Earnings call transcript: Portillo’s Q2 2025 results miss forecasts, stock drops

Portillo’s Inc. reported its second-quarter 2025 financial results, revealing a slight miss on both earnings and revenue forecasts. The company posted an earnings per share (EPS) of $0.12, falling short of the expected $0.1212. Revenue was reported at $188.5 million, below the forecasted $196.5 million. Following the earnings announcement, Portillo’s stock dropped by 20.23% in pre-market trading, reflecting investor disappointment. According to InvestingPro analysis, the stock appears undervalued at current levels, with technical indicators suggesting oversold conditions. Get access to 8 more exclusive ProTips and comprehensive valuation metrics with InvestingPro.

Key Takeaways

• Portillo’s EPS and revenue missed analyst expectations for Q2 2025.
• The company’s stock fell over 20% in pre-market trading.
• Portillo’s is expanding its restaurant formats and testing new technologies.
• The company is experiencing challenges in the Texas market.
• Full-year revenue growth guidance was reduced to 5-7%.

Company Performance

Portillo’s reported a 3.6% increase in revenue year-over-year, reaching $188.5 million in Q2 2025. Despite the revenue growth, the company faced challenges with a 1.4% decline in transactions. The average check size increased by 2.1%, and same-restaurant sales saw a modest increase of 0.7%. With a market capitalization of $710 million and trailing twelve-month revenue of $721 million, the company maintains a solid revenue base. The company is focusing on expansion, particularly in the Sunbelt region, while addressing slower performance in Texas. Dive deeper into Portillo’s financial health with InvestingPro’s exclusive Research Report, part of our coverage of 1,400+ US stocks.

Financial Highlights

• Revenue: $188.5 million, up 3.6% year-over-year
• Earnings per share: $0.12, below forecast
• Restaurant level adjusted EBITDA: $44.5 million (23.6% margin)
• Adjusted EBITDA: $30.1 million, up 0.7% from prior year

Earnings vs. Forecast

Portillo’s EPS of $0.12 fell short of the forecasted $0.1212, marking a surprise of -0.99%. Revenue was $188.5 million, missing the forecast of $196.5 million by 4.09%. This miss is significant compared to previous quarters where Portillo’s generally met or exceeded expectations.

Market Reaction

Following the earnings release, Portillo’s stock declined by 20.23% in pre-market trading, with the price dropping from $9.49 to $7.9. This movement brought the stock closer to its 52-week low of $8.38, indicating strong negative investor sentiment. The stock has experienced significant volatility, with a beta of 1.82 and a six-month decline of 37.4%. The trading volume was notably high, suggesting heightened market activity.

Outlook & Guidance

Portillo’s revised its full-year revenue growth guidance to 5-7%, down from previous estimates. The company anticipates mid-teens revenue growth in 2026 and is planning to open 12 new restaurants in 2025. Despite near-term challenges, analyst price targets range from $12 to $21, suggesting potential upside. Access complete analyst coverage and Fair Value estimates with InvestingPro, your source for professional-grade investment insights. Portillo’s is also investing in marketing and new technologies, such as AI-powered drive-thru systems, to enhance operational efficiency.

Executive Commentary

CEO Michael Osanlu emphasized a strategic approach to expansion, stating, "We’re not building for the sake of just building. We’re building in a very thoughtful way." He highlighted the success of the loyalty program, noting, "Our aspiration was we would be at 1.5 to 1.7 million members by mid-summer, we’re at 1.9."

Risks and Challenges

• Slower market penetration in Texas could impact growth.
• Commodity inflation is expected to rise by 3-5% in 2025.
• Labor costs are anticipated to increase by 3-4%.
• Transaction challenges with a 1.4% decline in Q2.
• Competition in the restaurant industry remains intense.

Q&A

During the earnings call, analysts inquired about the company’s strategy in the Texas market and the impact of customers trading down. Executives discussed the economics of new restaurant formats and the potential of the loyalty program to drive growth.

Full transcript - Portillo’s Inc (PTLO) Q2 2025:

Conference Operator: Greetings, and welcome to Portillo Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Brannen, Vice President of Investor Relations.

Thank you, sir. You may begin.

Chris Brannen, Vice President of Investor Relations, Portillo’s: Thanks, operator, and good morning, everyone, and welcome to our second quarter twenty twenty five earnings call. My first since joining this outstanding team and exciting investor story. With me on this call today is Michael Ossanlu, President and Chief Executive Officer and Michelle Hook, Chief Financial Officer. You can find our 10 Q, earnings press release and supplemental presentation on investors.portillos.com. Any commentary made here about our future results and business conditions are forward looking statements, which are based on management’s current expectations and are not guarantees of future performance.

We do not update these forward looking statements unless required by law. Our 10 ks identifies risk factors that may cause our actual results to vary materially from these forward looking statements. Today’s earnings call will make reference to non GAAP financial measures, which are not an alternative to GAAP measures. Reconciliations of these non GAAP measures to their most comparable GAAP counterparts are included in this morning’s posted materials. Finally, after we deliver our prepared remarks, we will be happy to take questions from our covering sell side analysts.

And with that, I will turn the call over to our President and Chief Executive Officer, Michael Osamu. Thanks, Chris,

Michael Osanlu, President and Chief Executive Officer, Portillo’s: and good morning, everyone. Before we begin today’s call, I want to take a moment to address what has been a very difficult few days for the Portillo’s family. As you may have seen in the news, the front entrance of our restaurant in Oswego, Illinois was the site of a tragic car accident. We pride ourselves in being a special part of the local communities we serve. And right now, we are deeply hurting for the entire Oswego community and the families affected.

We stand with them during this difficult time and we’ll continue to offer our support in any way we can. With that, I’ll now turn today’s call to our second quarter results. I’d first like to thank our dedicated restaurant team members, managers and company leaders. Their hard work in a still challenging economic environment continues to allow us to bring the Portillo’s experience to life for our guests every day. This is the foundation for our future growth.

We continue to manage the flow through elements of our business effectively in the second quarter, delivering restaurant level adjusted EBITDA of $44,500,000 with a margin of 23.6%. While there were bright spots, we know we have areas to improve within our overall performance. Specifically, our non comp restaurants in Texas have gotten off to a slower start and continue to pressure overall top line revenue performance. We remain focused on building awareness and driving transactions, while staying true to what makes Portillo special, our craveable, high quality food and one of a kind guest experience. At the same time, we’re playing offense.

We’re testing new ideas, growing our loyalty and tech platforms and reducing build costs, all in pursuit of industry leading unit economics. I’m proud of the progress we’re making and confident these actions will drive sustained growth and long term shareholder value. We had an active start to the second quarter with two strong initiatives. First, we celebrated Italian Beef Month in May with a buy one get one offer for our Portillo’s Perks loyalty members. Then in a moment of perfect timing, the Vatican named a Chicago native as the new pope.

Our team acted quickly, launching the Leo, a nod to new Pope Leo the fourteenth with a version of our signature Italian beef sandwich. It was a great example of our company’s agility and nimbleness to jump on a cultural moment creatively and with speed. We’re proud of that ability, and that’s a competitive advantage for Portillo’s versus the initiatives drove meaningful engagement and positive transactions in May, giving us valuable insights on how we use Perks as a promotional and customer acquisition tool. As anticipated, we saw performance level off some in June. While transactions were negative 1.4% for the quarter, we did deliver 170 basis points sequential improvement in transactions over Q1.

It’s a step forward and we’re encouraged by the early traction from actions designed to strengthen traffic, as well as our favorable management of margins in Q2. We remain committed to overcoming near term industry traffic pressures and are focused on our four key initiatives. First, multichannel marketing. Our ongoing campaigns in key markets like Phoenix and Dallas led the sales lifts in both markets. Second, continuous operational improvement, especially within speed and hospitality.

For example, our AI powered drive thru technology is getting strong feedback from operators benefits. We’re actively expanding that test now. Third, kiosk adoption. In restaurant usage now exceeds 33% with clear benefits to average check and mix. And fourth, evolving Portillo’s perks.

Now with over 1,900,000 members and counting, our May performance highlighted its growing power platform for guest engagement, acquisition and retention. These four initiatives are building a stronger foundation for transaction growth now and in the future. Shifting to restaurant development. We remain on track to open 12 restaurants in the 2025 and our build cost reduction plan is delivering results, tracking in the range of our projected net cost average of 5,200,000.0 to $5,500,000 per restaurant. This represents well over $1,000,000 in per restaurant build cost savings versus our class of twenty twenty four openings.

We just opened our third restaurant of the future one point zero with two more to follow next week and are encouraged by what we’re seeing. The combination of build cost reduction and operational efficiencies gives us even more confidence in our two point zero restaurant design. This next iteration, which will debut in the 2026, will reduce build costs further, streamline labor and unlock incremental site opportunities due to a more consolidated design. I’m really excited about our class of 2026 pipeline. It’s the most diverse lineup of formats in Portillo’s history, including multiple two point zero’s and a great mix of new prototypes.

Progress on new formats is equally encouraging. Later this week, we’ll open our first in line restaurant in The Villages in Florida, followed by our debut airport restaurant at Dallas Fort Worth Airport in 2026. We believe these in line and non traditional format restaurants could play a meaningful part of our development future. As we grow, we’re continuing to refine our new market playbook. We saw early traction in Dallas and Houston has been a little bit slower to ramp up.

In hindsight, we probably overcorrected at times in Texas to manage volumes and maintain service. We’ve since learned the importance of sustained marketing investment and have beefed up our efforts to accelerate awareness and drive revenue in Texas, which includes multichannel campaigns and new local field marketers on the ground to lead grassroots efforts. Every market is different, but we’re learning quickly and adapting to build a more scalable, consistent approach for new market entries. Atlanta is our next big opportunity this fall and we look forward to sharing those updates next quarter. At Portillo’s, there are some non negotiables, craveable made to order food and fast friendly service.

If we do these two things well, we will drive exceptional value for our guests while building restaurants that deliver industry leading unit economics. In the restaurant business, growth follows strong four wall returns. Our AUV strength coupled with our expedited efforts to reduce build costs positions us to deliver top tier cash on cash returns across diverse formats, geography and stages of market maturity. To level set, we know we’re a bit of a show me story within the investment community. It’s an opportunity that we actually embrace.

We’re putting the right energy, investments, and resources into what matters most, improving transactions, driving consistent new market performance, strengthening unit economics that support growth and continuously evolving our strategy without losing what makes Portillo’s one of a kind. I believe in the work we’re doing, the strength of our team and in our ability to create a long term value for both our guests and our shareholders. With that, I’ll hand it over to Michelle.

Michelle Hook, Chief Financial Officer, Portillo’s: Great. Thank you, Michael, and good morning, everyone. Before we dive into the financial results, I wanted to recap an equity transaction by Berkshire Partners. In the quarter, Berkshire redeemed $7,300,000 LLC units for newly issued shares of Class A common stock. As of the end of the quarter, Class A shares represent 95.4% and Class B shares represent the remaining 4.6% of the $75,300,000 in total outstanding shares.

Berkshire’s beneficial ownership after this transaction is approximately 5.2% of the company, down from over 60% at the time of the IPO. Now moving on to the second quarter. Revenues were $188,500,000 reflecting an increase of $6,600,000 or 3.6 percent compared to last year. Our revenue growth in the quarter was driven by both non comp restaurants and same restaurant sales. Restaurants not in our comp restaurant base contributed $6,100,000 in revenue during the quarter.

Same restaurant sales increased 0.7%, which drove revenues up approximately $1,100,000 in the quarter. The same restaurant sales growth was attributable to an increase in average check of 2.1%, partially offset by a 1.4% decrease in transactions. The higher average check was driven by an approximate 3.4% increase in menu prices and a 1.3% decrease in product mix. Same restaurant sales on a two year stack basis were flat. We are currently forecasting our comp sales for the full year at the low end of our 1% to three percent range.

To address inflationary cost pressures, we increased menu prices by approximately 1.5% in January, April and 0.7% in late June. Our effective price increase for the third quarter is estimated to be approximately 3.3%. We will continue to assess pricing in relation to our costs, the competitive environment, and our value proposition to our guests as the year progresses. Moving on to our costs. Food, beverage, and packaging costs as a percentage of revenues decreased to 33.8% in the 2025 from 33.9% in the prior year.

This decrease was the result of an increase in our average check, partially offset by 1.9% increase in our commodity prices. In the quarter, we experienced increases in chicken, hamburger and dairy products. We continue to forecast commodity inflation of 3% to 5% in 2025, with the most significant pressures coming from beef. Labor, as a percentage of revenues, increased to 25.7% in the 2025 from 25.5% in the prior year. The increase was primarily due to lower transactions, increased benefit costs, and incremental wage increases, partially offset by labor efficiencies and an increase in our average check.

Hourly labor rates were up 2.9% in the 2025. We continue to estimate labor inflation of 3% to 4% for the full year. Other operating expenses increased $2,000,000 or 9.8% in the 2025 compared to the prior year, which was primarily driven by the opening of new restaurants and an increase in repair and maintenance and utilities expense. As a percentage of revenues, other operating expenses increased to 11.6% from 11% in the prior year. Occupancy expenses increased $800,000 or 8.2% in the 2025 compared to the prior year, primarily driven by the opening of new restaurants.

As a percentage of revenues, occupancy expenses increased 0.2% compared to the prior year. Restaurant level adjusted EBITDA margins decreased 90 basis points to 23.6% in the 2025 versus 24.5% in the prior year. We continue to estimate our restaurant level adjusted EBITDA margins to be in the range of 22.5% to 23% in 2025. Our general expenses increased by $900,000 to $18,800,000 or 10% of revenue in the 2025 from $17,900,000 or 9.9% of revenue in the prior year. The increase was primarily due to higher professional fees and higher advertising expenses driven by ad campaigns in the Phoenix market.

Preopening expenses decreased by $400,000 to $1,700,000 in the 2025 compared to $2,100,000 in the prior year, primarily due to the number and timing of activities related to our planned restaurant openings. All this led to adjusted EBITDA of $30,100,000 in the 2025 versus $29,900,000 in the prior year, an increase of 0.7%. Below the EBITDA line, interest expense was $5,700,000 in the 2025, a decrease of $900,000 from the prior year. This decrease was driven by lower effective interest rate of 6.9% versus 8.3% for 2024. At the end of the quarter, we had $70,000,000 drawn on our revolving credit facility.

Our total net debt at the end of the quarter was $317,000,000 compared to $312,000,000 at the end of last year. We have approximately $75,000,000 of available capacity on the revolver and will continue to use our cash generated from operations and the capacity on the revolver to fund our new restaurant growth this year. Income tax expense was $3,700,000 in the 2025, an increase of $200,000 from the prior year. Our effective tax rate for the second quarter was 26.8%. We expect the full year tax rate to be approximately 25% to 27%.

Cash from operations decreased by 31.1% year over year to $28,700,000 year to date. We ended the quarter with $16,600,000 in cash. Lastly, let’s turn to our financial outlook for 2025. We have updated certain metrics to reflect our year to date results and expectations for the remainder of the year. We expect our total revenue growth to now be in the range of 5% to 7%.

Two key factors from our noncomp restaurants are driving this revenue change. First, the class of 2024 restaurants have seen a slower ramp up, specifically in Texas. Second, our Stafford, Texas opening, originally scheduled for Q1, has been delayed for several months due to local permitting challenges driving lower sales weeks versus our forecast. During the third quarter, we plan to open four to six new restaurants out of our 12 targeted this year, with the remainder opening later in the fourth quarter. On the cost side, we are now estimating G and A expenses in the range of $78,000,000 to $80,000,000 Given the change in our revenue and G and A outlooks, we now estimate adjusted EBITDA growth to be flat to low single digits.

We remain confident in the long term financial targets we have previously provided. Thank you for your time. And with that, I’ll turn it back to Michael.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Thanks, Michelle. In closing, Portillo’s is a place people want to be a part of. In a recent report by William Blair, Portillo’s was named in the top 10 of nearly 90 restaurant companies in employee satisfaction. And in April, Newsweek ranked us twenty fifth out of 700 companies in its America’s Most Trusted Companies list. I believe it’s because of the amazing experience we strive to create for anyone who enters our restaurants.

Whether it be in our restaurants or amongst field operators, restaurant support team members and the management team, the Portillo’s culture is something we’re very proud of and thrilled to share with our guests each and every day. Look no further than the talent that has joined our company, particularly in Q2 as we put the finishing touches on what is undoubtedly the strongest board of directors in the restaurant industry. I’m proud of the work we’re doing to evolve the Portillo’s investor story, some of which is tangible and some of which has yet to hit the scoreboard. But we’re getting there and the foundation in place is exciting. Thank you all for your time today, and we’re happy to take some questions.

Conference Operator: Thank you. We’ll now be conducting a question and answer session. Our first question comes from the line of Sharon Zackfia with William Blair. Please proceed with your question.

Sharon Zackfia, Analyst, William Blair: Hi, good morning. I guess two questions. First on the mix in the quarter, I was a little surprised to see it go negative just given the kiosk usage increasing. So maybe if we could get some clarity on what’s going on with mix? And then separately, think that the bigger question that investors have is just kind of the path to get to that mid teens revenue growth that is the longer term goal here.

Is that something that you think can be achievable in ’26 and what are the key strategies to get there? Thank you.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Morning, Sharon. Let me tackle your second question, then I’ll let Michelle take the first one. I think we remain confident on mid teens revenue growth. We have built some great restaurants in Texas and they’ve just started off slow. And we’re not haven’t given up on them.

We think that there’s a lot of potential there. We’re seeing some momentum. We’ve done, I think a lot of the foundational work to make sure that Texas continues to grow and evolve. We’ve got field marketers in both places. We have active marketing campaigns.

We’re building a loyalty database and we’ll keep using the loyalty database. So, know, mid teens growth is very reasonable to target for us for ’26. And I think that, you know, I’ll let Michelle talk about the mix.

Michelle Hook, Chief Financial Officer, Portillo’s: Yeah, Sharon, in terms of mix, so you’re absolutely right. The benefit we see on kiosks is definitely benefiting that. So there’s two components to the mix. The first is the items per transaction, and then the next is true mix in terms of what people are buying. So, where you’re seeing the kiosk benefit is the lift on the items per transaction.

But where we’re really seeing pressure is on the other part of mix, where essentially people are still buying the item, but they’re trading down. So, think of it as, instead of buying a big beef, they’re a regular beef. Instead of buying a large fry, they’re buying a small fry, etcetera. And so, that’s really where we’re seeing the pressures on the mix, is that true mix being offset, not fully, by the benefits that we’re seeing on kiosks. And obviously, we believe that’s an indicator of what’s going on in the broader macro in terms of the trade downs that we’re seeing there.

But we clearly, as Michael said in his prepared remarks, want to drive the business through transaction growth and other mechanisms. But we’re definitely seeing pressures in mix on the trade downs.

Sharon Zackfia, Analyst, William Blair: Okay. Thank you.

Conference Operator: Thank you. Our next question comes from the line of Chris O’Cull with Stifel. Please proceed with your question.

Chris O’Cull, Analyst, Stifel: Yes. Thanks. Good morning, guys. I did have a follow-up on new stores. I mean, the annualized sales contribution from locations that you guys opened last year was lower this quarter than in the prior quarter, which I believe you guys expected it to improve.

So just can you give us a little more detail of what you did this quarter to try to improve the performance of those stores? And what’s planned for the rest of the year?

Michelle Hook, Chief Financial Officer, Portillo’s: Yeah, absolutely, Chris. So, when you think about the class of 2024, some of those restaurants are getting into being in their second year. So, you’re starting to see some of a honeymoon effect to certain of those restaurants. Some of the later restaurants that were opened in the class of 2024 are later in the year, such as the Houston restaurants that we’ve mentioned. And so, the things that we’re doing are what Michael mentioned, which is continuing to pump the markets with marketing and advertising.

And so, as we’ve talked about previously, we ran a campaign in Dallas in the first quarter. In the second quarter, we were on with a campaign in the Phoenix market, but then also hired a field marketer within the Houston market and continue to do some advertising within that market as well. So we’re going to continue to invest in those newer markets to make sure that we continue to grow the top line. And as we go into the back half of the year, we’ll continue to look at advertising efforts. We’ll run another campaign in Dallas in the fourth quarter as well to continue to pump that market with additional awareness and trial.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Yeah, Chris, I would just add to what Michelle said that it’s a little bit of pick and shovel work. We’re building awareness every week. It takes a little bit of time. And you’re right, I think that the you know, essentially flattish performance in Q2 versus Q1 for some of those Texas restaurants was disappointing to us. But we’re active and very aggressive in building awareness.

We’ve got field marketers out there, making sure that people know who we are. We do really well once people try our food. So, we’re being very aggressive at getting our food in people’s mouths, sampling, doing things with local communities and embedding ourselves in local communities. So, it does take a little bit of time. I’m not daunted by the fact that it hasn’t picked up aggressively, but I do expect it to improve over the next few quarters.

Chris O’Cull, Analyst, Stifel: Okay. And then, Michael, just given the weak year to date comp and new store performance, why does it make sense to continue opening units beyond the current signed leases, especially when it will likely require the company to increase borrowings to kind of fund those openings?

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Yeah, that’s a great question. I would tell you that we are taking a hard look at the performance of new restaurants and how actively we’re building. So we’re not building for the sake of just building. We’re building, I think, in a very thoughtful way. There is this balancing act, you know, we see that when we reach a certain level of awareness and scale, our business performs very well.

And we have those proof points. Arizona performs really well for us. It’s a great testament to what Portillo’s can do once it has a certain level of awareness and once we have a certain level of scale. Indiana actually performs well for us. Wisconsin is starting to pick up some speed.

So there is this balancing act between getting a sufficient density so that you start to build awareness and then those restaurants fill in. So we probably are a little bit ahead of demand with the supply that we have of restaurants in Dallas. And that’s and we’ve got a couple more in flight, but we’re not pushing the gas there. We’re making sure that we’re filling in other places where there’s a lot of growth ahead for us. And the other thing that I would just reiterate, we’re really being focused on generating the right cash on cash returns.

So that number that Michelle and I have talked about, class of ’25 thus far is coming in at that 5,200,000.0 to $5,500,000 That’s a material decline in cost versus the class of 24, which is I’m sure you recall, came in at 6,800,000.0. And we have other examples of really great investments. We just built an in line that we’re opening in the next few weeks in the villages in Florida. And that thing is going to come in at sub $4,000,000 in investment cost. If it can do anywhere near what we think, it’s a home run for investors.

So, we’re not trying to like step on the gas and grow crazy. We’re being very prudent. I think we’re being thoughtful and I think we’re targeting growth where we think we can get best in class cash on cash returns.

Michelle Hook, Chief Financial Officer, Portillo’s: And just to add on to borrowing in the short term, Chris, we’ve talked about the fact that we’re getting ahead of the pipeline for ’twenty six. And so, we’re going to have a lot of spend this year that’s going to be for the class of ’26. And so that’s going to come into play in some of the capital needs this year. But our goal is what we continue to say, which is as we go into ’26, we don’t want to have any net new borrowings on the revolver. But yes, we’re going to continue to borrow this year because we have to fund some of that growth as we move into ’twenty six.

Chris O’Cull, Analyst, Stifel: Okay. Thanks, guys. Thank

Conference Operator: you. Our next question comes from the line of Gregory Francfort with Guggenheim Partners. Please proceed with your question.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Hey, thanks for the question. I had two questions. The first is maybe just looking at Texas versus the rest of the Sunbelt, how much of the Texas performance do you think is just how many stores in the industry are opening up in state right now? And can you maybe talk about how Arizona and Florida have been performing? I think you touched on it a little bit, Michael, but if you could just expand.

Well, I think that’s a great insight. Texas is not unique to us in development. I think Texas continues to be especially with all of the growth, all of the development, the population growth, it’s no secret to the restaurant industry. So there wherever we’re building, there’s all of our competitors are building right near us. So I’m sure that has a little bit to do with the slower start.

And I’m sure that there are other restaurant companies that need to get up sort of that curve in Texas as Texas digests all of these restaurants. I don’t know what the timeline is for Texas to become as great as Arizona and Florida and other markets are for us. I just have I take solace in seeing the performance in Arizona. We’ve talked about this in the past. When we went from two to four restaurants, we saw material improvement in both awareness, in revenues, but most importantly, in our margin profile in Arizona.

And I’m really confident that we’re going to see the same dynamic as Texas matures and that as the demand for us catches up with the supply of restaurants. And I think that there’s just this balancing act always between having restaurant know, when somebody has a craving for Portillo’s, we’d like to be able to satisfy it. All of the research that we do when we ask people, why did you not, you know, if you don’t regularly visit us, why don’t you visit us? The top two things are awareness, I didn’t know you were here, and then inconvenience. There’s a reason why we are so dominant in Chicago.

If you’re in the Chicagoland area in any of the suburbs, pretty much within five miles of you, there’s a Portillo’s. So if you have a craving for Portillo’s, you can go. We’re not there yet really in any other market. And so I think there’s this balancing act. That’s helpful.

Then maybe my second question is for you, Michelle. Just as I look at labor inflation and food inflation, it feels like beef moving maybe a little bit against you, but it also seems like the labor market might be a little bit easier. Can you just talk about the outlook for both of those going forward?

Michelle Hook, Chief Financial Officer, Portillo’s: Yeah, absolutely, Greg. So as we came into this year, we knew we were going to be pressured on beef. We knew it was going to be back half loaded. So I’ll start with commodities. So you saw we were up 3.4% in Q1, 1.9% this quarter.

I expect Q3 to be the most pressured quarter for commodities. And then Q4 will be higher as well than what we saw in the first half of the year. So, that’s how we get to our 3% to 5%. But yes, we absolutely expect the back half to be a little bit more pressured, and that is primarily related to beef. But I feel really good about our ability to derisk this and get in front of it.

We’re almost 90% hedged on our beef flats for this year. For our overall commodity basket, we’re over 70% locked in. And so I feel really good about us coming into this year having derisked that line item for us. So we feel very comfortable with the commodity outlook.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Yeah. Greg, let me just build on that. I’m very proud of our team, and under Michelle’s leadership. We saw this coming, towards the end of last year. And early, you’ll recall, we did, you know, we had higher beef inflation numbers than most everybody else.

And we took that, we believe that beef was going to be inflationary this year and we’ve taken a number of actions to mitigate that forward buying, making sure that we’re pushing every lever that we can to minimize conversion costs and making sure that we are on top of this. And so very proud of the team because we’ve done all those things so that our guests will not experience that inflation like they see elsewhere. We still are really focused on making sure that despite the inflationary pressure on beef that we’re providing amazing value to our guests. We’re not playing any games with shrinkflation. We’re not gouging people.

We’re still, you know, our burgers are still a third of a pound. Our beef sandwiches are huge and indulgent. So we’re making sure that the guests get all the value that we want. And we have managed that behind the scenes like a prudent company should.

Michelle Hook, Chief Financial Officer, Portillo’s: Yeah, and Greg, just on the labor front, you saw in both quarters, we were up 2.7% than 2.9% in Q2. I don’t expect that to be materially different in the back half of the year. We’ve continued over the course of the last several years to make meaningful labor investments within our system. And so I feel good about that guide at 3% to 4% for the full year. We don’t see that changing.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Thank you very much.

Conference Operator: Sure. Thank you. Our next question comes from the line of Sarah Senatore with Bank of America. Please proceed with your question.

Sarah Senatore, Analyst, Bank of America: Thank you. Just a question about maybe unit economics and then a follow-up on maybe the line items. So you mentioned your build costs are $1,000,000 lower maybe with this new prototype. But as I think about the shift to some of these maybe smaller boxes, think you mentioned in line, presumably those are more of the build to suit approach. And I guess, as I think about that model, presumably it would lower your build costs even more.

I mean, optically, you would be paying more in rent. So your margins might look lower, but presumably the ROI would be much higher. So I guess the question is, can you give me a sense of what that might look like restaurant level margins and also for the invested capital associated with it? And I guess confirm that that is kind of the complexion, maybe lower margins, but a higher ROI.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Let me start with that and give, Michelle chance to build on that. I think I mentioned just briefly that the class of ’26 is going to be the most, we’re excited by it. So we have some of these 1.0s, they’re smaller restaurants, those are the ones that have come in this year between five point two and five point five. We have some two point zero restaurants and they’ll start opening up in the back half of next year. Those are another order of magnitude smaller, they should be lower cost, we haven’t talked about the cost yet.

And then we have some atypical restaurants. We have obviously a restaurant opening up at the Dallas Fort Worth Airport. And we have a couple of other in line restaurants that I can’t talk about the locations yet, but should be fantastic economics for us. So you’re 100% right, Sarah, that as a class, we’re going to see reduced build costs across the board. We’re actively determining what the margin impact is, if in fact we do more build to suits.

Keep in mind that some of these smaller restaurants, especially the 2.0s, because it’s a different configuration in the kitchen, I don’t want to get super technical, but our kitchens are historically very linear. That rest that kitchen is either U shaped or a little E, which creates a lot more work sharing, reduces overall energy load capacity needs and reduces HVAC needs. So we expect to see some operating improvement in terms of labor costs and OpEx. So I’m not sure how much margin you give up with those smaller kitchens, if in fact you do a build to suit and pay more rent. So we’re still it’s still evolving.

But for certainly, I can tell you that we are targeting lower capital and you can imagine a world where that you get to a certain capital point with our typical revenues that we target by year three, the cash on cash returns get really, really attractive.

Sarah Senatore, Analyst, Bank of America: That’s very helpful. Thank you. And then just on the line items, when I look at your P and L, your cost of goods is probably higher than almost any other fast casual restaurant. That reads as very good value on the plate. But I’m not sure if consumers really recognize that.

I mean, I would think in this current environment that would translate into a lot of traffic share gains. So I guess, on that front, do you get credit for that? Also, whether or not you do, is there any opportunity, whether it’s from a supply chain or distribution or something else to maybe lower that cost of goods line?

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Yeah, it’s a great question. I mean, me start with the second part. Everything is on the table for us. We are actively looking at distribution costs. It is expensive for us to get our, some of our products across the nation.

And so, we need to evolve that. We need to get better at distribution and the entire supply chain motion. I mean, question really is a, call it the 34 ish percent in commodity costs. How much of that is really value to the guests and is there some waste in there? The reality is there’s probably a little bit of efficiency that we can do and we’ll always keep looking at improving efficiency.

But I want to anchor back to your first point. We’re very proud of the fact that we give that kind of value to our guests, right? It’s important to us. Our burgers are a third of a pound. Our beef sandwiches are really big, they’re beefy.

You know, we’re not playing games with fries. Our small fry, our regular fry is bigger than most people’s large fries and it’s cooked in tallow. So, we’re very proud of the quality and the value that we give guests. I believe the guests notice this. I don’t think it’s one of those things where they move in a herd week to week.

I think it takes a little bit of time. And I think right now, we like being in a position where we’re providing great value. Our value scores are really good internally. We’re very happy with it. And I think it’s just a question of time when the consumer behavior catches up to the consumer sentiment for us.

Sarah Senatore, Analyst, Bank of America: Thank you very much. That’s very helpful.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: You bet.

Conference Operator: Thank you. Our next question comes from the line of Brian Mullen with Piper Sandler. Please proceed with your question.

Brian Mullen, Analyst, Piper Sandler: Hey, thank you. Just wanted to ask about the breakfast testing in Chicago. Can you talk about how that’s going? What you are seeing on incrementality, which I think was a really important factor that you were watching?

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Yeah. Look breakfast is, we’re trying to be very cautious with breakfast, but I appreciate you asking about it. It’s it’s frankly going as well as I could have hoped. It appears that it is incremental. It appears that our guests really love it.

And, it’s not negatively affecting in any way our lunch or dinner business at those restaurants, either in terms of guest satisfaction or sales. So, there’s a lot to like about breakfast. And if you haven’t tried it, it’s absolutely delicious. I think we have the best, you know, I’ve gotten feedback from one investor that they’re too big. Our egg sandwiches are just too too big and, decadence.

But it’s delicious and, we’re continuing to evaluate it. We want to make sure that it’s sustainable for our teams and our management. We don’t want to burn people out. We don’t want to take our eye off the ball. So we’re going to run this run this test through the end of the year and then then we’ll have options.

Well, if if we decide that the test is a distraction, we’ll kill it. I don’t know if that’s gonna happen, but, you know, none of us are obtuse in seeing that there’s a lot of other great restaurant companies that have tried breakfast multiple times and failed. I don’t know, I don’t think that, I hope that’s not going to happen to us, but that happens. Second option is we decided breakfast is really just a Chicago thing and that you know, in Chicagoland, we have the credibility and the right with consumers to give them an amazing breakfast meal that they will buy in. And then the third test the third option is that we think breakfast has potential for us as a national thing, at which point we would have to test outside Chicago to see if we can also be relevant in breakfast.

But it’s going really well. We’re happy about it and, we just want to make sure that it’s sustainable.

Brian Mullen, Analyst, Piper Sandler: Okay. Thank you for that. And then I wanted to ask about the limited menu, you went with in Houston. Doesn’t seem like it would be right to equate this slow start just to that. So would you agree with that?

And then, you know, if so, what are some of the merits to the limited menu and are you still exploring the idea of trying that in other geographies potentially?

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Yeah, it’s a great question. There’s definitely a tail on that limited menu that we’re really confident in eliminating across the board as we open new restaurants. So that’s for sure. But I do think that there are other things that we think create some uniqueness and an experiential vibe at Portillo’s that maybe we should not have taken off and we’ve already been adding back. So, like any good test, there’s learnings.

There’s learnings on what you did right and there’s learnings on what you, didn’t do. So simplification is healthy for us. Right? It it when you can you know, you go from eight to three salads, that’s a great dynamic because everything is fresher, it’s being made faster, it requires less training on your team, you’re less likely to screw things up. So that’s a great example.

I think we went with a reduced fleet of reduced, variety of salads. And I think that’s a great that was a great takeaway. There’s a couple things like quirky things that we sold in Chicago that we didn’t put into Houston, no one’s missed. We didn’t we we decided to test not selling beer in in Houston. I think that was a mistake.

I think there’s a there’s a dynamic where people love coming to a Portillo’s and having a frosty stein of beer with a burger or a beef sandwich. We missed that occasion, and that was a mistake. And we’ve added that that back now and we learned. So I think it’s a balancing act.

Brian Mullen, Analyst, Piper Sandler: Thank you.

Conference Operator: Thank you. Our next question comes from the line of Jim Salera with Stephens Inc. Please proceed with your question.

Jim Salera, Analyst, Stephens Inc.: Yes, good morning. Thanks for taking our question. Michael, I wanted to ask a little bit about Portillo’s Perks and you guys said you’re almost at 2,000,000 members now. Are you able to give us any insight presumably those are all predominantly in the Chicago land area, but just kind of the geographic breakdown of the rewards program. Is that possibly a lever that could be leaning into a little bit more in some of the expansion markets to maybe drive repeat frequency?

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Yeah. So, great question about Let me sort of where, I wish I could tell you this 2,000,000, it’s a little over 1.9, but it’s growing. Here’s what I’d say. Let’s keep in mind Perks, we literally rolled this out in March. So it’s super early days for us.

Our aspiration, I think back when we talked about it was we would be at 1.5 to 1,700,000 members by mid summer, we’re at 1.9. So I feel really good about that. And then in almost every way, it’s exceeding my expectations. It’s really easy to forget that we only have 95 restaurants. If you look at loyalty members per restaurant, I think that the 1,900,000 puts us in pretty rarefied air in terms of, people who are engaged with our brand and want to be part of our brand.

So, encourage you to pop that into your chat GPT and ask loyalty members per restaurant across all leading, restaurant companies. That’s a really good place to be. We’re still learning what it can do for us. And it’s like a a brand new toy that we’re playing with. We’re learning that food promotion works really well.

People love our food. When we offer something for free or a BOGO or bring in a friend and sign up, when we do that kind of stuff, it really works well. People love our it’s people but we’re also you know, we get a lot of engagement with badges. We get engagement with people who want to be loyalty members. We have people who are posting all kinds of fun stuff in social media.

So they’re becoming an army of evangelists for us. I don’t think we have plumbed the depths of what Perks can do for us. I don’t think we fully appreciate it yet. It’s going to be a great gift that we give to our new CMO, who will be able to use Perks to generate activation, guest acquisition and improve frequency. So I think that it’s very early days and I’m super excited by what we’re going to do with this over the course of the next eighteen months or so.

Jim Salera, Analyst, Stephens Inc.: Great. And then I apologize if you guys touched on this already, but if we think about DFW AUVs and the expansion market AUVs, is there a scenario if consumer kind of stabilizes that we could see an acceleration there in 2026? Or are we still kind of trying to find a stabilization point for some of those market AUVs?

Michelle Hook, Chief Financial Officer, Portillo’s: Yes. I think, Jim, I’ll take that one. So we’ve talked about how we’ve gotten out of the gate a little slower in Texas. But I think as we get into ’26, we’re still going to be heavily focused on growth in the Sunbelt. That’s going to include continuing to grow the markets that we’re Texas and Dallas and Houston.

We’ll likely go and do we’ve talked about going into San Antonio, Austin. So we need to continue to drive that awareness, which is going to continue to drive the top line in those AUBs. And so we’re learning. We’re still learning how these curves are behaving in these markets. And so, I think that’s one of the things for us as we move forward.

And there still is a honeymoon curve to what we see in some of our restaurants, actually in most of our restaurants. And so, you have to play that into consideration, right? Remember, we’re still going to have 12 restaurants that are going to open into ’25. Our expectations continue to remain high. But, in terms of what we’re targeting, we are still targeting by year three as a class to be in that 5.9 to 6.3 range.

That is still our target goal. Now, the composition of the classes will determine how the behavior of those AUBs are. Because, as Michael and I sit here today, I don’t think that we expect Houston to have a significant curve. We expect that market to continue to grow. And we’ll have three more opening in Houston this year as well.

And we’re going to continue to put that new market playbook into play, and we’re going to continue to get tighter on that. And as Michael mentioned, our new CMO coming on board, they’re going to have great tools to work with. But I can’t reiterate the excitement that myself and Michael and the rest of the team have about the class of ’26. I think it’s going to be fantastic. We’re still on the class of ’25, but we’re really excited about that class as well.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: And I would just one other follow-up on what Michelle It this is not it’s not totally unusual for us when fill in restaurants start off a little slow. We’ve experienced this in the past. We had restaurants in Wisconsin that start off slow that are performing admirably. We’ve had restaurants in Arizona fill in restaurants that started off slow that are performing admirably. So our newest restaurants in Florida right now are probably performing better than some of our first few restaurants.

So it’s not an uncommon thing that happens. This is not, something that we’re ill equipped to deal with. We’re not daunted by the notion of, driving some sales in Dallas.

Jim Salera, Analyst, Stephens Inc.: Got it. I appreciate

Michael Osanlu, President and Chief Executive Officer, Portillo’s: the thoughts.

Chris O’Cull, Analyst, Stifel: I’ll bet with you. Thank

Conference Operator: you. Our next question comes from the line of Andy Barish with Jefferies. Please proceed with your question.

Andy Barish, Analyst, Jefferies: Hey, guys. Didn’t hear much on kind of operations and drive thru speed. And can you kind of give us an update on that channel, the rest of the business, just kind of given the persistent promos and discounts in the broader QSR world?

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Yeah, that’s a great question. We continue to grind and slowly but inexorably improve on speed in the drive thru, Andy. So thank you for bringing that up. And that’s hugely important, because speed very quickly converts into frequency and transactions, etc. At the same time, to be totally transparent, the drive thru is where you typically see the most economically pressured guests, and it probably has the place that has some of the most challenging dynamics for us.

So we have to get faster, and that’s a way of mitigating some of the pressure for the guests. We’re not going to go to value menus or dollar menus or any of that stuff. And that guest will choose those other options if they have to. So, speed continues to improve, accuracy continues to improve. I’m really happy overall with how we’re performing in the drive thru.

But and you know, the test we mentioned it, the AI tests that we’re using, we’ve got I think the right, it’s really fun to watch. We have these cameras, the cameras translate into highly intuitive monitors inside the restaurant so that the team knows exactly what’s going on. The individual anecdotes that I’m hearing about, we had times that were ridiculously long late in the evening because we just weren’t aware of people waiting. Now we are, it immediately has changed. We’ve shaved minutes off at different day periods.

So, love it. It’s helping us train our teams better. We’re putting tools in the hands of the team so that they can be more successful. And we’re seeing that real time. It’s a test.

My expectation is that we will wrap up this test sometime in the third quarter. And all things going well, we will deploy it in the fourth quarter and the 2026, we’ll see material improvement on drive thru times.

Andy Barish, Analyst, Jefferies: Got it. Appreciate it. And then, Michelle, just the revenue guidance change of kind of the mid single digit reduction, I guess, just thinking about that, is it sort of evenly balanced between a point or so of lower comp as well as new restaurant openings and then fewer operating weeks? Do you parse that out?

Michelle Hook, Chief Financial Officer, Portillo’s: Yeah, I’d say it’s primarily driven by more of the non comp pressures, Andy, that I mentioned. You’ll get a little bit on the comp. Like you said, we’re trending to the lower end of the 1% to 3% range that we previously guided to. And so I think about it as more heavily weighted on the non comp side, specifically as we talked about the class of ’24 continuing to see a little bit of headwinds there as well as timing. I think that the timing issue is real for what we came into the year thinking in terms of timing for the class of ’25 versus what we’re I mentioned our Stafford, Texas restaurant, which is in Houston, the delay of that, which was months of delays.

And then for our Q4 openings, it’s more back end weighted in the quarter as well. So it’s the timing component, the class of ’twenty four component, that’s primarily the driver, but you do get a little bit of comp in there.

Chris O’Cull, Analyst, Stifel: Okay, thank you.

Andy Barish, Analyst, Jefferies: Yep.

Conference Operator: Thank you. Our next question comes from the line of Dennis Geiger with UBS. Please proceed with your question.

Chris Brannen, Vice President of Investor Relations, Portillo’s0: Great. Thanks, guys. I wanted to ask another one just on the new stores and specifically the new stores outside of Texas. I guess just kind of clarifying, the stores outside of Texas, newer stores outside of Texas, generally all or mostly performing well or consistent with expectations? Or Michelle, I couldn’t tell if you were alluding to maybe some other markets a little softer, albeit anything on the non Texas newer stores to call out?

Michelle Hook, Chief Financial Officer, Portillo’s: Yes. I would say, Dennis, that it is primarily Texas. And when we say Texas, we have the Dallas restaurants in there as well. So, when we think about the class of ’24, there’s three restaurants that are in Dallas. There’s three restaurants that are in Houston of the 10 that we opened.

And so, the other restaurants that you have in that class Michael mentioned Florida. There’s a Florida restaurant in there. There’s an Arizona restaurant. There’s a restaurant in Michigan. Those are largely performing near expectations.

I wouldn’t say that there’s any one of those restaurants that I would call a home run restaurant. But the pressures that we’re seeing are primarily the infill restaurants within the Dallas market. Not all the Dallas infill restaurants, a certain handful of those, as well as Houston. So, that’s why we called that out specifically. The Arizona market continues to be, as Michael mentioned, a very strong market for us as we continue to infill that market, and we’ve been in that market for over ten years.

And so, we’re beginning to continue to build awareness. And then, our second restaurant in Michigan is one that, again, is challenged by awareness, We’ve got to continue to work through some of those challenges. But there’s nothing outside of that that I would call out that we’re concerned about.

Chris Brannen, Vice President of Investor Relations, Portillo’s0: Great. Helpful. Thank you. Then just one more, Michael or Michelle. As you think about sort of those four key priorities or initiatives to drive sales, how do you think about maybe the most impactful to support either transaction or comp gains in back half of this year into next?

I’m sure it’s all four and then some working in tandem, but are there any kind of particular call outs? I know you’ve given some color on the initiatives individually, but just what you think could be more impactful for the base driving that comp over the coming quarters? Thank you.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: That’s a great open ended question, Dennis. Here’s what I’d say. I think that the priority of those tactics is slightly different in the core versus outside the core. So when you think about in the core, like the continuous improvement operations, getting great at drive thru, that really benefits us in Chicagoland. So, every second that we can improve speed dramatically helps us in Chicago.

We need awareness outside Chicago, particularly in Dallas and Houston as we open in Atlanta. We need people to know who we are. And that’s where all that multi channel marketing. We’ve got field marketers deployed right now who are sampling food, setting up, fundraisers, going to local baseball games. In Texas, they’re going to, you know, we’re sending our beef bus to high school football games in the fall.

That’s a thing. You know, there’s stadiums with ten, twenty thousand people. That’s a great way of building awareness. So it’s it’s you’ve got to do that. And then the, you know, the sort of the my favorite thing, which is not fully deployed yet is perks.

I think that as perks matures, as we learn more, we will use it very surgically to drive guest acquisition outside Chicago and frequency in Chicago. That tool allows us to do basically one to one marketing and it allows us to be very segmented in our approach. And that’s, I think, what gives me the most confidence for ’26 and beyond. Of course, like I didn’t mention the kiosk, think we’ve done a great job with the kiosk. You know, our our data and our partners data would say we’re awfully close to best in class already with the kiosk.

But what I love about the kiosk is that it’s just creating a frictionless environment for guests. There’s a whole generation of people who just want to order digitally. They want to come into the restaurant, they want to see pictures of food, they want to order it on the kiosk. We’ve made great strides on kiosks. They haven’t even been deployed yet a year.

And, you know, we’re rolling out the next innovations over the next six months on kiosks. Already, if you come to one of our kiosks, you can see your order history. If you have something that’s pretty specific, you can put it in once. You don’t have to recreate it every time. So we’re getting really good with kiosks, I think that’s another way of becoming frictionless for our guests.

Michelle Hook, Chief Financial Officer, Portillo’s: I would just add on to what Michael’s saying in terms of the menu. And when you think about perks, I think there’s some cool, fun things we can do with the menu when you talk about secret menu items exploration of what we’re going to do with the menu as we move forward. I think there’s some things that are potentially in the pipeline for us that we’re exploring from menu innovation that could be fun and exciting, not so much in the short term in terms of the third quarter. But as we go into 2026, I think menu innovation can play a role as well in helping to drive some transactions, whether it’s in our core or outside.

Conference Operator: Thank you. Our next question comes from the line of Brian Harbour with Morgan Stanley. Please proceed with your question.

Chris Brannen, Vice President of Investor Relations, Portillo’s1: Yes. Good morning, guys. What are the inline locations going to look like? I mean, how big are those? Like what’s the experience going to be like there relative to kind of a typical Portillus?

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Yeah. So I don’t know if we’ve posted them online yet. I’m sure we will on social media soon. But our Village’s restaurant is gorgeous. It’s a beautiful, experiential restaurant.

I mean, we call it an in line. The truth is, I think, technically, it’s an end cap, so it’s a beautiful location. It’s in a I don’t know how familiar you are with The Villages. It’s one of the largest retirement communities in America. So it’s a beautiful restaurant.

We’re not going to make them anything less than that. They still need to be experiential. We want people to enjoy coming to Portillo’s, feel good about that dynamic, and then we want to win them over forever with amazing value, quality, and speed. So, we’re not when we say an inline, don’t think of a tiny little box that could be anything. It’s still a portillos, it’s still decorated to the nines, it looks beautiful, you’re still going to see, people cooking in the kitchen.

You’re going to see action in the kitchen. And it’s going to have that Portillo’s look and feel.

Michelle Hook, Chief Financial Officer, Portillo’s: Yeah, and I’ll just add on to that, Brian. Not all are created equal. So as Michael said, the villages may be different than a few in lines that we’re exploring for the pipeline, whether it’s next year or in the future. I think what we’re all excited about is the return potential of these in line units when you look at the investment cost and what we believe that the AUVs can do, what we believe that this can provide to the cash on cash return targets. I think as we sit here, the unit economic story for us is extremely important.

And as we think about that class of restaurants, continue to drive that industry leading unit economics is something that is paramount for us as we move forward. And I think the in lines play a role in driving that for us when we think about the composition of classes as we move forward.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: Great.

Conference Operator: Thank you. Thank you. Our final question comes from the line of David Tarantino with Baird. Please proceed with your question.

Chris Brannen, Vice President of Investor Relations, Portillo’s2: Hi, good morning. One more on the performance of new units. I guess, Michael, I know you’ve learned a lot as you’ve kind of opened some of these locations in Texas. And I wondered if you could just comment on whether you’re thinking differently about how you enter new markets in the future. And I know, you know, you’ve talked in the past about marketing support, but also, I guess the nature of my question is, you know, you added a lot of locations in a fairly short window, and I’m wondering if you’re rethinking whether that sort of pace of openings in the new markets should be adjusted going forward.

So any thoughts you have on that question would be great.

Michael Osanlu, President and Chief Executive Officer, Portillo’s: You bet, David. Good to hear from you. I would tell you that there’s you know, you’re always learning and trying to get better every single day. Trying to get a little bit better than you were yesterday. And so, our perspective is that, we’ve learned a lot about how to open and how to open successfully.

I think we’re lulled into a false sense of security with the success of The Colony. It was just we put a lot in pre marketing that restaurant. And it was just an enormous opening that almost broke So we quickly then tamped down all marketing. And Houston was the result of that. We started off slow in Houston.

And the fill ins in Dallas were slow because we didn’t really have a lot of active marketing going on. So I think the biggest lessons for us is we do want a big opening, because we do want to get some excitement and momentum and get people engaged with the brand early on. And then we need to keep a steady drip of marketing going on during the course of the next, call it, twelve months. I think we’ll see that in Atlanta. I think Atlanta is going to be, an exciting good test for us.

We’re opening in Kennesaw, which is a very, very, attractive market. It’s a great location. We’re doing all of the good grassroots things that we should do to build momentum. We’re partnering with Coca Cola who, you you don’t get better at marketing than Coca Cola. And we’ll get some great activation at that restaurant.

I think the pace of growth is something that we continue to think about and learn from. I think implicit in your question is, did you build too many restaurants too quickly in Dallas? I think it’s a very fair question, and I don’t know if I have a clean answer for that. I think that, clearly, without the marketing support, it was too many too quickly. The flip side is that we need to build awareness.

And so maybe it’s a combination of building and doing marketing to continue to build awareness and drive demand. So I think that’s more of a nuanced balancing act, and we’ll continue to evaluate, look at what’s happening in Dallas and figure out what the impact of that is in Houston, etcetera.

Conference Operator: Thank you. We have reached the end of our question and answer session, and this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

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