Portillo's lays off corporate staff as it seeks to cut costs

Five months into the job as CEO at Portillo’s, Brett Patterson on Wednesday outlined some of the shifts in strategy that he believes will right the ship for the fast-casual brand.

One of his first moves, however, was a reduction in force.

Portillo’s on July 31 cut 18% of corporate staff, along with some field managers. No restaurant-level staff were impacted, the company said. The company did not disclose how many jobs were impacted.

New company priorities

But the cuts to the Chicago-based corporate team were designed to realign teams, resources and decision making “more directly with priorities that matter most to our operators and guests,” Patterson said.

These new priorities come after the beloved Chicagoland brand began moving out of Illinois and across the Sun Belt, pushing aggressively into Texas, mostly, but also Georgia and Arizona.

The chain, however, has battled declining traffic and sales, and former CEO Michael Osanloo was ousted last year amid disappointing results. Portillo’s slowed its growth and announced a strategic reset.

But the troubles have continued. Reporting a 1.2% decline in same-store sales for the second quarter, including a 3.4% decrease in transactions, Patterson said the chain faced headwinds in part from the decision not to repeat aggressive promotions from last year.

The quarter also lapped the attempt to launch breakfast, which showed initial excitement but was later killed.

He also blamed cannibalization as the 109-unit brand attempted to push into Texas.

Changes in strategy

After taking time to study the brand’s customer segment, brand perception and menu satisfaction, Patterson revealed a few things the chain plans to do differently.

Portillo’s is dropping the aggressive promotions, for example, like the 50%-off burgers and buy-one, get-one sandwich deals of last year. Instead, the focus will be on profitable growth.

Patterson recognized that consumers are stretching their dollars.

“I believe it is very difficult for consumers these days,” he said. “But that’s part of the reason why we are hopefully trying to focus on giving them the proper value equation and a proper and consistent guest performance or experience every time they enter one of our restaurants.”

Portillo’s is developing yet another prototype restaurant designed to reduce the footprint and buildout costs, and to operate more efficiently, Patterson said. During the quarter, Portillo’s opened its first airport location in the Dallas-Fort Worth International Airport, which could offer learnings for operation in a small space, he said.

Though units in Texas were smaller that in Chicago, Patterson said the unit economics and sites there just haven’t performed as anticipated. The chain has added seven restaurants this year so far, all in Texas. (One more will open later this year in Chicago.)

“Candidly, we just built too many too quickly,” he said. “In Dallas, we built 12 in 3.5 years. In Houston, we built six in 16 months.”

And the build costs in those markets were “truly prohibitive to generating a reasonable return, based on those sales,” he added. “In order for us to solve this, we’re doing a full assessment of all of our real estate locations, and we’ll make the right strategic decision for the business that’s going to support our shareholders and the company.”

There is more detail to come, he noted.

Cost savings measures

Patterson said the company has also made meaningful cuts involving the supply chain, which he expects will result in $10 million to $15 million in annualized savings alone.

There have been new hires. Portillo’s brought in former Darden Restaurants exec Kevin Kalicak as CFO earlier this month. He starts in the new job Sept. 7.

In July, the chain brought in Christopher Hansen as executive chef. He worked previously as culinary lead at Guzman y Gomez.

Patterson mentioned that beverage innovation is on Hansen’s to-do list.

With the research the company has done, however, Patterson said one key takeaway is that “Portillo’s has exceptional brand affinity in Chicago and beyond, along with differentiated brand positioning that we believe can travel well across existing and new markets.”

Patterson expressed confidence that Portillo’s will find the right path for expansion.

“I am confident our sharper focus and more deliberate execution will position Portillo’s for more durable, profitable growth over time,” he said.

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Lisa Jennings is a veteran restaurant industry reporter and editor who covers the fast-casual sector, independent restaurants and emerging chain concepts.