even it a how itself help it's sale to use us.Inside

to customers. business, a -- its it our but a lot to awareness who lot it's a a have people's weight of So it's a different mouths -- and put may punches in its a up mean, not of been and it's of pretend going ability huge trial it business. because great otherwise I not not I'm generate food huge over

comes Stephens. from Our next with Salera the question line of Jim

taking seeing My additionally, smoothing Tyler Prause the environment. Can front? Jim. is openings that the to to the high-level Are you've scenes you you one talked improvement around year on behind And the steps quarters? had openings smooth a more about the between you're for previous question about any compared talk yearly This follow-up. years. throughout in past little permitting on was And

things What of is It's timelines on of would for a you great sort improvement of that ton the silly not like our tell question. I that silly control. we're permitting and things outside lots seeing a getting of are

for that development done we've has is what So our pipeline extended dramatically.

to -- And target that's open that we restaurant the XXXX, we Texas have in so quarter a when we in of prior. entire started a fourth XX restaurant the process months

we Development the -- than And a in down for things likes pipeline, So Chief our months things way more easier speed it's him to slow a that cycle say; advance to our now in predictable my we XX begin up. Officer advance. lot is so build permitting to have

And us more for very much it's very, in. so 'XX And just for we and predictable have have extra a much time built pipeline 'XX, so fulsome we because beyond.

up. one just And follow Very helpful.

at locations some the in and Texas is demand as markets. on new regarding we Day as far delivery great curve Investor gave shaping the You how this X trending catering? color Can in update the an get activating

extraordinary an restaurant, the into The get extraordinary was Texas Yes. but so feel do the everything Colony It only for things X because We're the catchment specifics it's -- driving Portillo's I has an about have, don't does we to were early of to everywhere. It that we the success on. from one each DFW months is people like want first we introduces community. restaurant the want. It of

As fill to in. we have started now

drive-thru. open. start on you Worth, the to is turn time little do And want the and you what can keep channel is in humming in same But X, But in cetera. Arlington, to company the a because still. to X, we're bit driving executing can more every opening and that tactics constrained We X little latent market. Dallas in Allen, area. we another we in are through the in just et -- now, a Worth restaurant flawlessly that restaurants you see XX, build that to imagine restaurants, Denton spent still have the building is channels is X right get in There Fort Portillo's as then aggressive opened to a in you Fort recently and Worth one ends make X scale.We in sure start bit an more anybody who's need X, with inside started but -- not knows up so staged, hour We little more the to we happening we're from demand, we alternate now spend Fort that first Dallas channels, alternative

Does that question? your complete

Yes.

from Our comes Guggenheim. next of Gregory the Francfort with question line

before that remind see, that's historically you My and a first is me? to then don't that know also you think an that the And decision you've What you if been -- made on or advertising make advertising just decision? you was if delivery kind the to what increase. back increase can comment if doing maybe just I And I the made going brand, did the it. about for of advertising third-party sites.

Greg, question. great -- we're So

half trends. we trends. advertising experience, When -- that of great our that they traffic come Arizona is, in our finance the operational believe improved last -- and the And right. in So will advertising undeniably we're worked. instances, not, both back quick But did pays and we not the outstanding give people did very In is timeframe. it itself year big just historically that on is marketing, it advertising. -- It's improved we're I spenders best just a Undeniably not worked still say in the execution, you team traffic back. for

gives confidence it a it a advertising drives on it spend return start that us that to P&L, so bit creates we up traffic, can more our a drives will And bit blow comp, it it not and on more little little positive and return, investment.

Yes, million partners. marketing of digital third-party do the has that presence just with team awareness, and Chicago, modest we're good on relatively actually the We what angles think a our that not converted that ends become going with that. That's a that way? not And ad not who to $XX We Chicago so by We're we're think little can eager advertising bit anything crazy. do spend restaurants a works, to in targeted campaigns. covers do continue we convert of not test we with to fun we delivery can Portillo's They to channels, doing really do what particularly scale drive their happening to and that Chicago restaurants, the can intrigued in Chicago, frequency.Outside and in think, of in But are. Portillo's. we'll we some have advertising lot that the I we maybe is were guests. we're So selectively.We're that. I in Portillo's seeing success guests advertising -- that and in that who we about know advertising up in mindset, there's some, then think a very

that more way still up scale, trial that Central we a awareness Florida; very but fashion targeted don't a like, think generating to to want. aggressively pays And dividends. we're awareness building of to we awareness. build a places Texas, the going going And we're and way where in that have candidly, we're starting digital test So in channels, particularly Arizona, in great we it's of channels, of as aggressively, more like and think third-party use markets delivery

And different Got very in the markets have maybe, is overall [ maybe just maybe thoughts Michelle, And just between are understanding sitting been an you situations just -- of don't there's Or those beef it. right meat hamburger I you now? -- on flat ] remind inflationary appreciation just any for Can steaks. beef at. contracting? where us give can and an me

a used to inflation those in leaner particular burgers, that's as because Yes. to beef No, little question, beef And The dogs, bit in cut. more we burgers you a hot then our We're Greg. the it's and flats, line saw, Italian make seeing obviously, going which But our pressured use are we X.X% all in products; QX. good a were sandwiches. beef our our items. up

And pressure as a lean so what the I out the we bit headwinds. is called feel on that more part burgers, which do QX market, little of

We about the are flats, XX% hedged full though, for our year. on

item. good about derisking And feel that so I line

beginning of dogs, We other and a our mitigate but be helping but costs line continue as to as a items burgers, in those other out pressures. the little called items for we saw the all the hot at ways some QX, our beef in beef other some We to pressure of to of mitigate think pressure particular, look year. our products, we will at year, us are on our But on bit on pork well. produce

Our next with question Vadis Capital. John of Quo line comes the from Zolidis

When I immature we for of it the from compared the larger in this XXXX. decline inclusive a number And is imagine, guidance restaurants to a look a at ago. implies restaurant-level margin year base, in that decline, year, modest of the impact

you margin? big into outside that So anticipate I we of help headwind range? multiple are the quantifying changing restaurant-level margins the restaurant that? do years about how as in of Chicagoland new are And How wondering still future a newer the could complexion and markets, thinking to restaurant-level base XX% by those look if was in about you XX% think restaurants us the then of you into

Yes, is our do in as to year scale in I newer restaurant-level margin Michael talked yes, haven't, we for and getting those to goal our operating. John, ideally, margins specific generally is, or we're specific we're keep within any that this that How range. markets quickly to general, about, that units impacts going year think that quantify the on we in not on

on markets the within know to getting believe mentioned as having And that cost.Michael can so that and scale we that's on restaurant, getting leveraging margins part goal. sets degradation strategy distribution that just have because range. scale we in that quick so build that continues that that's be those decision the awareness, the But you the that their That's more goal natural to within and keep people's -- open new become how when we margin there's routine and scale is up, new markets. of the absolutely on against benefits marketing, those matters you restaurants to the the to early within buffer continue the that

Thank you.

question-and-answer the We session, and end today's have of the that, the conclusion of with reached teleconference.

your disconnect time. day. wonderful now Thank a and may you participation, lines You your for this at have