From “Portillo’s: Texas Troubles” (August 2025):
“The company’s new units, particularly those opened in Texas over the past 12-18 months, have underwhelmed… Non-comp restaurants, most of which are in Texas, are at run rate AUV’s of roughly $4.5 million – well below expectations… Financial results by region reveal an important consideration for their model: Portillo’s doesn’t just have high AUVs - they need high AUVs.”
Much has changed over the past year for Portillo’s.
First, in September 2025, CEO Michael Osanloo “departed the Company”. His successor, Brett Patterson, joined in February 2026 following a brief stint as the CEO of Miller’s Ale House. In addition, Portillo’s has turned over a number of other top jobs in the past year, most notably the CFO, the Chief Development Officer, and the Board Chair. (Alongside the Board Chair transition, both representatives from Berkshire Partners left the board.)
Second, the stock price slide that started back in 2021 has continued, which comes amidst a more difficult backdrop for the restaurant industry: PTLO closed on Friday at $5.0 per share, down ~75% over the past three years.
The combination of those two developments informs the third: Portillo’s is in the middle of a strategic reset, particularly as it relates to new unit growth in markets like Texas. As Patterson said on the Q2 FY26 call, “We just built too many units too quickly. In Dallas, we built 12 in three and a half years. In Houston, we built six restaurants in 16 months… That’s not something we will repeat going forward… The locations and sites that we’ve opened in those markets, they don’t model appropriately right now for sales and returns… The build costs we went into those market with are prohibitive to generating a reasonable return based on [current] sales.” (As of yearend FY25, Portillo’s had 19 Texas locations, or nearly 20% of its total restaurant count. This is a state where Portillo’s opened its first location in 2023.)
Naturally, this conclusion is informing slower unit growth expectations: as opposed to the ~10 net new units per year that Portillo’s added during FY23 – FY25, next year’s plan contemplates just five new locations. As a reminder, prior management was targeting annualized net new unit growth of 12% - 15%; anything close to that level of growth is clearly off the table at this time.
One thing that hasn’t changed is management’s focus on smaller restaurants and lower build costs, as exemplified by their recent ~3,100 square foot DFW airport location. For context, that’s about half the square footage of their ~6,250 square foot “Restaurant of the Future” 1.0 store prototype, and it sounds like their intention will be to go smaller with the 2.0 store prototype.
As a public company, Portillo’s has kept moving down the path towards smaller, cheaper, and ultimately less distinctive restaurants, with the recent addition of further time and distance between new openings (informed by their struggles in Texas). Management explained their evolution on average restaurant size at the 2026 ICR conference: “We’ve learned over the years we don’t need to build restaurants in new markets at the same size as we have in Chicago… Over time, as Portillo’s grew in popularity, the restaurants got bigger and bigger. For example, we opened the Canal & Taylor restaurant in 2016 at 9,000 square feet, which does $20 million - but we [mistakenly] took that same approach to new markets... and got ourselves too big outside Chicago. We have been working on that problem now for several years.”
I’m of two minds about the strategic shift underway.