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What changed in Portillo's Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Portillo's Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+372 added−358 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-27)

Top changes in Portillo's Inc.'s 2024 10-K

372 paragraphs added · 358 removed · 264 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

61 edited+45 added−49 removed26 unchanged
Biggest changeOur supply chain approach is based on alignment with key strategic partners that are identified through a comprehensive evaluation process to ensure our standards and expectations are met on a continual basis. This approach affords our organization the opportunity for real-time performance assessments to identify any potential gaps and implement corrective measures where required.
Biggest changeThis approach affords our organization the opportunity for real-time performance assessments to identify any potential gaps and implement corrective measures where appropriate. We review and update our contingency plans on a regular basis to provide a reliable supply of products and services to our business.
We operate two commissaries to supply our network of restaurants with our signature beef, peppers and gravy for our Italian beef sandwiches and ensure product consistency and quality. These ingredients are shipped to our restaurants where our team members will finish the preparation in our kitchens to serve our guests. Quality Systems.
We operate two commissaries to supply our network of restaurants with our signature beef, peppers and gravy for our Italian beef sandwiches and to ensure product consistency and quality. These ingredients are shipped to our restaurants where our team members will finish the preparation in our kitchens to serve our guests. Quality Systems.
The development of additional restaurants will be subject to compliance with applicable regulations, including those relating to zoning, land use, water quality and retention, and environment.
The development of additional restaurants will be subject to compliance with applicable regulations, including those relating to zoning, land use, water quality and retention, and the environment.
This people-centric culture is centered on working together to create a fun, energetic atmosphere while living our values: Family We work together to make everyone feel at home, and we step up when someone needs help. Greatness We are obsessed with being the best and work hard to continuously improve.
Our people-centric culture is centered on working together to create a fun, energetic atmosphere while living our values: Family We work together to make everyone feel at home, and we step up when someone needs help. Greatness We are obsessed with being the best and work hard to continuously improve.
We are also subject to the Fair Labor Standards Act, the Immigration Reform and Control Act of 1986 and various federal, state and local laws governing such matters as minimum wages, exempt versus non-exempt, overtime, unemployment tax rates, paid leave, workers’ compensation rates, citizenship requirements and other working conditions.
We are also subject to the Fair Labor Standards Act, the Immigration Reform and Control Act of 1986 and various federal, state and local laws governing such matters as minimum wages, exempt versus non-exempt classification, overtime, unemployment tax rates, paid leave, workers’ compensation rates, citizenship requirements and other working conditions.
We believe federal and state environmental regulations have not had a material effect on operations, but more stringent and varied requirements of local government bodies with respect to zoning, land use and environmental factors, among others, could delay construction and increase development costs for new restaurants.
We believe federal and state environmental regulations have not had a material effect on our operations, but more stringent and varied requirements of local government bodies with respect to zoning, land use and environmental factors, among others, could delay construction and increase development costs for new restaurants.
Based on a whitespace analysis prepared in partnership with a third-party vendor in 2023, we believe we have a substantial runway for growth with a long-term opportunity to grow to more than 900 restaurants domestically and are well-positioned for global growth in the future.
Based on a whitespace analysis prepared in partnership with a third-party vendor in 2023, we believe we have a substantial runway for growth, including, a long-term opportunity to grow to more than 900 restaurants domestically and we are well-positioned for global growth in the future.
As a result, the Company consolidates the financial results of Portillo's OpCo and reports a non-controlling interest representing the economic interest in Portillo's OpCo held by the other members of Portillo's OpCo (the "pre-IPO LLC Members").
As a result, the Company consolidates the financial results of Portillo's OpCo and reports a non-controlling interest representing the economic interest in Portillo's OpCo held by the other members of Portillo's OpCo (the "pre-IPO LLC Members"). Portillo’s Inc.
Our distribution network is comprised of several independently operated partners aligned under the UniPro umbrella, the largest food service distribution cooperative in the United States. This strategy affords us the opportunity to align with right-sized organizations that are dedicated to us which allows us to leverage volume and scale for a competitive advantage and exceptional customer service. Commissaries.
Our main line distribution network is comprised of several independently-operated partners aligned under the UniPro umbrella, the largest food service distribution cooperative in the United States. This strategy affords us the opportunity to align with right-sized organizations that are dedicated to us which allows us to leverage volume and scale for a competitive advantage and exceptional customer service. Commissaries.
We take steps to enforce and maintain our intellectual property, but infringement, validity challenges and other risks may adversely affect or even eliminate our intellectual property.
We take steps to enforce and maintain our intellectual property, but infringement, validity challenges and other risks may adversely affect or even eliminate our intellectual property rights.
In the spirit of continuing education, we also have a "no meeting" policy for Friday afternoons. Instead, our team members can use this time for professional development or focused work time. From Memorial Day through Labor Day, team members can also take this time for personal use and get an early start to the weekend. Total Rewards.
In the spirit of continuing education, we also have a "no meeting" policy for Friday afternoons. Instead, our team members can use this time for professional development or focused work time. From Memorial Day through Labor Day, team members can also take this time for personal use and get an early start to the weekend.
No detail is too small, be it lighting, signage or even the stars subtly sparkling on the ceiling. Each restaurant also draws design elements from the local community. The layouts create spaces comfortable for individual diners, families, large groups, and even wedding parties. Beyond the space itself, the energy of a Portillo’s is unique.
No detail is too small, be it lighting, signage or even the stars subtly sparkling on the ceiling. Each restaurant also draws design elements from the local community. The layouts create comfortable spaces for individual diners, families, large groups, and even wedding parties. Beyond the space itself, we believe the energy of Portillo’s is unique.
We encourage team members to connect with one another in an informal mentoring program to build relationships and further create the sense of belonging. Engagement & Experience . We aspire to provide an unrivaled experience for every team member during their journey with Portillo’s. Creating lifelong memories for our team members and guests is paramount to the overall experience.
We encourage team members to connect with one another in an informal mentoring program to build relationships and solidify their sense of belonging. Engagement & Experience . We aspire to provide an unrivaled experience for every team member during their journey with Portillo’s. Creating lifelong memories for our team members and guests is paramount to the overall experience.
But the most important element of the energy is the enthusiasm of the scores of guests who are all excited to be there and enjoying their Portillo’s. We want every guest that visits to leave with good memories, a satiated appetite and a desire to return. Our Food Our Menu.
But the most important element of the energy is the enthusiasm of the scores of guests who are all excited to be there and enjoying their Portillo’s. We want every guest that visits to leave with good memories, a satiated appetite and a desire to return.
Of the 900 domestic restaurants, we project 800 to be full-scale restaurants and 100 to be pick-up/walk-up models. We see these company-operated full-scale restaurants as our largest opportunity moving forward. At the same time, we continue to evaluate innovative operating models.
Of the 900 domestic restaurants- to which we aspire, we currently project 800 to be full-scale restaurants and 100 to be pick-up/walk-up models. We see these company-operated full-scale restaurants as our largest opportunity moving forward. At the same time, we continue to evaluate innovative operating models.
We are also subject to the Americans with Disabilities Act (the “ADA”), which prohibits discrimination on the basis of disability in public accommodations and employment, which may require us to design or modify our restaurants to make reasonable accommodations for disabled persons.
We are also subject to the Americans with Disabilities Act (the “ADA”), which prohibits discrimination on the basis of disability in public accommodations and employment, which may require us to design or modify our restaurants to make reasonable accommodations for individuals with disabilities.
Our diverse menu features all-American favorites such as Chicago-style hot dogs and sausages, Italian beef sandwiches, char-grilled burgers, chopped salads, crinkle-cut fries, homemade chocolate cake and signature chocolate cake shake.
Our diverse menu features all-American favorites such as Chicago-style hot dogs and sausages, Italian beef sandwiches, char-broiled burgers, fresh chopped salads, crinkle-cut fries, homemade chocolate cake and our signature chocolate cake shake.
Over the long term, we aim to increase our number of restaurants by approximately 12% to 15% annually. Our near-term restaurant growth strategy is focused on leveraging our proven unit economic model primarily in markets outside Chicagoland with favorable macro-economic tailwinds where we already have a presence.
In fiscal 2024, we opened 10 new restaurants, representing 12% unit growth. Over the long term, we aim to increase our number of restaurants by approximately 12% to 15% annually. Our near-term restaurant growth strategy is focused on leveraging our proven unit economic model primarily in markets outside Chicagoland with favorable macro-economic tailwinds where we already have a presence.
We strive to foster a sense of individuality, safety, support, belonging and fairness through inclusive practices in talent acquisition, talent management, total rewards and learning and development.
We strive to foster a sense of individuality, safety, support, belonging and fairness through our people-centered practices in talent acquisition, talent management, total rewards and learning and development.
In 2023, we issued 29,808 shares (net of shares withheld for taxes) under the ESPP. In addition to our Beef Stock program, all restaurant team members who are newly hired as or promoted to General Manager become eligible for our long-term equity incentive plan.
In 2024, we issued 46,959 shares (net of shares withheld for taxes) under the ESPP. In addition to our Beef Stock program, all restaurant team members who are newly hired as, or promoted to, General Manager become eligible to participate in our long-term equity incentive plan.
For a more in-depth discussion of such risks, see Item 1A, "Risk Factors." As of December 31, 2023, we owned and operated 84 restaurants across 10 states, including a restaurant owned by C&O Chicago, L.L.C. ("C&O") of which we own 50% of the equity .
For a more in-depth discussion of such risks, see Part I, Item 1A, "Risk Factors." As of December 29, 2024, we owned and operated 94 restaurants across 10 states, including a restaurant owned by C&O Chicago, L.L.C. ("C&O") of which we own 50% of the equity .
Our greatness is rooted in Quality, Service, Attitude and Cleanliness (“QSAC”). Energy We move with urgency and passion, while maintaining attention to detail. Fun We entertain our guests, we connect authentically, and we make each other smile. These values extend beyond our restaurants, to every Portillo's team member. Living these values reinforces the culture we’re proud to have built.
Our greatness is rooted in Quality, Service, Attitude and Cleanliness (“QSAC”). Energy We move with urgency and passion, while maintaining attention to detail. Fun We entertain our guests, we connect authentically, and we make each other smile. We believe these values extend beyond our restaurants, to every Portillo's team member.
The physical, financial, and mental well-being of our team members remains our top priority, and we continue to invest in their success. We believe in a total rewards philosophy of providing top quartile pay in our restaurants, especially across our leadership positions. We remain focused on compensating our team members equally across gender and race/ethnicity.
The physical, financial, and mental well-being of our team members remains a top priority, and we continue to invest in their success. We believe in a total rewards philosophy of providing top quartile pay in our restaurants, especially across our leadership positions. We remain focused on compensating our team members fairly and equitably based on their roles and responsibilities.
On the heels of opening a second Portillo’s Pickup location, we will continue to analyze where these, and other operating models such as urban walk-ups, airports and campuses, fit within our growth trajectory to add sales, manage cannibalization, and provide additional pipeline growth. We are continuously evaluating evolving consumer preferences and footprint optimization of our restaurants.
On the heels of opening a third Portillo’s Pickup location, we will continue to analyze where these, and other operating models such as urban walk-ups, airports and campuses, fit within our growth trajectory to add sales, manage cannibalization, and provide additional pipeline growth.
These both are foundational to an individual’s engagement and success. In addition to the survey, we regularly hold roundtable discussions with team members and stay interviews with leaders to gain insights into ways we can cultivate an energizing, collaborative work environment.
In addition to the survey, we regularly hold roundtable discussions with team members and conduct stay interviews with leaders to gain insights into ways we can cultivate an energizing, collaborative work environment.
We compete primarily with quick service and fast casual concepts, and to a lesser extent, full-service restaurants. The number, size and strength of competitors vary by region.
Our Competition The restaurant industry is highly competitive and fragmented. We compete primarily with quick service and fast casual concepts, and to a lesser extent, full-service restaurants. The number, size and strength of competitors vary by region.
Our dining areas evoke nostalgia and local influences. No two Portillo’s are alike. Each of our restaurants has its own themed décor, ranging from a 1930s prohibition motif to a 1950s diner to a 1960s flower-power bus, as well as a retro automotive garage theme. The period music ties to the theme, from ragtime to doo wop to disco.
Each of our restaurants has its own themed décor, ranging from a 1930s prohibition motif to a 1950s diner to a 1960s flower-power bus, as well as a retro automotive garage theme. The period music ties to the theme, from ragtime to doo wop to disco.
Our restaurant locations are audited for food safety and quality compliance through a combination of third-party organizations and the Portillo's managed quality and food systems team. Our commissaries also undergo food safety and quality audits on a regular basis.
Our restaurant locations are audited for food safety and quality compliance through a combination of third-party organizations and the Portillo's-managed quality and food safety team. Our commissaries also undergo food safety and quality audits on a regular basis and are regulated by the U.S. Department of Agriculture ("USDA") and Food and Drug Administration ("FDA").
We believe this reflects our conviction that our people are the Heart of Portillo’s. We attract, hire and develop great people who turn their obsession for our brand into a profession. Our team members are passionate about our food, love our guests, and call their teammates “family.” We are proud that Portillo's family is both diverse and inclusive.
We aim to attract, hire and develop great people who turn their obsession for our brand into a profession. Our team members are passionate about our food, love our guests, and call their teammates “family.” We are proud that Portillo's family reflects the communities in which we operate.
This initiative allows us to give additional learning and development opportunities above and beyond job skills or initial leadership development. We have also partnered with Better Up Coaching to give our leaders feedback and opportunities for personal growth.
Portillo’s has invested in LinkedIn Learning for all hourly crew chiefs, restaurant management, commissary crew chiefs and RSC team members. This initiative allows us to give additional learning and development opportunities above and beyond job skills or initial leadership development. We have also partnered with Better Up Coaching to give our leaders feedback and opportunities for personal growth.
We filed objections to the election with the National Labor Relations Board ("NLRB") on April 19, 2023, asserting that the union and its agent's promises prevented a free and fair election. We have appealed to the NLRB to set aside the election results. Our Board of Directors and Board committees provide oversight on certain human capital programs.
We filed objections to the 2023 election with the National Labor Relations Board ("NLRB") on April 19, 2023, asserting that the union and its agent's promises prevented a free and fair election. We are actively pursuing litigation to set aside the election results.
Since our founding in 1963 in a small trailer that Dick Portillo called “The Dog House,” we have grown to become a treasured brand with a passionate (some might say obsessed) nationwide following.
Overview of Portillo's Portillo’s serves iconic Chicago street food in high-energy, multichannel restaurants designed to ignite the senses and create memorable dining experiences. Since our founding in 1963 in a small trailer that Dick Portillo called “The Dog House,” we have grown to become a treasured brand with a passionate (some might say obsessed) nationwide following.
Our menu features something for everyone and appeals to a broad demographic, which enables our restaurants to thrive and generate strong and balanced volumes across multiple dayparts, weekdays and occasions. No matter the location, our fans are bun-believably obsessed!
We capture the hearts, minds and stomachs of our guests with every meal. Our menu features something for everyone and appeals to a broad demographic, which enables our restaurants to thrive and generate strong and balanced volumes across multiple dayparts, weekdays and occasions.
It’s why we are passionate about attracting and selecting team members who are aligned with our purpose and values, as well as why we established an employee value proposition centered around culture. It’s also why our team members are our best ambassadors and why we’ve seen success with our referral program. Leadership Development.
Living these values reinforces the culture we’re proud to have built. It’s why we are passionate about attracting and selecting team members who are aligned with our purpose and values, as well as why we established an employee value proposition centered around culture.
In the past, our restaurants were over 10,000 square feet and had 105-foot production lines. Restaurants built in 2023 are approximately 7,700 square feet with a 65-foot production line. In the future, we are planning for restaurants generally in the range of 5,500 to 6,000 square feet with an approximate 47-foot production line.
In the past, some of our restaurants were over 10,000 square feet and had 105-foot production lines. Restaurants built in 2023 were approximately 7,700 square feet with a 65-foot production line all while capable of generating an equivalent AUV.
We believe in our team members having a voice to share their ideas, feedback and contribute to organizational success. We continue to partner with Gallup to implement our EverEngaged survey to gather, listen to and act on team member feedback. We conduct this survey annually to measure improvement and areas of focus.
We continue to partner with Gallup to implement our EverEngaged survey to gather, listen to and act on team member feedback. We conduct this survey annually to measure improvement and areas of focus. In 2024, we maintained our team member engagement in alignment with the restaurant industry at large.
Our scheduling system allows hourly team members to align their work schedule with their personal schedule, as well as submit schedules, time-off requests and trade shifts. For our RSC team members, we provide a flexible work environment. Quarterly, we hold engagement-focused RSC culture weeks to bring the team together for connecting, recognition and development.
Our scheduling system allows hourly team members to align their work schedule with their personal schedule, as well as submit schedules, request time-off and trade their shifts. For our RSC team members, we provide a hybrid work environment, with our teams coming in to the office for collaboration three days a week.
In 2023, the “Heart of Portillo’s Fund,” an IRC section 501(c)(3) charitable fund raised over $300,000 to provide emergency assistance to team members. In 2023, the fund awarded over 60 grants and has provided support to team members for expenses following illness or injury, the unexpected death of a family member and other financial hardships.
In 2024, the fund awarded over 60 grants and has provided support to team members for expenses following illness or injury, the unexpected death of a family member, negative impact from a natural disaster, and other financial hardships.
In 2023, many of our leaders received annual grants providing our team with opportunities to own shares, which we believe supports retention of key team members. Diversity, Equity, Inclusion and Belonging. At Portillo’s, we embrace Diversity, Equity, Inclusion and Belonging ("DEIB") through our core values of Family, Greatness, Energy and Fun.
In 2024, many of our leaders received annual equity award grants, providing our team with opportunities to own Portillo's shares, which we believe supports retention of key team members and further drives engagement. Heart of Portillo's.
Our restaurant team members are not covered by any collective bargaining agreements. On April 13, 2023, certain of our team members at one of our commissaries voted in favor of being represented by a union.
Certain of our team members at our commissaries in Addison, IL and Aurora, IL voted on April 13, 2023 and April 30, 2024, respectively, in favor of being represented by a union.
While our operating model is focused on getting delicious, made-to-order food to our guests quickly, our atmosphere makes the experience more than a delicious meal. When guests walk into a Portillo’s, they get an experience completely different than a typical chain restaurant visit. Our restaurants engage all the senses to create a fun, relaxed and memorable occasion.
When guests walk into a Portillo’s, they get an experience completely different than a typical chain restaurant visit. Our restaurants engage all the senses to create a fun, relaxed and memorable occasion. Our dining areas evoke nostalgia and local influences. No two Portillo’s are alike.
Our business, including many of the elements described below, is subject to certain risks that may materially and adversely affect our ability to achieve our desired outcomes.
We believe the combination of our craveable food, multichannel sales model, dedication to operational excellence, and distinctive team member-driven culture gives us a competitive advantage. Our business, including many of the elements described below, is subject to certain risks that may materially and adversely affect our ability to achieve our desired outcomes.
We use a full suite of communication channels, such as email, X (formerly known as "Twitter"), Instagram, TikTok, Facebook, and other platforms to spread our message to different customer segments. ◦ In 2023, we partnered with the town of Bacon, Indiana to launch our new Rodeo Burger.
We use a full suite of communication channels, such as email, X (formerly known as "Twitter"), Instagram, TikTok, Facebook, and other platforms to spread our message to different customer segments. When a compelling opportunity arises, Portillo’s also utilizes traditional advertising in Chicagoland to drive frequency and outside Chicagoland to drive trial and awareness.
In 2023, our engagement score continued to improve with statistical significance while the restaurant industry remained flat. Our engagement results for multi-unit and general managers continue to be top quartile. Our team members reflected that they know what is expected of them at work and strongly agree they have what they need to do their jobs.
Our engagement results for multi-unit and general managers continue to be top quartile. Our team members reflected they know what is expected of them at work and they have the necessary materials to do their jobs well, which both strongly influence overall engagement. Our team members also reflected they understand how Portillo’s values impact how they do their jobs.
Our Story We relish the opportunity to create lifelong memories by igniting the senses with unrivaled food and experiences. An Iconic and Beloved Brand with Obsessed, Lifelong Fans . We capture the hearts, minds and stomachs of our guests with every meal.
As of December 29, 2024 , the Company owned 85.6% of Portillo's OpCo and the pre-IPO LLC Members owned the remaining 14.4% of Portillo's OpCo. Our Story We relish the opportunity to create lifelong memories by igniting the senses with unrivaled food and experiences. An Iconic and Beloved Brand with Obsessed, Lifelong Fans .
Our Sourcing and Supply Chain We are committed to maintaining our high-quality food standards through fresh ingredients that meet our stringent specifications. We partner with a variety of companies that are similarly focused on producing and providing high quality products.
Our Sourcing and Supply Chain Our supply chain approach is based on alignment with key strategic partners that are identified through a comprehensive evaluation process to ensure they meet our standards and expectations on a continual basis. We are committed to maintaining our high-quality food standards through fresh ingredients that meet our stringent specifications.
Particularly, our short-term focus is in the Sunbelt, with growth across markets in Arizona, Texas, and Florida. Simultaneously, we will continue to fill-in Chicagoland and adjacent markets as opportunities come available. Over the past year, our development function has made great strides in creating scalable, repeatable processes, giving us confidence as we grow nationally.
Over the past year, our development function has made great strides in creating scalable, repeatable processes, giving us confidence as we grow nationally.
This commitment is evidenced by our investment in our compensation packages and robust suite of benefit offerings. In 2023, we increased hourly pay across many of our geographies and for some of our restaurant management positions.
This commitment is evidenced by our investment in our compensation packages and robust suite of benefit offerings. In 2024, we completed a comprehensive benchmark analysis for our positions and made pay adjustments to preserve our competitive edge.
We view this investment as fundamental to our growth, building a pipeline of leaders for our future. We are committed to continuing education and providing ways for individuals to build their talents. Portillo’s has invested in LinkedIn Learning for all hourly Crew Chiefs, Restaurant Management, Commissary Crew Chiefs and RSC Team Members.
Our philosophy is to develop people to be ready before a position is open, as opposed to waiting for a position to be open and then training them. We view this investment as fundamental to our growth, building a pipeline of leaders for our future. We are committed to continuing education and providing ways for individuals to build their talents.
Our teams consistently monitor price points across the many segments and occasions that are relevant to our guests. We will continue our price laggard strategy combined with a focus on operational excellence to succeed moving forward. • Purposeful Menu Enhancements . We are constantly studying ways to further enhance our existing offerings while thoughtfully adding new high-quality items.
Our teams consistently monitor price points across many categories and occasions that are relevant to our guests. To succeed moving forward, we will continue our pricing strategy combined with a focus on operational excellence and aim to remain an unrivaled value compared to fast casual competitors. Innovate and Amplify the Portillo's Experience.
We work with team members and managers to build individual development plans with training and experiences, and we hold regularly scheduled development programs throughout the year for each level of leadership. Further, we hold bi-annual talent and succession planning summits to identify and support individuals with career pathing and development opportunities.
Our growth, development, and retention strategies align on these leadership traits to build skills to be used both professionally and personally. We work with team members and managers to build individual development plans with training and experience, and we hold regularly scheduled development programs throughout the year for each level of leadership.
Guests cake shake their way in for our Chicago-style hot dogs, Italian beef sandwiches, char-grilled burgers, cheese fries, fresh salads and famous chocolate cake. Our new restaurant openings draw massive crowds of passionate fans with lines stretching around the block. Energetic Restaurant Atmosphere that Engages the Senses.
Guests cake shake their way in for our Chicago-style hot dogs, Italian beef sandwiches, char-broiled burgers, cheese fries, fresh salads and famous chocolate cake. Energetic Restaurant Atmosphere that Engages the Senses. While our operating model is focused on getting delicious, made-to-order food to our guests quickly, we believe our atmosphere makes the experience more than a delicious meal.
We have implemented and are executing several initiatives to support our objectives to attract, develop and retain team members. Values-Driven, People-Centered Culture . In 2023, Portillo’s was selected for the second year in a row by QSR Magazine as one of the Best Brands to Work For.
We have implemented and are executing several initiatives to support our objectives to attract, develop and retain team members, including at the executive level. Values-Driven, People-Centric Culture . We believe this reflects our conviction that our people are the Heart of Portillo’s.
We've also expanded our recruiting efforts to encourage members of underserved communities, such as military veterans, to join the Portillo's family. Heart of Portillo's Foundation. We care deeply about our people and believe that by taking care of our team members, they will in turn take care of our guests.
We care deeply about our people and believe that by taking care of our team members, they will in turn take care of our guests. Our core values of Family, Greatness, Energy and Fun are the “Heart of Portillo’s” and are ingrained in everything we do as a company.
Robust contingency plans are reviewed and updated on a regular basis to provide a reliable supply of products and services to our business. As part of our risk assessment strategy, the supply chain team identifies areas critical to supporting the restaurants and executes any necessary adjustments or alternate programs.
As part of our risk assessment strategy, the supply chain team identifies areas critical to supporting the restaurants and makes any necessary adjustments or institutes alternate programs. Suppliers and distribution partners are managed under both a supplier code of conduct and a pricing protocol that provides transparent insight to costing mechanisms.
In our sales channels of digital pickup, delivery, and catering we have made great strides operationally that will allow us to win additional market share. • Protect our Incredible Value Proposition. Experience, service, and food quality define value in our brand, but maintaining a strong price point remains a high priority given how broadly we compete in the restaurant industry.
We have also started a camera vision test in select restaurants to provide operators with real-time actionable insights. • Unrivaled Value in Fast Casual: Experience, service, and food quality define value in our brand, but maintaining a strong price point remains a high priority given how broadly we compete in the restaurant industry.
Unless the context otherwise requires, references to "we," "us," "our," "Portillo's," the "Company" and other similar references refer to Portillo's Inc. and its subsidiaries, including Portillo’s OpCo. Overview of Portillo's Portillo’s serves iconic Chicago street food in high-energy, multichannel restaurants designed to ignite the senses and create memorable dining experiences.
Class A common stock trades on the Nasdaq under the symbol "PTLO." Unless the context otherwise requires, references to "we," "us," "our," "Portillo's," the "Company" and other similar references refer to Portillo's Inc. and its subsidiaries, including Portillo’s OpCo.
This included 190 Restaurant Support Center (“RSC”) team members, 439 res taurant managers, assistant general managers, and general managers, and 7,455 restaurant hourly team members in positions such as crew chief, training lead, food production and guest services. We also have 85 hourly team members, which also includes crew chiefs, and 11 managers and above at our commissaries.
Our Team – Human Capital Management Our team member base, as of December 29, 2024, consisted of 8,512 team members. This included 216 Restaurant Support Center (“RSC”) team members, 482 restaurant managers, AGMs, and GMs, and 7,714 restaurant hourly team members in positions such as crew chief, training lead, food production and guest services.
We believe the following initiatives will drive same-restaurant sales growth. • Deliver a Consistently Outstanding Guest Experience Across Order Channels . Portillo’s remains committed to offering industry-leading experiences across our traditional sales channels, while continuing to grow and innovate in growth sales channels.
The core tactics we use in this strategy are: • Flexing our Multichannel Muscle : Portillo’s aims to offer industry-leading experiences across our traditional sales channels, while continuing to grow and innovate in growth sales channels.
We believe this purposeful innovation drives increased guest frequency and reinforces the everyday value proposition that is key to our success. Moving forward, we will continue to consider menu enhancements to re-invigorate our core guests while drawing in new guests. • Drive Brand Awareness and Trial Through Marketing.
We believe this purposeful menu innovation drives increased guest frequency and reinforces the everyday value proposition that is key to our success. ◦ We enhance our menu with seasonal shakes and specialty cakes, offering something special throughout the year. In Fall 2024, we launched our first new cake flavor in 20 years: the Salted Caramel Spice Cake.
Suppliers and distribution partners are managed under both a code of conduct and a pricing protocol that provides transparent insight to costing mechanisms. In addition, we engage directly with manufacturers to ensure compliance with negotiated contract pricing and requisite volume expectations. Distribution.
We expect all suppliers to meet rigorous standards set forth in the code, which cover areas such as human rights, business integrity, and environmental management. In addition, we engage directly with manufacturers to ensure compliance with negotiated contract pricing and requisite volume expectations. Distribution.
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No matter how our guests order from us, our highly productive kitchens and team members consistently serve high-quality food and deliver a memorable guest experience. We believe the combination of our craveable food, multichannel sales model, dedication to operational excellence, and distinctive team member-driven culture gives us a competitive advantage.
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Our Strategy Our strategic plan is comprised of four pillars, which guide our short-term objectives and form the basis for growth: • Run World-Class Operations • Innovate and Amplify the Portillo’s Experience • Build Restaurants with Industry-Leading Returns • Take Great Care of Our Teams We believe that by focusing on the components of each of these simple, but focused, strategies we feed a virtuous cycle in which we take care of our team members, our team members take care of our guests, and our guests reward our shareholders.
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Our menu features unrivaled Chicago-style street food and all-American favorites — something for everyone! We're known for our famous Chicago-style hot dogs, Italian beef sandwiches, chopped salad, cheese fries, homemade chocolate cake, and chocolate cake shake. Our Italian beef is slow-roasted for four hours, thinly sliced, and served on freshly-baked French bread.
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Run World-Class Operations. We believe that delivering a consistently exceptional guest experience, including having guests try our delicious food is one of the most effective forms of marketing. By running world class operations, we will fuel Portillo’s same-restaurant sales growth.
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Then, it's dipped in hot gravy made with our homemade blend of seasonings that we've been perfecting for 60 years. Our Chicago-style hot dogs feature mustard, relish, freshly chopped onion, sliced red-ripe tomatoes, a kosher pickle and sport peppers piled high onto a perfectly steamed poppy seed bun, all finished with a few shakes of savory celery salt.
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In our sales channels of digital pickup, delivery, and catering we have made great strides operationally that will allow us to win additional market share. • Greatness in Drive-Thru : Portillo’s pioneered a winning drive-thru model beginning in the 1980s, combining speed and hospitality via outside order takers, food runners, and multi-lane drive-thrus.
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Guests also love our craveable crinkle-cut french fries which are cooked in beef tallow, resulting in a perfectly salted, crispy outside with a soft inside. Lastly, for those craving something sweet, our famous homemade fluffy chocolate cakes are baked with love each morning in every restaurant and generously iced with rich chocolate frosting. Commitment to Quality.
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Our teams are focused on continuously improving and innovating the drive-thru experience to improve throughput and order accuracy. All new restaurants are opened with drive-thru doors to aid our runners and improve the guest experience.
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Our made-to-order food is prepared with fresh, high-quality ingredients, and our commitment to quality can be seen in every item on the menu. We have been perfecting our menu for 60 years, and we are constantly seeking ways to further enhance the quality and desirability of our offerings. Menu Innovation.
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We believe one of the most effective ways to market Portillo’s is by having people experience our food firsthand. Our efforts in field marketing, social media, digital engagement, advertising, and menu innovation support the following aspirations: • Craveable & Fresh For Everyone : Our industry-leading AUVs are bolstered by a broad menu that offers something truly craveable for everyone.
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We intend to drive traffic through truly craveable foods that can be made with a Portillo’s spin.
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We constantly research our menu, our guests, and our competition to keep the menu fresh and relevant while also balanced to ensure operational efficiency.
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New menu items are introduced when we believe they will offer superior guest satisfaction and typically coincide with the removal of an existing menu item to ensure a manageable menu size, allowing our team members to maintain the operational efficiency that enables our high volumes and consistently high quality offerings.
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For example: ◦ In 2024 we launched two new salads, our Chicken Pecan Salad with Bacon to appeal to health-driven foodies and our Spicy Chicken Chopped Salad, a new twist on a Portillo’s classic to increase visits from longtime fans. Both items added excitement and variety to the menu while enhancing average ticket.
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Recent examples of new menu items include our Spicy Chicken Sandwich featuring our proprietary spicy giardiniera sauce, launched in 2021, the Plant-based Garden Dog, launched in 2022, and our Rodeo Burger, launched in 2023, featuring our homemade barbecue sauce and premium bacon.
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To celebrate the launch, we unveiled a limited-time brown paper bag with green stripes. Similar to its predecessor, the new bag is 100% recyclable, bleach-free, and is made from fibers certified by the Sustainable Forestry Initiative.
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The Rodeo Burger combines existing ingredients in a unique way , while highlighting our improved ingredients, such as bacon. We also offer seasonal shakes and specialty cakes to complement our existing menu. In 2023 , we opened our Innovation Center, a test kitchen that allows us to explore new menu items and refinements to our operational procedures.
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To celebrate, September 2024 became "Spice-Tember", in which we sold our new cake for $1 a slice with the purchase of an entree.
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Our teams leverage this space to efficiently explore new opportunities as we continue to grow. Our Sales Channels Our restaurants are thoughtfully designed for both their variety of access modes and the overall guest experience. Drive-Thru.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOn April 13, 2023, certain of our team members at one of our commissaries voted in favor of being represented by a union. We filed objections to the election with the National Labor Relations Board on April 19th, 2023, asserting that the union and its agent's promises prevented a free and fair election.
Biggest changeWe filed objections to the Addison 2023 election with the National Labor Relations Board ("NLRB") on April 19, 2023, asserting that the promises made by the union and its agent prevented a free and fair election. We are actively pursuing litigation to set aside the election results.
While a portion of our commodities are subject to contract pricing, as our contracts expire we may unable to successfully (re)negotiate terms that protect us from inflation or the portion not covered by pricing might increase unexpectedly, creating unplanned price inflation.
While a portion of our commodities are subject to contract pricing, as our contracts expire we may unable to successfully (re)negotiate terms that protect us from inflation or the portion not covered by contract pricing might increase unexpectedly, creating unplanned price inflation.
This could increase our operating costs, including new customer acquisition costs and, consequently, have a material adverse effect on our Results. Various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current or enact new laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection, consumer protection, and advertising.
This could increase our operating costs, including new customer acquisition costs and, consequently, have a material adverse effect on our Results. Various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current or enact new laws or regulations, or issue revised rules or guidance regarding privacy, data protection, consumer protection, and advertising.
The restaurant industry is subject to extensive federal, state and local laws and regulations, including without limitation those related to building and zoning requirements, and the preparation and sale of food. Such laws and regulations may change. Failure to comply with applicable laws and regulations could adversely affect our results of operations.
The restaurant industry is subject to extensive federal, state and local laws and regulations, including without limitation those related to building and zoning requirements, and the preparation and sale of food. Such laws and regulations may change and failure to comply with applicable laws and regulations could adversely affect our results of operations.
If we fail to maintain effective internal controls over financial reporting, or if our internal controls are ineffective, our ability to produce timely and accurate financial information or comply with Section 404 of the Sarbanes-Oxley Act of 2002 could be impaired.
If we fail to maintain effective internal controls over financial reporting, or if our internal controls are ineffective, our ability to produce timely and accurate financial information or to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could be impaired.
While we continue to make significant investment in physical and technological security measures, team member training, and third-party services to anticipate cyberattacks and prevent breaches, protect our information technology networks and infrastructure, and to identify vendors and service providers that could be vulnerable to damage, disruptions, shutdowns, data loss, or breaches due to criminal conduct, team member error, negligence or malfeasance, utility failures, natural disasters or other catastrophic events, we cannot guarantee that we will be successful in preventing every possible instance of cyberattacks, breach, or data loss, any of which could disrupt our operations, resulting in inefficiencies and a loss of profits.
We continue to make significant investment in physical and technological security measures, team member training, and third-party services to anticipate cyberattacks and prevent breaches, protect our information technology networks and infrastructure, and to identify vendors and service providers that could be vulnerable to damage, disruptions, shutdowns, data loss, or breaches due to criminal conduct, team member error, negligence or malfeasance, utility failures, natural disasters or other catastrophic events, we cannot guarantee that we will be successful in preventing every possible instance of cyberattacks, breach, or data loss, any of which could disrupt our operations, resulting in inefficiencies and a loss of profits.
Fair Labor Standards Act, which governs such matters as minimum wages and overtime, and a variety of federal, state and local laws that govern employment law matters like employee classifications, unemployment tax rates, workers’ compensation rates, family leave, working conditions, safety standards, immigration status, payroll taxes, discrimination, and citizenship requirements. In addition, under the U.S.
Fair Labor Standards Act, which governs such matters as minimum wages and overtime, and a variety of federal, state and local laws that govern employment law matters like employee classifications, unemployment tax rates, workers’ compensation rates, family leave, paid leave, working conditions, safety standards, immigration status, payroll taxes, discrimination, and citizenship requirements. In addition, under the U.S.
We may be adversely affected by negative publicity relating to food quality, the safety, sanitation and welfare of our restaurant facilities, guest complaints or litigation, health inspection scores, integrity of our suppliers’ food processing and other policies, practices and procedures, team member relationships and welfare or other matters at one or more of our restaurants.
We may be adversely affected by negative publicity relating to food quality, the safety, sanitation and welfare of our restaurant facilities, guest complaints or litigation, health inspection scores, integrity of our suppliers’ food processing and other policies, practices and procedures, team member relationships and welfare, employment practices or other matters at one or more of our restaurants.
Despite our efforts, there is a risk that our internal control Portillo's Inc. Form 10-K | 14 Table of Contents over financial reporting may not comply with Section 404. Failure to achieve and maintain effective internal controls could have a material adverse effect on our Results.
Despite our efforts, there is a risk that our internal controls over financial reporting may not comply with Section 404. Portillo's Inc. Form 10-K | 14 Table of Contents Failure to achieve and maintain effective internal controls could have a material adverse effect on our Results.
To maintain compliance with Section 404, we will continue to employ internal resources and outside consultants to assess and document the adequacy of our internal control over financial reporting, including validating that controls are functioning as documented and maintaining a continuous reporting and improvement process for internal control over financial reporting.
To maintain compliance with Section 404, we will continue to employ internal resources and outside consultants to assess and document the adequacy of our internal controls over financial reporting, including validating that controls are functioning as documented and maintaining a continuous reporting and improvement process for internal controls over financial reporting.
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, liquidity or access to sources of financing, and consequently, the market value of our Class A common stock.
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, liquidity or access to sources of financing, and/or the market value of our Class A common stock.
If we are not able to demonstrate Section 404 compliance, or if our internal control over financial reporting is perceived as inadequate or it is perceived that we are unable to produce timely or accurate consolidated financial statements, investors may lose confidence in our business, the price of our Class A common stock could decline, we could become subject to investigations by the Nasdaq, the SEC or other regulatory agencies, or our Class A common stock may not be able to remain listed on the Nasdaq.
If we are not able to demonstrate Section 404 compliance, or if our internal controls over financial reporting are perceived as inadequate or it is perceived that we are unable to produce timely or accurate consolidated financial statements, investors may lose confidence in our business, the price of our Class A common stock could decline, we could become subject to investigations by the Nasdaq, the SEC or other regulatory agencies, or our Class A common stock may not be able to remain listed on the Nasdaq.
For example, failure to enforce our trademarks, whether in print, on the Internet or through social media or other media, could prevent us from challenging third parties who use trademarks similar to ours, which may cause consumer confusion, harm the public perception of our brand, prevent our brand and branded products from achieving and maintaining market acceptance and cause a material adverse effect on our Results.
For example, failure to register or enforce our trademarks, whether in print, on the Internet or through social media or other media, could prevent us from successfully challenging third parties who use trademarks similar to ours, which may cause consumer confusion, harm the public perception of our brand, prevent our brand and branded products from achieving and maintaining market acceptance and cause a material adverse effect on our Results.
Additionally, even if food-borne illnesses were not identified at our restaurants, our restaurant sales could be adversely affected if instances of food-borne illnesses at other restaurant chains were highly publicized.
Additionally, even if food-borne illnesses are not identified at our restaurants, our restaurant sales could be adversely affected if instances of food-borne illnesses at other restaurant chains were highly publicized.
Our chief executive officer has been with us for more than five years and our executive officers have numerous years of experience in the food service industry.
Our chief executive officer has been with us for more than five years and many of our executive officers have numerous years of experience in the food service industry.
We cannot accurately predict the amount and timing of any impairment. Should the value of goodwill or other indefinite-lived intangible assets become impaired in the future, such impairment could have a material adverse effect on our Results. See Note 6. Goodwill & Intangible Assets in the notes to the consolidated financial statements for additional information.
We cannot accurately predict the amount and timing of any impairment. Should the value of goodwill or other indefinite-lived intangible assets become impaired in the future, such impairment could have a material adverse effect on our Results. See Note 6. Goodwill & Intangible Assets in the notes to the consolidated financial statements for additional information. Portillo's Inc.
Failure to comply with the laws and regulatory requirements of federal, state and local authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability. Compliance with all these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings.
Failure to comply with the laws and regulatory requirements of federal, state and local authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability. Compliance with all these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings. Portillo's Inc.
While we plan to continue investing in additional supply chain capacity in the future, as necessary, any prolonged disruption in the operations of any of our existing facilities, whether due to technical, operational or labor difficulties, product contamination, destruction or damage to the facility, limited capacity or other reasons, could adversely affect our Results.
While we plan to continue investing in additional supply chain capacity in the future, as necessary, any prolonged disruption in the operations of any of our existing facilities, whether due to technical, operational or labor difficulties, product contamination, destruction or damage to the facility, limited capacity or other reasons, could adversely affect our Results. Portillo's Inc.
We currently operate two commissaries in Illinois, which produce all the Italian beef, gravy and sweet peppers used in our restaurants.
We currently operate two commissaries in Illinois, which produce the Italian beef, gravy and sweet peppers used in our restaurants.
It’s possible that third parties will assert claims of infringement, misappropriation or other violations of intellectual property against us, or assert claims that portion of our IP is invalid or unenforceable. Claims decided against us could invalidate or narrow our IP or allow competing uses, which could have a material adverse effect on our Results.
It is possible that third parties will assert claims of infringement, misappropriation or other violations of intellectual property against us, or assert claims that a portion of our IP is invalid or unenforceable. Claims decided against us could invalidate or narrow our IP or allow competing uses, which could have a material adverse effect on our Results.
In addition, our AUV and same-restaurant sales may not increase at the rates our existing restaurants have achieved over the past several years. Our ability to operate new restaurants profitably and increase AUV and same-restaurant sales will depend on many factors, some of which are beyond our control.
In addition, our AUVs and same-restaurant sales may not increase at the rates our existing restaurants have achieved over the past several years. Our ability to operate new restaurants profitably and increase AUVs and same-restaurant sales will depend on many factors, some of which are beyond our control.
Excess cash payments made by us to a TRA Party will be netted against any future cash payments, if any, that we might otherwise be required to make to such TRA Party under the Tax Receivable Agreement once a challenge is finally settled or determined.
Excess cash payments made by us to a TRA Party will be netted against any future cash payments, if any, that we might otherwise be required to make to such TRA Party under the Tax Receivable Agreement once a challenge is finally settled or determined. Portillo's Inc.
We are required to comply with Section 404 of the Sarbanes-Oxley Act (“Section 404”), which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting.
We are required to comply with Section 404 of the Sarbanes-Oxley Act (“Section 404”), which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal controls over financial reporting.
Regardless of outcome, there could be significant expenses associated with the defense of such a claim. We may also from time to time have to assert claims against third parties and initiate litigation in order to enforce our IP.
Regardless of outcome, there could be significant expenses associated with the defense of such a claim. We may also from time to time have to assert claims against third parties and initiate litigation in order to defend our IP.
In recent years, restaurant companies, including us, have been subject to lawsuits, including class actions, alleging violations of federal and state laws regarding workplace and employment conditions, discrimination and similar matters. Some lawsuits have resulted in substantial damage awards.
In recent years, restaurant companies, including us, have been subject to lawsuits, including class actions, alleging violations of federal and state laws regarding workplace and employment conditions, discrimination, immigration status and similar matters. Some lawsuits have resulted in substantial damage awards.
We are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state securities laws or law regarding workplace and employment matters, equal opportunity, harassment, discrimination and similar matters, and we could encounter class action or other lawsuits related to these or different matters in the future.
We are also subject to a variety of other claims that could arise in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state securities laws or law regarding workplace and employment matters, equal opportunity, harassment, discrimination and similar matters, and we could encounter class action or other lawsuits related to these or different matters in the future.
Our business is subject to the risk of litigation by team members, consumers, suppliers, shareholders or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action and regulatory actions, is difficult to assess or quantify.
Our business is subject to the risk of litigation by team members, consumers, suppliers, shareholders or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action and regulatory actions, is difficult to predict or quantify.
Our business requires the collection, transmission, and retention of large volumes of guest and team member data, including personally identifiable information, thought information technology systems maintained by us or vendors retained by us.
Our business requires the collection, transmission, and retention of large volumes of guest and team member data, including personally identifiable information, through information technology systems maintained by us or vendors retained by us.
Our information technology systems, which in some cases rely on third-party providers, have in the past, and may in the future experience service interruptions, degradation or other performance problems because of hardware and software defects or malfunctions, distributed denial-of-service and other cyberattacks, infrastructure changes, human error, earthquakes, hurricanes, floods, fires, natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses, ransomware, malware, or other events.
Our information technology systems, which in some cases rely on third-party providers, have in the past, and may in the future, experience service interruptions, degradation or other performance problems because of hardware and software defects or malfunctions, distributed denial-of-service and other cyberattacks, infrastructure changes, human error, natural/weather disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses, ransomware, malware, or other events.
Many of our competitors have greater name recognition locally, regionally, or nationally in these target markets. Our continued success also depends on the popularity of our menu and guest experience. Consumer tastes, nutritional and dietary trends, traffic patterns and the type, number, and location of competing restaurants often affect restaurant performance, and our competitors may react more Portillo's Inc.
Many of our competitors have greater name recognition locally, regionally, or nationally in these target markets. Our continued success also depends on the popularity of our menu and guest experience. Consumer tastes, nutritional and dietary trends, traffic patterns and the type, number, and location of competing restaurants often affect restaurant performance, and our competitors may react more effectively to changes.
Form 10-K | 10 Table of Contents In certain cases, payments under the Tax Receivable Agreement to the TRA Parties may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement and may impair our ability to consummate change of control transactions or negatively impact the value received by owners of our Class A common stock.
In certain cases, payments under the Tax Receivable Agreement to the TRA Parties may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement and may impair our ability to consummate change of control transactions or negatively impact the value received by owners of our Class A common stock.
In addition, our independent registered public accounting firm must attest to the effectiveness of our internal control over financial matters.
In addition, our independent registered public accounting firm must attest to the effectiveness of our internal controls over financial matters.
These changes to our menu could negatively impact our restaurant traffic and operational results during the shortage and thereafter. Additionally, we may be unable to offset a portion or even all of a future cost increase through menu price increases.
These changes to our menu could negatively impact our restaurant traffic and operational results during the shortage and thereafter. Additionally, we may be unable to offset all or even a portion of a future cost increase through menu price increases. Competitive conditions may Portillo's Inc.
Changes to estimates related to our property, fixtures and equipment and definite-lived intangible assets or operating results that are lower than our current estimates at certain restaurant locations may cause us to incur impairment charges or accelerate the amortization on certain long-lived assets, which could have a material adverse impact on our results of operations.
Form 10-K | 7 Table of Contents Changes to estimates related to our property, fixtures and equipment and definite-lived intangible assets or operating results that are lower than our current estimates at certain restaurant locations may cause us to incur impairment charges or accelerate the amortization on certain long-lived assets, which could have a material adverse impact on our results of operations.
Should our competitors increase spending on marketing and other initiatives or our marketing expenditures decrease, or our advertising, promotions, and restaurant designs and locations be less effective than our competitors, it could have a material adverse effect on our Results .
If our competitors increase spending on marketing and other initiatives or our marketing expenditures decrease, or our advertising, promotions, and restaurant designs and locations are less effective than our competitors, it could have a material adverse effect on our Results .
We are subject to the Americans with Disabilities Act (the "ADA"), which, among other things, requires our restaurants to meet federally mandated requirements for the disabled. The ADA prohibits discrimination in employment and public accommodations on the basis of disability. Under the Portillo's Inc.
We are subject to the Americans with Disabilities Act (the "ADA"), which, among other things, requires our restaurants to meet federally mandated requirements for individuals with disabilities. The ADA prohibits discrimination in employment and public accommodations on the basis of disability.
Form 10-K | 6 Table of Contents However, use of the “E-Verify” program does not guarantee that we will properly identify all applicants who are ineligible for employment. Unauthorized workers are subject to deportation and we may be subject to fines or penalties if any of our workers are found to be unauthorized.
However, use of the “E-Verify” program does not guarantee that we will properly identify all applicants who are ineligible for employment. Unauthorized workers are subject to deportation and we may be subject to fines or penalties if any of our workers are found to be unauthorized.
The foregoing factors, as well as the significant common stock ownership by Berkshire, could make acquisition of our Class A common stock less desirable, which, under certain circumstances, could reduce its market value. Portillo's Inc. Form 10-K | 9 Table of Contents We are a holding company and our principal asset is our ownership of LLC Units in Portillo’s OpCo.
The foregoing factors, as well as the significant common stock ownership by Berkshire, could make acquisition of our Class A common stock less desirable, which, under certain circumstances, could reduce its market value. We are a holding company and our principal asset is our ownership of LLC Units in Portillo’s OpCo.
Additionally, the cybersecurity and privacy requirements imposed by governmental regulations are evolving. Our systems may not be able to immediately satisfy applicable requirements, and may require significant additional investment and time to do so.
Additionally, the cybersecurity and privacy requirements, including the regulation of artificial intelligence, imposed by governmental regulations are evolving. Our systems may not be able to immediately satisfy applicable requirements, and may require significant additional investment and time to do so.
We experienced 5.5% and 15.2% commodity price inflation for the years ended December 31, 2023 and December 25, 2022, respectively. If the cost of our ingredients increase, we may suspend or permanently discontinue certain menu items rather than pay the increased cost for the ingredients.
We experienced 4.2% and 5.5% commodity price inflation for the years ended December 29, 2024 and December 31, 2023, respectively. If the cost of our ingredients increase, we may suspend or permanently discontinue certain menu items rather than pay the increased cost for the ingredients.
If we do not distribute such excess cash as dividends or otherwise undertake ameliorative actions, holders of our LLC Units (other than Portillo’s Inc.) may benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following a redemption or exchange of their LLC Units, notwithstanding that such holders of our LLC Units (other than Portillo’s Inc.) may previously have participated as holders of LLC Units in distributions by Portillo’s OpCo that resulted in such excess cash balances at Portillo’s Inc.
If we do not distribute such excess cash as dividends or otherwise undertake ameliorative actions, holders of our LLC Units (other than Portillo’s Inc.) may benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following a redemption or exchange of their LLC Units, notwithstanding that such holders of our LLC Units (other than Portillo’s Inc.) may previously Portillo's Inc.
An impairment in the carrying value of our goodwill, indefinite-lived intangible assets or long-lived assets could have a material adverse effect on our business. As of December 31, 2023, we had approximately $394.3 million of goodwill and $252.8 million of intangible assets, primarily related to the purchase price allocation performed in connection with the Berkshire Acquisition .
An impairment in the carrying value of our goodwill, indefinite-lived intangible assets or long-lived assets could have a material adverse effect on our business. As of December 29, 2024, we had approximately $394.3 million of goodwill and $250.0 million of intangible assets, primarily related to the purchase price allocation performed in connection with the Berkshire Acquisition.
Our systems also may be subject to break-ins, sabotage, theft, and intentional acts of vandalism perpetrated by criminal third parties, third parties we do business with or team members. Our reliance on third parties increases our exposure to such risks as we exercise less control over such persons.
Our systems are also subject to break-ins, sabotage, theft, and intentional acts of vandalism perpetrated by criminal third parties, third parties we do business with, or team members. Our reliance on third parties increases our exposure to such risks as we cannot exercise direct control over such persons / entities.
We may be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent Portillo's Inc. Form 10-K | 12 Table of Contents or unauthorized use or disclosure of data that we store or handle in our operations.
We may be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle in our operations.
Other restaurant chains have experienced incidents related to food-borne illness incidents that have had material adverse impacts on their operations, and it’s possible we could suffer a similar impact if a similar incident occurred at one of our restaurants.
Other restaurant chains have experienced incidents related to food-borne illness incidents that have had material adverse impacts on their operations, and it’s possible we could suffer a similar impact if one or more of our restaurants were to experience a material food safety incident.
Form 10-K | 13 Table of Contents ADA, we could be required to modify our restaurants to provide service to, or make reasonable accommodations for the employment of, disabled persons. Our employment practices are also subject to the requirements of the U.S. Citizenship & Immigration Service ("USCIS") relating to citizenship and residency.
Under the ADA, we could be required to modify our restaurants to provide service to, or make reasonable accommodations for the employment of, disabled persons. Our employment practices are also subject to the requirements of the U.S. Citizenship & Immigration Service ("USCIS") relating to citizenship and residency.
We depend on our executive officers and certain other key team members, the loss of whom could have a material adverse effect on our business. We rely upon the accumulated knowledge, skills and experience of our executive officers and certain other key team members.
Form 10-K | 5 Table of Contents We depend on our executive officers and certain other key team members, the loss of whom could have a material adverse effect on our business. We rely upon the accumulated knowledge, skills and experience of our executive officers and certain other key team members.
Portillo's Inc. Form 10-K | 15 Table of Contents Our current certificate of incorporation provides that, absent our written consent, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any action asserting a claim arising under the Securities Act or the rules and regulations promulgated thereunder.
Our current certificate of incorporation provides that, absent our written consent, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any action asserting a claim arising under the Securities Act or the rules and regulations promulgated thereunder.
Our marketing programs and any limited time or seasonal offerings may be unsuccessful and could fail to meet expectations, and our new menu items, advertising campaigns, heavy reliance on social media and restaurant designs and remodels may not generate increased sales or profits.
Any such events could have a material adverse effect on our Results. Our marketing programs and any limited time or seasonal offerings may be unsuccessful and could fail to meet expectations, and our new menu items, advertising campaigns, heavy reliance on social media and restaurant designs and remodels may not generate increased sales or profits.
Competitive conditions may limit our menu pricing flexibility and implementing menu price increases may change our guests’ visit frequencies or purchasing patterns. Our industry depends on consumer discretionary spending and is affected by changes in consumer tastes, and macro- and micro-economic conditions (including economic downturns, inflation or increased food or energy costs).
Form 10-K | 2 Table of Contents limit our menu pricing flexibility and implementing menu price increases may change our guests’ visit frequencies or purchasing patterns. Our industry depends on consumer discretionary spending and is affected by changes in consumer tastes, and macro- and micro-economic conditions (including economic downturns, consumer sentiment, inflation or increased food or energy costs).
Additionally, an infringement or misappropriation claim decided against us could result in our being required to pay damages, cease using our IP, develop or adopt non-infringing intellectual property or acquire a license to the third-party Portillo's Inc. Form 10-K | 11 Table of Contents intellectual property that is the subject of the asserted claim.
Additionally, an infringement or misappropriation claim decided against us could result in us being required to pay damages, cease using our IP, develop or adopt non-infringing intellectual property or acquire a license to use the third-party intellectual property that is the subject of the asserted claim.
If these initiatives are unsuccessful, we may incur expenses without the benefit of higher revenues, which could have a material adverse effect on our Results. Our marketing efforts rely heavily on the use of social media.
If these initiatives are unsuccessful, we may incur expenses without the benefit of higher revenues, Portillo's Inc. Form 10-K | 3 Table of Contents which could have a material adverse effect on our Results. Our marketing efforts rely heavily on the use of social media.
Our competitors could open additional restaurants in the Midwestern United States, which could result in reduced market share for us in this key geographic region, which could have a material adverse effect on our Results. Damage to our reputation and negative publicity could have a material adverse effect on our Results.
Our competitors could open additional restaurants in the Midwestern United States, which could result in reduced market share for us in this key geographic region, which could have a material adverse effect on our Results. Portillo's Inc. Form 10-K | 4 Table of Contents Damage to our reputation and negative publicity could have a material adverse effect on our Results.
Events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy certain financial covenants that apply under our credit agreements and we cannot guarantee that our lenders will waive any failure to satisfy such financial covenants.
Events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy certain financial Portillo's Inc. Form 10-K | 8 Table of Contents covenants that apply under our credit agreements and we cannot guarantee that our lenders will waive any failure to satisfy such financial covenants.
If we do not maintain and innovate competitive digital systems, our digital business and sales may be adversely affected as we lose guests to competitors. We rely on third-parties for our ordering and payment platforms.
If we do not maintain and innovate competitive digital systems, including our growing use of artificial intelligence in our operations, our digital business and sales may be adversely affected as we lose guests to competitors. We rely on third-parties for our ordering and payment platforms.
Security breaches, system interruptions or a material failure of our system could disrupt our operations, compromise confidential personally identifying information, subject us to loss, harm our business, and have a material adverse impact on our business, financial condition and results of operations.
Security breaches, system interruptions, material failure of our system, or complications with the implementation or usage of our new enterprise resource planning system could disrupt our operations, compromise confidential personally identifying information, subject us to loss, harm our business, and have a material adverse impact on our business, financial condition and results of operations.
We serve alcoholic beverages at most of our restaurants and we may expand service to additional restaurants in the future. Alcoholic beverage control regulations generally require our restaurants to apply to a state authority and, in certain locations, county or municipal authorities for an annual license that may be revoked or suspended for cause at any time.
Alcoholic beverage control regulations generally require our restaurants to apply to a state authority and, in certain locations, county or municipal authorities for an annual license that may be revoked or suspended for cause at any time.
Our restaurant base is geographically concentrated in the Midwestern United States, and we could be negatively affected by conditions specific to that region. Our restaurants in the Midwestern United States represented approximately 77% of our restaurants as of December 31, 2023. Our restaurants in the Chicagoland area represented approximately 49% of our restaurants as of December 31, 2023.
Our restaurant base is geographically concentrated in the Midwestern United States, and we could be negatively affected by conditions specific to that region. Our restaurants in the Midwestern United States represented approximately 71% of our restaurants as of December 29, 2024.
In particular, our omni-channel approach relies in large part on our information technology systems to operate successfully and allow for capabilities like mobile order and pay, third-party delivery, and digital menu boards. Like many other companies, we have experienced, and will continue to experience, attempts to compromise our information technology systems.
In particular, our omni-channel approach relies in large part on our information technology systems to operate successfully and allow for capabilities like kiosk transactions, mobile order and pay, third-party delivery, and digital menu boards.
Additionally, some device manufacturers and web browsers have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies or to block other tracking technologies, which, if widely adopted, could result in third-party cookies and other online tracking methods becoming significantly less effective.
Form 10-K | 12 Table of Contents implement, means to make it easier for Internet users to prevent the placement of cookies or to block other tracking technologies, which, if widely adopted, could result in third-party cookies and other online tracking methods becoming significantly less effective.
Any person or entity purchasing or otherwise acquiring or holding any interest in any shares of our capital stock shall be deemed to have notice of and consented to the forum provision in our certificate of incorporation, limiting such person’s ability to bring a claim in a more favorable or convenient judicial forum, which may discourage such lawsuits, make them more difficult or expensive to pursue and result in less favorable shareholder outcomes.
Any person or entity purchasing or otherwise acquiring or holding any interest in any shares of our capital stock shall be deemed to have notice of and consented to the forum provision in our certificate of incorporation, limiting such person’s ability to bring a claim in a more favorable or Portillo's Inc.
Risks Related to Our Business, Industry and Growth Strategies We are vulnerable to changes in economic conditions, increases in food and commodity costs and consumer preferences.
Risks Related to Our Business, Industry and Growth Strategies We are vulnerable to changes in economic conditions, increases in food and commodity costs and consumer preferences. Like other companies in the restaurant industry, we are dependent upon food and commodity availability and their costs impact our business and results.
Like other companies in the restaurant industry, we are subject to volatility in food and commodity costs and availability that may be outside of our control, including general economic conditions, inflation, labor shortages, seasonal fluctuations, weather and climate conditions, energy costs, global demand, trade protections and subsidies, food safety issues, infectious diseases, possible terrorist activity, cyberattacks, transportation issues, currency fluctuations, product recalls, and government regulatory schemes.
Food and commodity costs and availability can be volatile and are affected by factors outside of our control, including general economic conditions, inflation, labor shortages, seasonal fluctuations, weather and climate conditions, energy costs, global demand, trade protections and subsidies, food safety issues, infectious diseases, possible terrorist activity, cyberattacks, transportation issues, currency fluctuations, product recalls, and government regulations, among others.
If any third-party delivery provider we partner with experiences damage to their brand image, we may also see ramifications due to our partnership with them. Portillo's Inc. Form 10-K | 5 Table of Contents We have a limited number of suppliers and distributors for certain key ingredients.
If any third-party delivery provider we partner with experiences damage to their brand image, we may also see ramifications due to our partnership with them. We have a limited number of suppliers and distributors for certain key ingredients. If our suppliers or distributors do not fulfill their contractual obligations, we could encounter supply shortages and incur higher costs.
In addition, a labor dispute involving some or all our team members may harm our reputation, disrupt our operations and reduce our revenues, and resolution of disputes could increase our costs.
Form 10-K | 6 Table of Contents current compensation arrangements, it could have a material adverse effect on our Results. In addition, a labor dispute involving some or all our team members may harm our reputation, disrupt our operations and reduce our revenues, and resolution of labor disputes could increase our costs.
Portillo's Inc. Form 10-K | 3 Table of Contents Our same-restaurant sales may be lower than we expect in future periods. Same-restaurant sales continue to be critical to profitability because their profit margin is generally higher than the profit margin on new restaurant sales.
Our same-restaurant sales may be lower than we expect in future periods. Same-restaurant sales continue to be critical to profitability because their profit margin is generally higher than the profit margin on new restaurant sales. Initiatives to grow same restaurant sales may be unsuccessful, we may miss our targets, or same-restaurant sales could decrease.
Revenues and profit, if any, generated at a relocated restaurant may not equal those generated at the existing restaurant. Portillo's Inc. Form 10-K | 7 Table of Contents Our business is subject to risks related to our sale of alcoholic beverages.
Revenues and profit, if any, generated at a relocated restaurant may not equal those generated at the existing restaurant. Our business is subject to risks related to our sale of alcoholic beverages. We serve alcoholic beverages at most of our restaurants and we may expand service to additional restaurants in the future.
In the ordinary course of its business activities, Berkshire may engage in activities where its interests' conflict with our interests or those of our shareholders.
Berkshire engages in a range of investing activities, including investments in restaurants and other consumer-related companies. In the ordinary course of its business activities, Berkshire may engage in activities where its interests conflict with our interests or those of our shareholders.
As we expand our business channels, our risk exposure will increase proportionately. The techniques and sophistication used to conduct cyberattacks, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks have occurred.
The techniques and sophistication used to conduct cyberattacks, as well as the sources and targets of these attacks, change frequently and may not be recognized until or after such attacks have occurred.
Our reputation as a brand or as an employer could be adversely affected, which could impair our ability to attract and retain guests and qualified employees. Failure to comply with existing and new federal and state laws and regulations relating to privacy, data protection, advertising and consumer protection, could have a material adverse effect.
Failure to comply with existing and new federal and state laws and regulations relating to privacy, data protection, advertising and consumer protection, could have a material adverse effect.
Risks Related to Our Organizational Structure The interests of Berkshire may conflict with our interests or the interests of the holders of our Class A common stock in the future. Berkshire Private Equity continues to own a significant percentage of our common stock. Berkshire engages in a range of investing activities, including investments in restaurants and other consumer-related companies.
Risks Related to Our Organizational Structure The interests of Berkshire may conflict with our interests or the interests of the holders of our Class A common stock in the future. Berkshire Partners, our largest shareholder as of December 29, 2024, continues to own a significant percentage of our common stock.
Although we require all workers to provide us with government-specified documentation evidencing their employment eligibility, some of our team members may, without our knowledge, be unauthorized workers.
Although we require all workers to provide us with government-specified documentation evidencing their employment eligibility, some of our team members may, without our knowledge, be unauthorized workers. We currently participate in the “E-Verify” program, an Internet-based, free program run by the U.S. government to verify employment eligibility in states where participation is required.
Risks Related to Intellectual Property, Information Technology, and Data Security The failure to protect and maintain our intellectual property, including our trademarks, could have a material adverse effect on our business.
Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism matters. Risks Related to Intellectual Property, Information Technology, and Data Security The failure to protect and maintain our intellectual property, including our trademarks, could have a material adverse effect on our business.
The TRA Parties’ interests may differ from or conflict with our interests and your interests and they may exercise their consent rights in a manner adverse to our interests and your interests.
The TRA Parties’ interests may differ from or conflict with our interests and they may exercise their consent rights in a manner adverse to our interests. Payments made under the Tax Receivable Agreement could significantly exceed any tax savings that we realize from the tax attributes that are the subject of the Tax Receivable Agreement.
If we cannot compete effectively, our traffic, restaurant sales and restaurant operating profit margins could decline, which could have a material adverse effect on our Results.
In the past, some of our competitors have implemented promotional programs that provide price discounts or reward programs, and they may continue to do so in the future. If we cannot compete effectively, our traffic, restaurant sales and restaurant operating profit margins could decline, which could have a material adverse effect on our Results.
We may also experience backlash from individuals, organizations and investors who do not support such initiatives. Portillo's Inc. Form 10-K | 8 Table of Contents Risks Related to Our Indebtedness Our level of indebtedness could have a material adverse effect on our business and limit our ability to plan for or respond to changes in our business.
Risks Related to Our Indebtedness Our level of indebtedness could have a material adverse effect on our business and limit our ability to plan for or respond to changes in our business.
Such criticisms could impair our brand, our restaurant sales, our hiring, and our expansion plans. If we changed our practices because of concerns about animal welfare, or in response to such criticisms, our costs might increase, or we may have to change our suppliers or our menu.
If we changed our practices because of concerns about animal welfare, or in response to such criticisms, our costs might increase, or we may have to change our suppliers or our menu. A similar risk exists with respect to food service businesses unrelated to us if customers mistakenly associate such unrelated businesses with our operations.
Portillo's Inc. Form 10-K | 2 Table of Contents This has affected our profitability and reputation in the past and could do so in the future.
Food and commodity cost volatility has affected our profitability and reputation in the past and could do so in the future.
We have appealed to the NLRB to set aside the election results. Although we have not received other petitions to unionize, it is possible that additional team members may choose to be represented by labor unions in the future.
Although we have not received other petitions to unionize, it is possible that additional team members may seek to be represented by labor unions in the future. If a significant number of our team members were to become unionized and collective bargaining agreement terms were significantly different from our Portillo's Inc.
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Initiatives to grow same restaurant sales may be unsuccessful, we may miss our targets, or same-restaurant sales could decrease. Any such events could have a material adverse effect on our Results.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

11 edited+7 added−18 removed5 unchanged
Biggest changeIn addition to our ITVP, the cybersecurity portion of our IT team includes one dedicated team member and four additional team members who handle cybersecurity risks in addition to other job responsibilities. To address any gaps in the Company’s collective expertise and to account for the ever-evolving nature of cybersecurity risks, the Company retains various consultants as noted above.
Biggest changeTo address any gaps in the Company’s collective expertise and to account for the ever-evolving nature of cybersecurity risks, the Company retains various consultants as noted above. The internal and external headcount, and the expertise of the employees and consultants, will change from time to time as we adapt to the changing cybersecurity environment.
We work with team members at all levels to educate them about evolving risks, from well-known tactics and scams (e.g., phishing) to their more sophisticated descendants (e.g., vphishing, spear phishing and smishing). Team members receive training on data security and privacy practices and are included in periodic awareness campaigns to test real-world responses.
We work with team members at all levels to educate them about evolving risks, from well-known tactics and scams (e.g., phishing) to their more sophisticated descendants (e.g., spear phishing and smishing). Team members receive training on data security and privacy practices and are included in periodic awareness campaigns to test real-world responses.
For a more in-depth discussion of risks associated with cybersecurity and cybersecurity insurance risks , see Item 1A, "Risk Factors." Oversight and Execution of Our Cybersecurity Risk Strategy Both the Board and the Audit Committee play an important role in the Board’s oversight of cybersecurity threats.
For a more in-depth discussion of risks associated with cybersecurity and cybersecurity insurance risks , see Item 1A, "Risk Factors." Cybersecurity Governance Both the Board and the Audit Committee play an important role in the Board’s oversight of cybersecurity threats.
We manage cybersecurity risk through a variety of tactics, including (i) the structure of our systems and platforms, (ii) the contractual terms with our third-party vendors, (iii) the proactive vulnerability assessments we conduct (or require our vendors to conduct), (iv) compliance with applicable regulations and continuous improvement around best practices, (v) mitigating user error and human vulnerabilities through training and guidance and (vi) the placement of cybersecurity insurance policies.
We manage cybersecurity risk through a variety of tactics, including (i) the structure of our systems and platforms, (ii) the contractual terms with our third-party vendors, (iii) the proactive vulnerability assessments we conduct (or require our vendors to conduct), (iv) compliance with applicable regulations and continuous improvement around best practices, (v) mitigating user error and human vulnerabilities through training and guidance, (vi) attending security conferences and operationalizing new learnings and/or planning for environment changes in response to these learnings, and (vii) the placement of cybersecurity insurance policies.
Responsibility for cybersecurity risk management is a team effort, with day-to-day oversight and management from our executive and information technology ("IT") teams, the Audit Committee taking a more active role in setting both proactive and reactive strategies and our Board overseeing our efforts and helping to guide our strategy.
ITEM 1C. CYBERSECURITY Risk Management Strategy Responsibility for cybersecurity risk management comes from a collective effort, with day-to-day oversight and management from our executive and information technology ("IT") teams. Additionally, the Audit Committee continues to take a more active role in setting both proactive and reactive strategies, with the overall Board overseeing our efforts and helping to guide our strategy.
We presently have three Directors, Ann Bordelon, Chair of the Audit Committee, Paulette Dodson, and Noah Glass who have cybersecurity risk management experience and we continue to monitor whether supplemental experience may be useful as cybersecurity threats continue to evolve. Day to day management of cybersecurity risk sits with our Vice President of Information Technology (“ITVP”) and his team.
We presently have three Directors, Ann Bordelon, Chair of the Audit Committee, Paulette Dodson, and Noah Glass, who have cybersecurity risk management experience and we continue to monitor whether supplemental experience may be useful as cybersecurity threats continue to evolve.
The Company also employs and enforces a number of policies to guide team member behavior and help protect against threats, covering everything from regular password updates to obtaining permission to install third-party programs and use personal devices. Team member training reinforces the Company’s risk management policies and procedures and the expectation that all team members will adhere to them.
The Company also employs and enforces policies to guide team member behavior and help protect against threats, which includes steps such as regular password updates, and obtaining permission to install third-party programs. Team member training reinforces the Company’s risk management policies and procedures and the expectation that all team members will adhere to them.
We involve our IT team when negotiating contracts that could increase our cybersecurity risk exposure, so that the team is aware of the specific risks related to a given vendor and can provide feedback and advice on the contractual provisions necessary to prevent a cybersecurity incident, or in the Portillo's Inc.
We involve our IT team when negotiating contracts that could increase our cybersecurity risk exposure, so that the team is aware of the specific risks related to a given vendor and can provide feedback and advice on the contractual provisions necessary to prevent a cybersecurity incident, or in the event an incident does occur, to ensure that the Company has the necessary rights to act quickly to protect team members, guests, and our business and mitigate potential damage.
This may include sharing SOC 1 or 2 Type 2 audit reports, conducting periodic penetration and vulnerability testing and confirmation that vendors are adhering to applicable laws.
We negotiate with our vendors about a variety of monitoring, testing, and reporting provisions so that we can work with them to better address vulnerabilities. This may include sharing SOC 1 or 2 Type 2 audit reports, conducting periodic penetration and vulnerability testing, both internally and externally, and confirmation that vendors are adhering to applicable laws.
As noted above, the team conducts risk assessment activities on a regular basis. The team also liaises with cross-functional partners and outside experts, including legal counsel and consultants, and reviews applicable security frameworks (e.g., National Institute of Standards and Technology ("NIST")) to identify the legal requirements and industry practices and expectations that the Company’s security measures should satisfy.
We also work with cross-functional partners and outside experts, including legal counsel and consultants to identify the legal requirements and industry practices and expectations that the Company’s security measures should satisfy.
Form 10-K | 16 Table of Contents event an incident does occur, to ensure that the Company has the necessary rights to act quickly to protect team members, guests, and our business and mitigate potential damage. We are continuously improving our processes and contract positions to reflect evolving risks and market practices.
We are continuously improving our processes and contract positions to reflect evolving risks and market Portillo's Inc. Form 10-K | 16 Table of Contents practices. We appreciate the need to monitor and test our systems to make sure that they are working the way that they should.
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ITEM 1C. CYBERSECURITY Risk Management Philosophy and Strategy As part of our overall risk management strategy, we have increased our attention to cybersecurity.
Added
From a framework standpoint, we primarily utilize the National Institute of Standards and Technology ("NIST") framework to assess and mitigate cybersecurity risks. This framework guides our efforts to identify, analyze and contain any security threats, and advises as to potential actions to consider if a need arose to recover from a security incident.
Removed
We appreciate the need to monitor and test our systems to make sure that they are working the way that they should. We negotiate with our vendors about a variety of monitoring, testing, and reporting provisions so that we can work with them to better address vulnerabilities.
Added
Some of this testing and monitoring is conducted in-house and some is conducted by third-party vendors. We routinely conduct penetration testing across our various environments and networks, including our Restaurant Support Center, our restaurants and our cloud-based architecture and systems. We review penetration testing outcomes and take steps to address any meaningful findings, while documenting resolution steps these efforts.
Removed
We also deploy the same approach internally, and we are currently expanding our testing efforts across our servers and networks, continually monitoring access (including more formal quarterly access reviews for any systems that are subject to SOX oversight), and documenting changes via a ticketing system.
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We continue to add further training opportunities as they become available and have incorporated “tabletop” exercises for our Board, our management team, and our team members into our risk mitigation efforts to help us refine our business interruption and response plans.
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In addition to tracking logins, our monitoring system is equipped to respond automatically to certain triggers, taking a range of actions, from notifying administrators to locking out an account. Some of this testing and monitoring is conducted in-house and some is conducted by third-party vendors.
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The IT Team manages day-to-day cybersecurity risks under the oversight of our Chief Information Officer ("CIO"), who is actively engaged in strategic planning, security assessments, and mitigation efforts. Our CIO has 10+ years of experience overseeing security practices at various multi-national restaurant concepts.
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As a restaurant and public company, we are subject to Payment Card Industry Data Security Standards ("PCI-DSS") and SOX requirements and we take steps to make sure that we are compliant with those regulations.
Added
Our CIO and Chief Financial Officer discuss IT matters on a routine basis, and as noted above, periodic reviews are conducted with the executive management team and the Audit Committee. We have an incident response process that is activated in the event of a direct or third-party attack.
Removed
We also continue to monitor evolving laws and regulations related to security and privacy and look for opportunities to improve our systems based on evolving best practices in the IT industry. We know that people are often the most vulnerable element in an IT ecosystem.
Added
The plan is designed to help us detect, respond to and recover from cybersecurity incidents.
Removed
We are on the lookout for additional training opportunities and have recently begun scheduling “tabletop” exercises to test our PCI-related responses and creating new business interruption plans.
Added
Criteria are in place to determine the scope and severity of an incident, in relation to: incident reporting to the Audit Committee and/or the Board; disclosure or other external reporting; compliance with applicable legal obligations and mitigation of the impact to our brand, its reputation and any impacted parties.
Removed
The Company regularly updates its practices to incorporate new best practices and strengthen compliance with SOX, PCI-DSS and the Health Insurance Portability and Accountability Act requirements. These activities are used to develop and update the Company’s cybersecurity risk profile.
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The team then identifies the potential mitigation measures to address these risks, and may bring in consultants as appropriate based on their expertise and knowledge of the Company to develop strategies that are tailored to the Company’s needs and profile.
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These measures include business continuity plans (which are developed in connection with our risk management team and the users of a given platform), improving system redundancy to limit disruptions and eliminating single points of failure where possible.
Removed
The internal and external headcount, and the Portillo's Inc. Form 10-K | 17 Table of Contents expertise of the employees and consultants, will change from time to time as we adapt to the changing cybersecurity environment. Our ITVP has over twelve years of experience in IT at Portillo's, including managing cybersecurity risks.
Removed
He reports to our Chief Financial Officer and updates her on a weekly basis. Our Chief Financial Officer discusses IT matters, including security, during weekly executive leadership meetings and may call upon the ITVP periodically to report directly to the team. Following these meetings, the ITVP works with his team to address any feedback received.
Removed
Cybersecurity and privacy objectives are built into the ITVP’s annual objectives and those of his team and his short-term incentive compensation reflects how successful he, the team and the Company are at accomplishing those objectives. Detecting and Responding to a Cybersecurity Incident As noted previously, both we and our vendors (to the extent contractually required) monitor systems for potential incidents.
Removed
We are working with our vendors to determine the applicable warning flags and thresholds and appropriate notification processes based on the services provided and type of data processed.
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In the event of a cybersecurity incident, whether the attack is on the Company or on a third-party service provider, the IT team conducts an initial assessment to estimate the scope and potential impact of the attack. The team also identifies critical information yet to be determined.
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A cross-functional team meets about the results of the initial assessment, including the nature and scope of the attack, which Company functions are affected, the response from the service provider (if a third-party incident), both financial and non-financial measures of materiality, the expected duration of the incident, any open or unknown information, and the status of the Company’s response.
Removed
Following the initial briefing, depending on the seriousness of the incident, a cadence for updates and escalation is established and the cross-functional team continues to investigate, mitigate and resolve the incident, retaining outside counsel, forensic investigators and other consultants as needed. Priority is given to critical business functions/tasks/processes.
Removed
Progress and developments are reported to more senior leadership based on the severity of the incident, up to and including the Board.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2023, we operated 84 restaurants located in the following states: State Number of Restaurants Arizona 7 California 2 Florida 6 Illinois 48 Indiana 8 Iowa 1 Michigan 1 Minnesota 3 Texas 4 Wisconsin 4 Total 84 Portillo's Inc. Form 10-K | 18 ITEM 3.
Biggest changeAs of December 29, 2024, we operated 94 restaurants, including C&O, located in the following states: State Number of Restaurants Arizona 8 California 2 Florida 7 Illinois 49 Indiana 8 Iowa 1 Michigan 2 Minnesota 3 Texas 10 Wisconsin 4 Total 94 ITEM 3.
ITEM 2. PROPERTIES Our home office is located at 2001 Spring Road, Suite 400, Oak Brook, IL 60523. We lease our home office. Our restaurant footprint consists of 84 Portillo’s restaurants across ten states, including C&O. We operate two food production commissaries in Illinois.
ITEM 2. PROPERTIES Our home office is located at 2001 Spring Road, Suite 400, Oak Brook, IL 60523. We lease our home office. Portillo's Inc. Form 10-K | 17 Table of Contents Our restaurant footprint consists of 94 Portillo’s restaurants across ten states, including C&O. We operate two food production commissaries in Illinois.
We do not own any real property and lease all of our properties on which we operate restaurants and commissaries. We also have two non-traditional locations in operation including a food truck and a ghost kitchen in Chicago (small kitchen with no store-front presence, used to fill online orders).
We lease the majority of our properties on which we operate restaurants and commissaries. We own real property underlying one company-operated restaurant. We also have two non-traditional locations in operation including a food truck and a ghost kitchen in Chicago (small kitchen with no store-front presence, used to fill online orders).

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings 19 Item 4. Mine Safety Disclosure 19 Part II Item 5. Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities 20 Item 6. [Reserved] 22 Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operations 23 Item 7A. Quantitative And Qualitative Disclosures About Market Risk 35 Item 8.
Biggest changeItem 3. Legal Proceedings 18 Item 4. Mine Safety Disclosure 18 Part II Item 5. Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities 19 Item 6. [Reserved] 21 Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operations 22 Item 7A. Quantitative And Qualitative Disclosures About Market Risk 35 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+2 added−2 removed2 unchanged
Biggest changeForm 10-K | 20 Stock Performance Graph The following graph and table illustrate the total return from October 21, 2021 through December 31, 2023 for (i) our Class A common stock, (ii) the Standard and Poor's 500 Index, (iii) the Standard and Poor’s 500 Restaurants Index, and (iv) the Standard and Poor's 600 Restaurant Index assuming an investment of $100 on October 21, 2021 of Portillo's Inc. stock or on September 30, 2021 in the indices, including the reinvestment of dividends.
Biggest changeForm 10-K | 19 Stock Performance Graph The following graph and table illustrate the total return from October 21, 2021, the first day of trading for our Class A common stock, through December 29, 2024 for (i) our Class A common stock, (ii) the Standard and Poor's 500 Index and (iii) the Standard and Poor's 600 Restaurant Index, assuming an investment of $100 on October 21, 2021 of Portillo's Inc. stock or on September 30, 2021 in the indices, including the reinvestment of dividends. 10/21/2021 12/26/2021 12/25/2022 12/31/2023 4/1/2024 7/1/2024 10/1/2024 12/29/2024 Portillo's Inc. $100.00 $131.75 $59.07 $54.74 $48.73 $33.40 $46.29 $30.86 S&P 500 100.00 111.03 90.92 114.82 126.94 132.38 140.17 143.55 S&P 600 Restaurants 100.00 89.79 71.31 84.48 88.53 77.95 82.18 100.21 *$100 invested on 10/21/21 in Portillo's Inc. stock or 9/30/21 in indices, including reinvestment of dividends.
Indices calculated on month-end basis. Source Data: Research Data Group Inc. Portillo's Inc. Form 10-K | 21 Recent Sale of Unregistered Securities and Use of Proceeds from Registered Securities None. Issuer Purchases of Equity Securities None.
Indices calculated on month-end basis. Source Data: Research Data Group Inc. Portillo's Inc. Form 10-K | 20 Recent Sale of Unregistered Securities and Use of Proceeds from Registered Securities None. Issuer Purchases of Equity Securities None.
Securities Authorized for Issuance under Equity Incentive Plans The following table provides information about our compensation plans under which our Class A common stock is authorized for issuance, as of December 31, 2023: Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuances under equity compensation plans (3) Equity compensation plans approved by security holders 7,609,420 $ 8.60 4,255,789 (1) Includes shares issuable pursuant to stock options, restricted stock units, restricted stock awards, stock appreciation rights and other stock-based awards under the Company's 2021 Plan.
Securities Authorized for Issuance under Equity Incentive Plans The following table provides information about our compensation plans under which our Class A common stock is authorized for issuance, as of December 29, 2024: Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuances under equity compensation plans (3) Equity compensation plans approved by security holders 7,063,911 $ 8.28 3,670,837 (1) Includes shares issuable pursuant to stock options, restricted stock units, restricted stock awards and other stock-based awards under the Company's 2021 Plan.
Represents shares under the 2021 Plan, including 5,261,663 shares assumed from the 2014 Plan. (2) The weighted-average exercise price set forth in this column is calculated excluding restricted stock units or other awards for which recipients are not required to pay an exercise price to receive the shares subject to the awards.
(2) The weighted-average exercise price set forth in this column is calculated excluding restricted stock units or other awards for which recipients are not required to pay an exercise price to receive the shares subject to the awards. (3) This amount represents shares of common stock available for issuance under the 2021 Plan and the ESPP. Portillo's Inc.
Holders of Record As of February 20, 2024, there were approximately 36 shareholders of record of our Class A common stock. The number of record holders does not include persons who held shares of our Class A common stock in nominee or "street name" accounts through brokers.
The number of record holders does not include persons who held shares of our Class A common stock in nominee or "street name" accounts through brokers. As of February 18, 2025, there were 7 shareholders of record of our Class B common stock. Dividend Policy No dividends have been declared or paid on our shares of common stock.
As of February 20, 2024, there were 13 shareholders of record of our Class B common stock. Dividend Policy No dividends have been declared or paid on our shares of common stock. We do not anticipate paying any cash dividends on any of our shares of common stock in the foreseeable future.
We do not anticipate paying any cash dividends on any of our shares of common stock in the foreseeable future.
Removed
(3) This amount represents shares of common stock available for issuance under the 2021 Plan, which include stock options, restricted stock units, restricted stock awards, stock appreciation rights and other stock-based awards. Portillo's Inc.
Added
Our Class B common stock together with a unit of Portillo's OpCo, are exchangeable for one share of Class A common stock, subject to and in accordance with the limited liability company agreement of Portillo's OpCo. Holders of Record As of February 18, 2025, there were approximately 38 shareholders of record of our Class A common stock.
Removed
Beginning in 2024, we will use the S&P 500 and S&P 600 Restaurant indices to benchmark against broad market and small-cap restaurant company performance as these indices better reflect the external market and our business. 10/21/2021 12/26/2021 4/1/2022 7/1/2022 10/1/2022 12/25/2022 4/1/2023 7/1/2023 10/1/2023 12/31/2023 Portillo's Inc. $100.00 $131.75 $82.10 $57.53 $67.66 $59.07 $73.44 $77.42 $52.89 $54.74 S&P 500 100.00 111.03 105.92 88.87 84.53 90.92 97.74 106.28 102.8 114.82 S&P 500 Restaurants 100.00 108.31 93.75 87.32 87.58 99.35 106.88 113.08 101.76 114.02 S&P 600 Restaurants 100.00 89.79 88.62 59.31 65.38 71.31 82.51 88.27 70.67 84.48 *$100 invested on 10/21/21 in Portillo's Inc. stock or 9/30/21 in indices, including reinvestment of dividends.
Added
Represents 2,782,248 shares under the 2021 Plan, including 4,118,056 shares assumed from the 2014 Plan, and 163,607 shares under the Employee Stock Purchase Plan (the "ESPP").

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTax Receivable Agreement In connection with the IPO, we entered into a Tax Receivable Agreement ("TRA") with certain of our pre-IPO LLC Members, pursuant to which we will generally be required to pay 85% of the amount of cash savings, if any, in U.S. federal, state, and local income tax that we actually realize or are deemed to realize, as a result of (i) our allocable share of existing tax basis in depreciable or amortizable assets relating to LLC Units acquired in the IPO, (ii) certain favorable tax attributes acquired by the Company from the Blocker Companies (including net operating Portillo's Inc.
Biggest changeTax Receivable Agreement In connection with the IPO, we entered into a Tax Receivable Agreement ("TRA") with certain of our pre-IPO LLC Members, pursuant to which we will generally be required to pay 85% of the amount of cash savings, if any, in U.S. federal, state, and local income tax that we actually realize or are deemed to realize, as a result of (i) our allocable share of existing tax basis in depreciable or amortizable assets relating to LLC Units acquired in the IPO, (ii) certain favorable tax attributes acquired by the Company from the Blocker Companies (including net operating losses and the Blocker Companies' allocable share of existing tax basis), (iii) increases in our allocable share of then existing tax basis in depreciable or amortizable assets, and adjustments to the tax basis of the tangible and intangible assets, of Portillo’s OpCo and its subsidiaries, as a result of (x) sales or exchanges of interests in Portillo’s OpCo (including the repayment of the redeemable preferred units) in connection with the IPO and (y) future redemptions or exchanges of LLC Units by pre-IPO LLC Members for Class A common stock and (iv) certain other tax benefits related to entering into the TRA, including payments made under the TRA.
If we do not generate sufficient taxable income in the aggregate over the term of the TRA to utilize the tax benefits, then we would not be required to make the related TRA payments.
If we do not generate sufficient taxable income in the aggregate over the term of the TRA to utilize the tax benefits, then we would not be required to make the related TRA payments.
Income Tax Expense (Benefit) Portillo's OpCo is treated as a partnership for U.S. federal, state and local income tax purposes and is generally not subject to income taxes. Rather, any taxable income or loss generated by Portillo's OpCo is allocated to its members in relation to their respective ownership percentage of Portillo's OpCo.
Income Tax Expense Portillo's OpCo is treated as a partnership for U.S. federal, state and local income tax purposes and is generally not subject to income taxes. Rather, any taxable income or loss generated by Portillo's OpCo is allocated to its members in relation to their respective ownership percentage of Portillo's OpCo.
A change in same-restaurant sales growth is the result of a change in restaurant transactions, average guest check, or a combination of the two. We gather daily sales data and regularly analyze the guest transaction counts and the mix of menu items sold to strategically evaluate menu pricing and demand.
A change in same-restaurant sales is the result of a change in restaurant transactions, average guest check, or a combination of the two. We gather daily sales data and regularly analyze the guest transaction counts and the mix of menu items sold to strategically evaluate menu pricing and demand.
The amounts recorded for both the deferred tax assets and the liability for our obligations under the TRA were estimated at the time of the IPO and secondary offerings as a reduction to shareholders’ equity, and the effects of changes in any of our estimates after this date will be included in net income (loss).
The amounts recorded for both the deferred tax assets and the liability for our obligations under the TRA were estimated at the time of the IPO and secondary offerings as a reduction to stockholders’ equity, and the effects of changes in any of our estimates after this date will be included in net income (loss).
Other Income, Net Other income, net includes among other items, income resulting from discounts received for timely filing of sales tax returns, management fee income associated with our investment in C&O, trading gains or losses on our deferred compensation plan and gains or losses on asset disposals.
Other Income, Net Other income, net includes, among other items, income resulting from discounts received for timely filing of sales tax returns, management fee income associated with our investment in C&O, trading gains or losses on our deferred compensation plan and gains, losses on asset disposals, and asset impairment charges.
Fiscal 2023 consisted of 53 weeks and fiscal 2022 consisted of 52 weeks. The 53rd week in fiscal 2023 included Christmas day, resulting in six operating days. (a) Includes C&O, as described in Note 2. Summary Of Significant Accounting Policies in our consolidated financial statements. Total restaurants indicated are as of a point in time.
Fiscal 2024 consisted of 52 weeks and fiscal 2023 consisted of 53 weeks. The 53rd week in fiscal 2023 included Christmas day, resulting in six additional operating days. (a) Includes C&O, as described in Note 2. Summary Of Significant Accounting Policies in our consolidated financial statements. Total restaurants indicated are as of a point in time.
Liabilities Under Tax Receivable Agreement As described in "Liquidity Upon IPO", we are a party to the TRA under which we are contractually committed to pay certain of our pre-IPO LLC Members 85% of the amount of any tax savings that we actually realize, or in some cases are deemed to realize, as a result of certain transactions.
Liabilities Under Tax Receivable Agreement We are a party to the TRA under which we are contractually committed to pay certain of our pre-IPO LLC Members 85% of the amount of any tax savings that we actually realize, or in some cases are deemed to realize, as a result of certain transactions.
We believe that Adjusted EBITDA and Adjusted EBITDA Margin are important measures of operating performance because they eliminate the impact of expenses that do not relate to our core operating performance.
We believe that Adjusted EBITDA and Adjusted EBITDA Margin are important measures of operating performance because they eliminate the impact of expenses that do not relate to our core operating performance. Portillo's Inc.
Fiscal 2023 consisted of 53 weeks and fiscal 2022 consisted of 52 weeks. The 53rd week in fiscal 2023 included Christmas day, resulting in six operating days. Except as noted below, the Company’s consolidated results of operations includes the 53rd week in 2023. Revenues, Net Revenues primarily represent the aggregate sales of food and beverages, net of discounts.
Fiscal 2024 consisted of 52 weeks and fiscal 2023 consisted of 53 weeks. The 53rd week in fiscal 2023 included Christmas day, resulting in six additional operating days. Except as noted below, the Company’s consolidated results of operations includes the 53rd week in fiscal 2023. Revenues, Net Revenues primarily represent the aggregate sales of food and beverages, net of discounts.
Fiscal 2023 consisted of 53 weeks and fiscal 2022 consisted of 52 weeks. The 53rd week in fiscal 2023 included Christmas day, resulting in six operating days. (1) Represents the difference between cash rent payments and the recognition of straight-line rent expense recognized over the lease term.
Fiscal 2024 consisted of 52 weeks and fiscal 2023 consisted of 53 weeks. The 53rd week in fiscal 2023 included Christmas day, resulting in six additional operating days. (1) Represents the difference between cash rent payments and the recognition of straight-line rent expense recognized over the lease term.
The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. For the tax year ended December 31, 2023, we did not record any unrecognized tax benefits. Portillo's Inc. Form 10-K | 34 Table of Contents
The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. For the tax year ended December 29, 2024, we did not record any unrecognized tax benefits. Portillo's Inc. Form 10-K | 34 Table of Contents
Sales taxes collected from customers are excluded from revenues. Revenues in any period are directly influenced by the number of operating weeks in the period, the number of open restaurants, restaurant traffic, our menu prices, third-party delivery platform prices and product mix.
Sales taxes collected from customers are excluded from revenues. Revenues in any period are directly influenced by, among other factors, the number of operating weeks in the period, the number of open restaurants, restaurant traffic, our menu prices, third-party delivery platform prices and product mix.
Change in Same-Restaurant Sales The change in same-restaurant sales is the percentage change in year-over-year revenue (excluding gift card breakage) for the comparable restaurant base, which is defined as the number of restaurants open for at least 24 full fiscal periods (the “Comparable Restaurant Base”).
Key Performance Indicators Change in Same-Restaurant Sales The change in same-restaurant sales is the percentage change in year-over-year revenue (excluding gift card breakage) for the comparable restaurant base, which is defined as the number of restaurants open for at least 24 full fiscal periods (the “Comparable Restaurant Base”).
We may enter into purchase commitments relating to supply chain, construction, marketing and other service-related arrangements that occur in the normal course of business. Such commitments are typically short-term in nature and are not material as of December 31, 2023.
We may enter into purchase commitments relating to supply chain, construction, marketing and other service-related arrangements that occur in the normal course of business. Such commitments are typically short-term in nature and are not material as of December 29, 2024.
"Financial Statements & Supplementary Data." Key Performance Indicators and Non-GAAP Financial Measures In addition to the GAAP measures presented in our financial statements, we use the following key performance indicators and non-GAAP financial measures to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions.
Key Performance Indicators and Non-GAAP Financial Measures Overview In addition to the GAAP measures presented in our financial statements, we use the following key performance indicators and non-GAAP financial measures to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions.
The payments that we are required to make will generally reduce the amount of overall cash flow that might have otherwise been available to us, but we expect the cash tax savings we will realize to fund the required payments.
The payments that we are required to make will generally reduce the amount of overall cash flow that might have otherwise been available to us, but we expect the cash tax savings we will realize to fund the required payments. Assuming no Portillo's Inc.
Fiscal 2023 consisted of 53 weeks and fiscal 2022 consisted of 52 weeks. The 53rd week in fiscal 2023 included Christmas day, resulting in six operating days.
Fiscal 2024 consisted of 52 weeks and fiscal 2023 consisted of 53 weeks. The 53rd week in fiscal 2023 included Christmas day, resulting in six additional operating days.
Debt, the payment of deferred financing costs of $3.6 million and payments made under the TRA of $0.8 million. 2023 Revolver Facility and Liens On February 2, 2023, Holdings, the Borrower, the other Guarantors party thereto from time to time, each lender party thereto from time to time and Fifth Third Bank, National Association, as Administrative Agent, L/C Issuer and Swing Line Lender entered into the 2023 Credit Agreement which provides for the 2023 Term Loan in an initial aggregate principal amount of $300.0 million and the 2023 Revolver Facility in an initial aggregate principal amount of $100.0 million.
The increase was partially offset by an increase in payments made under the TRA of $3.6 million. 2023 Revolver Facility and Liens On February 2, 2023, Holdings, the Borrower, the other Guarantors party thereto from time to time, each lender party thereto from time to time and Fifth Third Bank, National Association, as Administrative Agent, L/C Issuer and Swing Line Lender entered into the 2023 Credit Agreement which provides for the 2023 Term Loan in an initial aggregate principal amount of $300.0 million and the 2023 Revolver Facility in an initial aggregate principal amount of $100.0 million.
Income Taxes We are subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of Portillo’s OpCo and will be taxed at the prevailing corporate tax rates.
Form 10-K | 33 Table of Contents Income Taxes We are subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of Portillo’s OpCo and will be taxed at the prevailing corporate tax rates.
As of December 31, 2023, we had $184.7 million of deferred tax assets, net of the recorded valuation allowance. Under the provisions of ASC 740— Income Taxes , as it relates to accounting for uncertainties in tax positions, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized.
As of December 29, 2024, we had $197.4 million of deferred tax assets, net of the recorded valuation allowance. Under the provisions of ASC 740— Income Taxes , as it relates to accounting for uncertainties in tax positions, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized.
We expect a payment of $4.4 million relating to tax year 2022 to be made within the next 12 months.
We expect a payment of $7.7 million relating to tax year 2023 to be made within the next 12 months.
Therefore, we would only recognize a liability for TRA payments if we determine it is probable that we will generate sufficient future taxable income over the term of the TRA to utilize the related tax Portillo's Inc. Form 10-K | 33 Table of Contents benefits.
Therefore, we would only recognize a liability for TRA payments if we determine it is probable that we will generate sufficient future taxable income over the term of the TRA to utilize the related tax benefits.
AUV for fiscal 2023 and fiscal 2022 consist of 53 weeks and 52 weeks, respectively. (b) Excludes C&O. (c) For fiscal 2023, same-restaurant sales compares the 53 weeks from December 26, 2022 through December 31, 2023 to the 53 weeks from December 27, 2021 through January 1, 2023.
AUV for fiscal 2024 and fiscal 2023 consist of 52 weeks and 53 weeks, respectively. (b) Excludes C&O. (c) For fiscal 2024 , same-restaurant sales compares the 52 weeks from January 1, 2024 through December 29, 2024 to the 52 weeks from January 2, 2023 through December 31, 2023.
Loss on Debt Extinguishment Loss on debt extinguishment for the year ended December 31, 2023 was $3.5 million due to the write-off of debt discount and deferred issuance costs associated with the payoff of the 2014 Credit Agreement as described in Note 9. Debt. There was no such loss for the year ended December 25, 2022.
Loss on Debt Extinguishment There was no loss on debt extinguishment for fiscal 2024. Loss on debt extinguishment for fiscal 2023 was $3.5 million due to the write-off of debt discount and deferred issuance costs associated with the payoff of the 2014 Credit Agreement as described in Note 9. Debt.
As of December 31, 2023, we recognized $299.8 million of liabilities relating to our obligations under the TRA, after concluding that it was probable that we would have sufficient future taxable income to utilize the related tax benefits.
As of December 29, 2024, we recognized $324.6 million of liabilities relating to our obligations under the TRA, after concluding that it was probable that we would have sufficient future taxable income to utilize the related tax benefits.
Restaurant-Level Adjusted EBITDA Margin represents Restaurant-Level Adjusted EBITDA as a percentage of revenues, net. We believe that Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin are important measures to evaluate the performance and profitability of our restaurants, individually and in the aggregate.
Restaurant-Level Adjusted EBITDA excludes corporate level expenses and depreciation and amortization on restaurant property and equipment. Restaurant-Level Adjusted EBITDA Margin represents Restaurant-Level Adjusted EBITDA as a percentage of revenues, net. We believe that Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin are important measures to evaluate the performance and profitability of our restaurants, individually and in the aggregate.
For a comparison of results of operations and financial condition for fiscal years 2022 and 2021, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the fiscal year ended December 25, 2022, filed March 2, 2023.
For a comparison of results of operations and financial condition for fiscal years 2023 and 2022, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the fiscal year ended December 31, 2023, filed February 27, 2024.
In order to compare like-for-like periods for fiscal 2024, same-restaurant sales will compare the 52 weeks from January 1, 2024 through December 29, 2024 to the 52 weeks from January 2, 2023 through December 31, 2023.
Fiscal 2024 consists of 52 weeks and fiscal 2023 consisted of 53 weeks. In order to compare like-for-like periods for fiscal 2024, same-restaurant sales compares the 52 weeks from January 1, 2024 through December 29, 2024 to the 52 weeks from January 2, 2023 through December 31, 2023.
The increase in net income for the year ended December 31, 2023 was primarily due to higher revenue partially offset by the factors driving the aforementioned expenses as described in the consolidated results of operations for the year ended December 31, 2023 compared to the year ended December 25, 2022.
The increase in net income for the fiscal 2024 was primarily due to higher revenue partially offset by the factors driving the aforementioned expenses as described in the consolidated results of operations for fiscal 2024 compared to fiscal 2023.
Fiscal Years Ended December 31, 2023 December 25, 2022 Total Restaurants (a) 84 72 AUV (in millions) (a) $ 9.1 $ 8.5 Change in same-restaurant sales (b)(c) 5.7 % 5.4 % Adjusted EBITDA (in thousands) (b) $ 102,282 $ 84,955 Adjusted EBITDA Margin (b) 15.0 % 14.5 % Restaurant-Level Adjusted EBITDA (in thousands) (b) $ 165,171 $ 132,506 Restaurant-Level Adjusted EBITDA Margin (b) 24.3 % 22.6 % Note : We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31.
Fiscal Years Ended December 29, 2024 December 31, 2023 Total Restaurants (a) 94 84 AUV (in millions) (a) $ 8.7 $ 9.1 Change in same-restaurant sales (b)(c) (0.6) % 5.7 % Adjusted EBITDA (in thousands) (b) $ 104,760 $ 102,282 Adjusted EBITDA Margin (b) 14.7 % 15.0 % Restaurant-Level Adjusted EBITDA (in thousands) (b) $ 168,114 $ 165,171 Restaurant-Level Adjusted EBITDA Margin (b) 23.7 % 24.3 % Note : We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31.
Under this scenario, we would be required to pay the TRA Parties approximately 85% of such amount, or $299.8 million, primarily over the next 15 years, substantially declining in year 16 through year 47. During the year ended December 31, 2023, we made a TRA payment of $0.8 million relating to tax year 2021.
Under this scenario, we would be required to pay the TRA Parties approximately 85% of such amount, or $324.6 million, primarily over the next 15 years, declining in year 16 through year 47. During the year ended December 29, 2024, we made a TRA payment of $4.4 million relating to tax year 2022.
This increase was primarily driven by the change in non-cash items of $8.0 million and higher net income of $7.7 million, partially offset by the change in operating assets and liabilities of $1.8 million.
This increase was primarily driven by the change in operating assets and liabilities of $23.6 million and higher net income of $10.3 million, partially offset by the change in non-cash items of $6.6 million.
As of December 31, 2023, we maintained cash and cash equivalents and restricted cash balance of $10.4 million and had $80.7 million of availability under our 2023 Revolver Facility, after giving effect to $4.3 million in outstanding letters of credit.
As of December 29, 2024, we maintained cash and cash equivalents and restricted cash balance of $22.9 million and had $69.7 million of availability under our 2023 Revolver Facility, after giving effect to $5.3 million in outstanding letters of credit.
The increase in net income attributable to non-controlling interests for the year ended December 31, 2023 was primarily due to an increase in net income, compared to the year ended December 25, 2022, partially offset by a decrease in the non-controlling interest holders' weighted average ownership, from 45.8% for the year ended December 25, 2022 to 25.9% for the year ended December 31, 2023.
The decrease in net income attributable to non-controlling interests for fiscal 2024 was primarily due to a decrease in the non-controlling interest holders' weighted average ownership from 25.9% for fiscal 2023 to 17.0% for fiscal 2024, partially offset by an increase in net income for fiscal 2024 compared to fiscal 2023.
Summary of Cash Flows The following table presents a summary of our cash flows from operating, investing and financing activities (in thousands): Fiscal Years Ended December 31, 2023 December 25, 2022 Net cash provided by operating activities $ 70,781 $ 56,889 Net cash used in investing activities (87,837) (47,017) Net cash used in financing activities (16,933) (4,708) Net (decrease) increase in cash and cash equivalents and restricted cash (33,989) 5,164 Cash and cash equivalents and restricted cash at beginning of period 44,427 39,263 Cash and cash equivalents and restricted cash at end of period $ 10,438 $ 44,427 Note : We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31.
Summary of Cash Flows The following table presents a summary of our cash flows from operating, investing and financing activities (in thousands): Fiscal Years Ended December 29, 2024 December 31, 2023 Net cash provided by operating activities $ 98,040 $ 70,781 Net cash used in investing activities (88,114) (87,837) Net cash provided by (used in) financing activities 2,512 (16,933) Net increase (decrease) in cash and cash equivalents and restricted cash 12,438 (33,989) Cash and cash equivalents and restricted cash at beginning of period 10,438 44,427 Cash and cash equivalents and restricted cash at end of period $ 22,876 $ 10,438 Note : We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31.
Assuming no material changes in relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, we estimate that the tax savings associated with all tax attributes described above would aggregate to approximately $352.7 million as of December 31, 2023.
Form 10-K | 31 Table of Contents material changes in relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, we estimate that the tax savings associated with all tax attributes described above would aggregate to approximately $381.9 million as of December 29, 2024.
Form 10-K | 26 Table of Contents General and Administrative Expenses General and administrative expenses primarily consist of costs associated with our corporate and administrative functions that support restaurant development and operations, including marketing and advertising costs incurred as well as legal and professional fees. General and administrative expenses also include equity-based compensation expense.
As a percentage of revenues, net, operating expenses increased 0.4%. General and Administrative Expenses General and administrative expenses primarily consist of costs associated with our corporate and administrative functions that support restaurant development and operations, including marketing and advertising costs incurred as well as legal and professional fees. General and administrative expenses also include equity-based compensation expense.
As of December 31, 2023 and December 25, 2022, there were 68 an d 62 restaurants in our Comparable Restaurant Base, respectively. The Comparable Restaurant Base excludes C&O, as described in Note 2. Summary Of Significant Accounting Policies in our consolidated financial statements.
As of December 29, 2024 and December 31, 2023, there were 71 an d 68 restaurants in our Comparable Restaurant Base, respectively. The Comparable Restaurant Base excludes C&O, as described in Note 2. Summary Of Significant Accounting Policies of our consolidated financial Portillo's Inc. Form 10-K | 28 Table of Contents statements.
To the extent our estimate differs from actual results, we may be required to reclassify portions of our liabilities under the TRA between current and non-current. We expect a payment of $4.4 million to be made within the next 12 months.
To the extent our estimate differs from actual results, we may be required to reclassify portions of our liabilities under the TRA between current and non-current. We expect a payment of $7.7 million to be made within the next 12 months. See Note 19. Subsequent Events for information about a recent amendment to the TRA. Portillo's Inc.
This increase was primarily driven by the opening of twelve restaurants in the year ended December 31, 2023 and the opening of three restaurants in 2022, and incremental investments to support our team members, including annual rate increases, and higher variable-based compensation.
This increase was primarily driven by the opening of ten restaurants in fiscal 2024 and the opening of twelve restaurants in fiscal 2023, and incremental investments to support our team members, including annual rate increases, partially offset by lower variable-based compensation.
The Tax Receivable Agreement liability adjustment was $3.3 million for the year ended December 31, 2023 related to a remeasurement primarily due to activity under equity-based compensation plans. The Tax Receivable Agreement liability adjustment was $5.3 million for the year ended December 25, 2022.
The Tax Receivable Agreement liability adjustment was $9.1 million for the fiscal year ended December 29, 2024 related to a remeasurement primarily due to activity under equity-based compensation plans and effective state tax rate changes. The Tax Receivable Agreement liability adjustment was $3.3 million for the fiscal year ended December 31, 2023.
Fiscal Years Ended December 31, 2023 December 25, 2022 REVENUES, NET $ 679,905 100.0 % $ 587,104 100.0 % COST AND EXPENSES: Restaurant operating expenses: Food, beverage and packaging costs 230,869 34.0 % 204,237 34.8 % Labor 173,868 25.6 % 154,392 26.3 % Occupancy 33,358 4.9 % 30,657 5.2 % Other operating expenses 76,639 11.3 % 65,312 11.1 % Total restaurant operating expenses 514,734 75.7 % 454,598 77.4 % General and administrative expenses 78,835 11.6 % 66,892 11.4 % Pre-opening expenses 9,019 1.3 % 4,715 0.8 % Depreciation and amortization 24,313 3.6 % 20,907 3.6 % Net income attributable to equity method investment (1,401) (0.2) % (1,083) (0.2) % Other income, net (1,035) (0.2) % (204) — % OPERATING INCOME 55,440 8.2 % 41,279 7.0 % Interest expense 27,470 4.0 % 27,644 4.7 % Interest income (212) — % — — % Tax Receivable Agreement liability adjustment (3,349) (0.5) % (5,345) (0.9) % Loss on debt extinguishment 3,465 0.5 % — — % INCOME BEFORE INCOME TAXES 28,066 4.1 % 18,980 3.2 % Income tax expense (benefit) 3,248 0.5 % 1,823 0.3 % NET INCOME 24,818 3.7 % 17,157 2.9 % Net income attributable to non-controlling interests 6,394 0.9 % 6,306 1.1 % NET INCOME ATTRIBUTABLE TO PORTILLO'S INC. $ 18,424 2.7 % $ 10,851 1.8 % Note : We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31.
Fiscal Years Ended December 29, 2024 December 31, 2023 REVENUES, NET $ 710,554 100.0 % $ 679,905 100.0 % COST AND EXPENSES: Restaurant operating expenses: Food, beverage and packaging costs 241,679 34.0 % 230,869 34.0 % Labor 181,091 25.5 % 173,868 25.6 % Occupancy 36,632 5.2 % 33,358 4.9 % Other operating expenses 83,038 11.7 % 76,639 11.3 % Total restaurant operating expenses 542,440 76.3 % 514,734 75.7 % General and administrative expenses 75,089 10.6 % 78,835 11.6 % Pre-opening expenses 9,236 1.3 % 9,019 1.3 % Depreciation and amortization 27,297 3.8 % 24,313 3.6 % Net income attributable to equity method investment (1,229) (0.2) % (1,401) (0.2) % Other income, net (312) — % (1,035) (0.2) % OPERATING INCOME 58,033 8.2 % 55,440 8.2 % Interest expense 25,616 3.6 % 27,470 4.0 % Interest income (309) — % (212) — % Tax Receivable Agreement liability adjustment (9,149) (1.3) % (3,349) (0.5) % Loss on debt extinguishment — — % 3,465 0.5 % INCOME BEFORE INCOME TAXES 41,875 5.9 % 28,066 4.1 % Income tax expense 6,799 1.0 % 3,248 0.5 % NET INCOME 35,076 4.9 % 24,818 3.7 % Net income attributable to non-controlling interests 5,559 0.8 % 6,394 0.9 % NET INCOME ATTRIBUTABLE TO PORTILLO'S INC. $ 29,517 4.2 % $ 18,424 2.7 % Note : We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31.
For the purpose of calculating same-restaurant sales as of December 31, 2023, sales for 68 restaurants were included in the Comparable Restaurant Base (as defined in "Key Performance Indicators and Non-GAAP Financial Measures" below) as of the end of fiscal 2023.
For the purpose of calculating same-restaurant sales as of December 29, 2024, sales for 71 restaurants were included in the Comparable Portillo's Inc. Form 10-K | 24 Table of Contents Restaurant Base (as defined in "Key Performance Indicators and Non-GAAP Financial Measures" below) as of the end of fiscal 2024.
Factors that influence labor costs include wage inflation and payroll tax legislation, health care costs and the staffing needs of our restaurants. Labor expenses for the year ended December 31, 2023 were $173.9 million compared to $154.4 million for the year ended December 25, 2022, an increase of $19.5 million or 12.6%.
Factors that influence labor costs include wage inflation and payroll tax legislation, health care costs and the staffing needs of our restaurants. Labor expenses for fiscal 2024 were $181.1 million compared to $173.9 million for fiscal 2023, an increase of $7.2 million or 4.2%.
The weighted average ownership percentages for the applicable reporting periods are used to attribute net income (loss) to Portillo's Inc. and the non-controlling interest holders. Portillo's Inc.
The weighted average ownership percentages for the applicable reporting periods are used to attribute net income to Portillo's Inc. and the non-controlling interest holders. Net income attributable to non-controlling interests for fiscal 2024 was $5.6 million, compared to $6.4 million for fiscal 2023.
Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin Restaurant-Level Adjusted EBITDA is defined as revenue, less restaurant operating expenses, which include food, beverage and packaging costs, labor expenses, occupancy expenses and other operating expenses. Restaurant-Level Adjusted EBITDA excludes corporate level expenses and depreciation and amortization on restaurant property and equipment.
(7) Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Revenues, net. Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin Restaurant-Level Adjusted EBITDA is defined as revenue, less restaurant operating expenses, which include food, beverage and packaging costs, labor expenses, occupancy expenses and other operating expenses.
Interest expense for the year ended December 31, 2023 was $27.5 million compared to $27.6 million for the year ended December 25, 2022, a decrease of $0.2 million or 0.6%. This decrease was primarily driven by the improved lending terms associated with our 2023 Term Loan and 2023 Revolver Facility.
Interest expense for fiscal 2024 was $25.6 million compared to $27.5 million for fiscal 2023, a decrease of $1.9 million or 6.7%. This decrease was primarily driven by a lower effective interest rate due to improved lending terms associated with our 2023 Term Loan and 2023 Revolver Facility.
The following table reconciles net income to Adjusted EBITDA and Adjusted EBITDA margin (in thousands): Fiscal Years Ended December 31, 2023 December 25, 2022 Net income $ 24,818 $ 17,157 Depreciation and amortization 24,313 20,907 Interest expense 27,470 27,644 Interest income (212) — Loss on debt extinguishment 3,465 — Income tax expense 3,248 1,823 EBITDA 83,102 67,531 Deferred rent (1) 5,096 3,998 Equity-based compensation 15,542 16,137 ERP implementation costs (2) 401 — Other income (3) 590 397 Transaction-related fees & expenses (4) 900 2,237 Tax Receivable Agreement liability adjustment (5) (3,349) (5,345) Adjusted EBITDA $ 102,282 $ 84,955 Adjusted EBITDA Margin (6) 15.0 % 14.5 % Note : We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31.
Form 10-K | 29 Table of Contents The following table reconciles net income to Adjusted EBITDA and Adjusted EBITDA margin (in thousands): Fiscal Years Ended December 29, 2024 December 31, 2023 Net income $ 35,076 $ 24,818 Net income margin 4.9 % 3.7 % Depreciation and amortization 27,297 24,313 Interest expense 25,616 27,470 Interest income (309) (212) Loss on debt extinguishment — 3,465 Income tax expense 6,799 3,248 EBITDA 94,479 83,102 Deferred rent (1) 5,255 5,096 Equity-based compensation 11,151 15,542 Cloud-based software implementation costs (2) 679 401 Amortization of cloud-based software implementation costs (3) 586 — Other loss (4) 1,184 590 Transaction-related fees and expenses (5) 575 900 Tax Receivable Agreement liability adjustment (6) (9,149) (3,349) Adjusted EBITDA $ 104,760 $ 102,282 Adjusted EBITDA Margin (7) 14.7 % 15.0 % Note : We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31.
This increase was primarily due to the number of restaurant openings and builds in process during 2023 and the planned restaurant openings for 2024.
This increase was primarily due to the number of restaurant openings and builds in process during 2024 and the planned restaurant openings for 2025, partially offset by adopting a more cost effective restaurant format.
Recent Developments and Trends Fiscal 2023 Highlights Our fiscal 2023 financial highlights include: • Total revenue increased 15.8% or $92.8 million to $679.9 million; this increase is inclusive of the favorable impact of the 53rd week, which resulted in incremental revenue of approximately $13.9 million. • Same-restaurant sales* increased 5.7%. • Operating income increased $14.2 million to $55.4 million; this increase is inclusive of the favorable impact of the 53rd week, which resulted in incremental operating income of approximately $1.6 million. • Net income increased $7.7 million to $24.8 million; this increase is inclusive of the favorable impact of the 53rd week, which resulted in incremental net income of approximately $1.2 million. • Restaurant-Level Adjusted EBITDA** increased $32.7 million to $165.2 million; • Adjusted EBITDA** increased $17.3 million to $102.3 million; * For fiscal 2023, same-restaurant sales compares the 53 weeks from December 26, 2022 through December 31, 2023 to the 53 weeks from December 27, 2021 through January 1, 2023.
Recent Developments and Trends Fiscal 2024 Highlights Our fiscal 2024 financial highlights include: • Total revenue increased 4.5% or $30.6 million to $710.6 million; this increase is inclusive of the impact of the 53rd week in fiscal 2023, which resulted in incremental revenue of approximately $13.9 million in fiscal 2023. • Same-restaurant sales* decreased 0.6%. • Operating income increased $2.6 million to $58.0 million; this increase is inclusive of the impact of the 53rd week in fiscal 2023, which resulted in incremental operating income of approximately $1.6 million in fiscal 2023. • Net income increased $10.3 million to $35.1 million; this increase is inclusive of the impact of the 53rd week in fiscal 2023, which resulted in incremental net income of approximately $1.2 million in fiscal 2023. • Restaurant-Level Adjusted EBITDA** increased $2.9 million to $168.1 million. • Adjusted EBITDA** increased $2.5 million to $104.8 million. * For fiscal 2024, same-restaurant sales compares the 52 weeks from January 1, 2024 through December 29, 2024 to the 52 weeks from January 2, 2023 through December 31, 2023. ** Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP measures.
As of December 31, 2023, we estimate that our obligation for future payments under the TRA totaled $299.8 million. Amounts payable under the TRA are contingent upon, among other things, (i) generation of future taxable income over the term of the TRA and (ii) future changes in tax laws.
Amounts payable under the TRA are contingent upon, among other things, (i) generation of future taxable income over the term of the TRA and (ii) future changes in tax laws.
Food, Beverage and Packaging Costs Food, beverage and packaging costs include the direct costs associated with food and beverages, including paper products and third-party delivery commissions. The components of food, beverage and packaging costs, are variable by nature, change with sales volume, are impacted by product mix and are subject to increases or decreases in commodity costs .
The components of food, beverage and packaging costs are variable by nature, change with sales volume, are impacted by product and channel mix and are subject to increases or decreases in commodity costs, as well as geographic scale and proximity.
Average Unit Volume AUV is the total revenue (excluding gift card breakage) recognized in the Comparable Restaurant Base, including C&O, divided by the number of restaurants in the Comparable Restaurant Base, including C&O, by period. Portillo's Inc.
Average Unit Volume AUV is the total revenue (excluding gift card breakage) recognized in the Comparable Restaurant Base, including C&O, divided by the number of restaurants in the Comparable Restaurant Base, including C&O, by period. This key performance indicator allows management to assess changes in consumer spending patterns at our restaurants and the overall performance of our restaurant base.
Our ongoing capital expenditures are principally related to opening of new restaurants, existing capital investments (both for remodels and maintenance), as well as investments in our restaurant support center infrastructure.
Our ongoing capital expenditures are principally related to opening of new restaurants, existing capital investments (both for remodels and maintenance), as well as investments in our Restaurant Support Center infrastructure. Additionally, we continue to invest in technology, including the deployment of self-service kiosks and upgrades to our IT infrastructure, to improve operational efficiency and the guest experience.
The following table reconciles operating income to Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin (in thousands): Fiscal Years Ended December 31, 2023 December 25, 2022 Operating income $ 55,440 $ 41,279 Plus: General and administrative expenses 78,835 66,892 Pre-opening expenses 9,019 4,715 Depreciation and amortization 24,313 20,907 Net income attributable to equity method investment (1,401) (1,083) Other income, net (1,035) (204) Restaurant-Level Adjusted EBITDA $ 165,171 $ 132,506 Restaurant-Level Adjusted EBITDA Margin 24.3 % 22.6 % Note : We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31.
Form 10-K | 30 Table of Contents thousands): Fiscal Years Ended December 29, 2024 December 31, 2023 Operating income $ 58,033 $ 55,440 Operating income margin 8.2 % 8.2 % Plus: General and administrative expenses 75,089 78,835 Pre-opening expenses 9,236 9,019 Depreciation and amortization 27,297 24,313 Net income attributable to equity method investment (1,229) (1,401) Other income, net (312) (1,035) Restaurant-Level Adjusted EBITDA $ 168,114 $ 165,171 Restaurant-Level Adjusted EBITDA Margin (1) 23.7 % 24.3 % Note : We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31.
Income tax expense for the year ended December 31, 2023 was $3.2 million compared to $1.8 million for the year ended December 25, 2022, an increase of $1.4 million. Our effective income tax rate for year ended December 31, 2023 was 11.5%, compared to 9.6% for year ended December 25, 2022.
Income tax expense for fiscal 2024 was $6.8 million compared to $3.2 million for fiscal 2023, an increase of $3.6 million or 109.3%. Our effective income tax rate for fiscal 2024 was 16.2%, compared to 11.5% for fiscal 2023.
This decrease was primarily due to an increase in average check and lower third-party delivery commissions, partially offset by an increase in certain commodity prices. Labor Expenses Labor expenses include hourly and management wages, bonuses and equity-based compensation, payroll taxes, workers’ compensation expense, and team member benefits.
As a percentage of revenues, net, food, beverage and packaging costs remained flat during fiscal 2024 as the increase in average check and lower third-party delivery commissions were offset by an increase in certain commodity prices. Labor Expenses Labor expenses include hourly and management wages, bonuses and equity-based compensation, payroll taxes, workers’ compensation expense, and team member benefits.
During January of 2024, we increased certain menu prices by approximately 1.5%. We will continue to monitor our cost pressures, the competitive landscape as well as consumer sentiment to inform our pricing decisions in the coming quarters.
We will continue to strategically offset these expense increases through menu price increases and operational efficiencies, while monitoring the competitive landscape as well as consumer sentiment to inform our pricing decisions. During January of 2025, we increased certain menu prices by approximately 1.5%.
Other operating expenses for the year ended December 31, 2023 were $76.6 million compared to $65.3 million for the year ended December 25, 2022, an increase of $11.3 million or 17.3%, primarily due to the opening of twelve restaurants in the year ended December 31, 2023 and the opening of three restaurants in 2022 and an increase in credit card fees, utilities, repair and maintenance expenses, and insurance, partially offset by a decrease in professional fees.
Other operating expenses for fiscal 2024 were $83.0 million compared to $76.6 million for fiscal 2023, an increase of $6.4 million or 8.3%, primarily due to the opening of ten restaurants in fiscal 2024 and the opening of twelve restaurants in 2023 and an increase in repair and maintenance expenses, IT expenses, and utilities, partially offset by a decrease in operating supplies and advertising expenses.
As a percentage of revenues, net, operating expenses increased 0.1% due primarily due to the aforementioned increases in expenses, partially offset by an increase in our average check. Portillo's Inc.
As a percentage of revenues, net, labor decreased 0.1% during fiscal 2024 primarily due to an increase in our average check and lower variable-based compensation, partially offset by the lower transactions and the aforementioned wage rate increases.
General and administrative expenses are impacted by changes in our team member count and costs related to strategic and growth initiatives. General and administrative expenses for the year ended December 31, 2023 were $78.8 million compared to $66.9 million for the year ended December 25, 2022, an increase of $11.9 million or 17.9%.
General and administrative expenses are impacted by changes in our team member count and costs related to strategic and growth initiatives. General and administrative expenses for fiscal 2024 were $75.1 million compared to $78.8 million for fiscal 2023, a decrease of $3.7 million or 4.8%.
Our effective interest rate was 8.36% and 10.39% as of December 31, 2023 and December 25, 2022, respectively. Interest Income Interest income primarily consists of interest earned on our cash, cash equivalents and restricted cash. Interest income for the year ended December 31, 2023 was $0.2 million. There was no interest income for the year ended December 25, 2022.
Our effective interest rate was 7.53% and 8.36% as of December 29, 2024 and December 31, 2023, respectively. Interest Income Interest income primarily consists of interest earned on our cash, cash equivalents and restricted cash. Interest income for fiscal 2024 was $0.3 million compared to $0.2 million for fiscal 2023, an increase of $0.1 million or 45.8%.
Fiscal 2023 consisted of 53 weeks and fiscal 2022 consisted of 52 weeks. The 53rd week in fiscal 2023 included Christmas day, resulting in six operating days. Liquidity and Capital Resources Our primary sources of liquidity are cash from operations, cash and cash equivalents on hand, and availability under our 2023 Revolver Facility.
Liquidity and Capital Resources Our primary sources of liquidity are cash from operations, cash and cash equivalents on hand, and availability under our 2023 Revolver Facility.
Depreciation and Amortization Depreciation and amortization expenses consist of the depreciation of fixed assets, including leasehold improvements, fixtures and equipment and the amortization of definite-lived intangible assets, which are primarily comprised of recipes.
Depreciation and Amortization Depreciation and amortization expenses consist of the depreciation of fixed assets, including leasehold improvements, fixtures and equipment and the amortization of definite-lived intangible assets, which are comprised of recipes. Depreciation and amortization expense for fiscal 2024 was $27.3 million compared to $24.3 million for fiscal 2023, an increase of $3.0 million or 12.3%.
The increase in our effective income tax rate for the year ended December 31, 2023 compared to the year ended December 25, 2022 was primarily driven by an increase in the Company's ownership interest in Portillo's OpCo, which increases its share of taxable income (loss) of Portillo's OpCo, partially offset by the decrease in the valuation allowance and the recording of net operating loss carryforwards.
The increase in our effective income tax rate for fiscal 2024 compared to fiscal 2023 was primarily driven by an increase in the Company's ownership interest in Portillo's OpCo, which increases its Portillo's Inc.
Same-restaurant sales increased 5.7% during the year ended December 31, 2023, which was attributable to an increase in average check of 6.1%, partially offset by a 0.4% decline in Portillo's Inc. Form 10-K | 25 Table of Contents transactions. The higher average check was driven by an approximate 8.5% increase in menu prices partially offset by product mix.
This increase in revenues was partially offset by a same-restaurant sales decrease of 0.6%, or $3.4 million. The same-restaurant sales decline was attributable to a 3.2% decrease in transactions, partially offset by an increase in average check of 2.6%. The higher average check was primarily driven by an approximate 4.6% increase in menu prices partially offset by product mix.
This increase was primarily driven by the opening of twelve restaurants in the year ended December 31, 2023 and the opening of three restaurants in 2022 and a 5.5% increase in commodity prices, partially offset by lower third-party delivery commissions. As a percentage of revenues, net, food, beverage and packaging costs, decreased 0.8% during the year ended December 31, 2023.
This increase was primarily driven by the opening of ten restaurants in fiscal 2024 and the opening of twelve restaurants in fiscal 2023 and a 4.2% increase in commodity prices, partially offset by lower third-party delivery commissions.
The $1.8 million change in our operating asset and liability balances was primarily driven by operating assets and liabilities being a source of net cash of $2.1 million in year ended December 31, 2023, compared to a source of net cash of $3.9 million in the year ended December 25, 2022 driven by the change in other current assets due to increased cash outflows for insurance premiums and occupancy and change in other assets and liabilities due to the implementation of a new ERP system.
The $23.6 million change in our operating asset and liability balances was primarily driven by operating assets and liabilities being a source of net cash of $25.7 million in fiscal 2024, compared to a source of net cash of $2.1 million in the fiscal 2023 driven by the change in accounts payable, deferred lease incentives, other current assets, and inventories.
Particularly, our short-term focus continues to be in the Sunbelt, with growth across markets in Arizona, Texas, and Florida. Simultaneously, we will continue to fill-in Chicagoland and adjacent markets as opportunities come available. Consolidated Results of Operations The following table summarizes our results of operations for the fiscal years ended December 31, 2023 and December 25, 2022 (in thousands).
Simultaneously, we will continue to fill-in existing markets, including Chicagoland and adjacent markets as opportunities come available. Portillo's Inc. Form 10-K | 23 Table of Contents Consolidated Results of Operations The following table summarizes our results of operations for fiscal 2024 and fiscal 2023 (in thousands).
As a percentage of revenues, occupancy expenses decreased 0.3% during the year ended December 31, 2023 primarily due to an increase in our average check. Other Operating Expenses Other operating expenses consist of direct marketing expenses, utilities and other expenses incidental to operating our restaurants, such as credit card fees and repairs and maintenance.
Other Operating Expenses Other operating expenses consist of direct marketing expenses, utilities and other expenses incidental to operating our restaurants, such as credit card fees and repairs and maintenance.
This increase was due to the number and timing of executed and planned new restaurant openings for the year ended December 31, 2023 as compared to the year ended December 25, 2022.
Pre-opening expenses for fiscal 2024 were $9.2 million compared to $9.0 million for fiscal 2023, an increase of $0.2 million or 2.4%. This increase was due to the number, timing and location of executed and planned new restaurant openings for fiscal 2024 as compared to fiscal 2023.
In 2025, we are targeting at least 12% new restaurant growth, and our long-term outlook is approximately 12% to 15% annual new restaurant growth. Our near-term restaurant growth strategy is focused on leveraging our proven unit economic model primarily in markets outside Chicagoland with favorable macro-economic tailwinds where we Portillo's Inc. Form 10-K | 24 already have a presence.
Our near-term restaurant growth strategy is focused on leveraging our proven unit economic model primarily in markets outside Chicagoland with favorable macro-economic tailwinds where we already have a presence. Particularly, our current focus continues to be in the Sunbelt, primarily in Texas, with plans to enter the Atlanta, Georgia market.
The $8.0 million change from the year ended December 25, 2022 in non-cash charges is primarily attributable to the loss on debt extinguishment, an increase in depreciation and amortization, the TRA liability adjustment, and an increase in our deferred income tax provision, partially offset by a decrease in amortization of debt issuance costs and discount and equity-based compensation expense.
The $6.6 million change from fiscal 2023 in non-cash charges was primarily driven by lower equity-based compensation expense and the loss on debt extinguishment in the prior year, partially offset by higher depreciation and amortization and an increase in income tax expense in the current year.
Occupancy expenses for the year ended December 31, 2023 were $33.4 million compared to $30.7 million for the year ended December 25, 2022, an increase of $2.7 million or 8.8%, primarily driven by the opening of twelve new restaurants in the year ended December 31, 2023 and the opening of three restaurants in 2022.
Form 10-K | 25 Table of Contents Occupancy expenses for fiscal 2024 were $36.6 million compared to $33.4 million for fiscal 2023, an increase of $3.3 million or 9.8%, primarily driven by the opening of ten restaurants in fiscal 2024 and the opening of twelve restaurants in 2023. As a percentage of revenues, occupancy expenses increased 0.2% during fiscal 2024.
Refer to Note 9. Debt for additional information. Material Cash Requirements Our material cash requirements greater than twelve months include: Debt. Refer to Note 9. Debt to the consolidated financial statements for further information of our obligations and the timing of expected payments. Lease obligations . Refer to Note 10.
Debt to the consolidated financial statements for further information of our obligations and the timing of expected payments. Also, see Note 19. Subsequent Events for information about further amendments to the 2023 Term Loan and 2023 Revolver Facility. Lease obligations . Refer to Note 10.
Net income attributable to equity method investment for the year ended December 31, 2023 was $1.4 million compared to $1.1 million for the year ended December 25, 2022, an increase of $0.3 million or 29.4%. This increase was primarily driven by increased revenue, which is attributable to an increase in average check, partially offset by a decrease in transactions.
Portillo's Inc. Form 10-K | 26 Table of Contents Net income attributable to equity method investment for fiscal 2024 was $1.2 million compared to $1.4 million for fiscal 2023, a decrease of $0.2 million or 12.3%. This decrease was primarily driven by an increase in restaurant-level operating expenses, partially offset by an increase in sales.
Operating Activities Net cash provided by operating activities for the year ended December 31, 2023 was $70.8 million compared to net cash provided by operating activities of $56.9 million for the year ended December 25, 2022, an increase of $13.9 million or 24.4%.
Operating Activities Net cash provided by operating activities for fiscal 2024 was $98.0 million compared to net cash provided by operating activities of $70.8 million for fiscal 2023, an increase of $27.3 million or 38.5%.
The weighted average ownership percentage decreased due to the Secondary Offering as discussed in Item 8.
The weighted average ownership percentage decreased due to the Secondary Offering and Redemption of LLC units as discussed in Note 1. Description Of Business of our consolidated financial statements.
In order to compare like-for-like periods for fiscal 2024, same-restaurant sales will compare the 52 weeks from January 1, 2024 through December 29, 2024 to the 52 weeks from January 2, 2023 through December 31, 2023. ** Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP measures.
(2) Represents the impact from shifting comparable weeks for all periods in fiscal 2023 to compare like-for-like periods. For fiscal 2023, same-restaurant sales includes sales from the 52 weeks from January 2, 2023 through December 31, 2023 rather than the 53 weeks from December 26, 2022 through December 31, 2023. (3) Total restaurants indicated are as of December 29, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn addition, a portion of the leases for our restaurants provide for contingent rent obligations based on a percentage of sales. As a result, an increase in occupancy and related expenses will offset a proportionate share of any menu price increases at our restaurants.
Biggest changeAs a result, an increase in occupancy and related expenses will offset a proportionate share of any menu price increases at our restaurants. Labor Costs Increases in minimum wage, health care and other benefit costs may have a material adverse effect on our labor costs.
Whether that pressure originates from commodity costs, labor expenses, energy or transportation, this can have a material influence on restaurant margins. Several strategies are employed to combat the ongoing inflationary pressures, including improvement to restaurant operating efficiencies, strategic menu price increases and supplier partner engagement via pricing programs.
Whether that pressure originates from commodity costs, labor expenses, energy or transportation, this can have a material influence on restaurant margins. Several strategies are employed to combat the ongoing inflationary pressures, including improvement to restaurant operating efficiencies, strategic menu price increases and supplier partner engagement via pricing programs or continuous improvement initiatives.
Based on the terms of the 2023 Credit Agreement, as of December 31, 2023, a change of one hundred basis points in the applicable interest rate would cause an increase or decrease in interest expense of approximately $3.9 million on an annual basis. Effects of Inflation Inflation has the potential to impact restaurant operating expenses at all levels.
Based on the terms of the 2023 Credit Agreement, as of December 29, 2024, a change of one hundred basis points in the applicable interest rate would cause an increase or decrease in interest expense of approximately $3.1 million on an annual basis. Effects of Inflation Inflation has the potential to impact restaurant operating expenses at all levels.
As of December 31, 2023 and December 25, 2022, we had a total of $309.4 million and $322.4 million, respectively, in outstanding borrowings under o ur 2023 Term Loan and 2023 Revolver Facility, excluding unamortized debt discount and deferred issuance costs. See Note 9. Debt for individual balances for our 2023 Term Loan and 2023 Revolver Facility.
As of December 29, 2024 and December 31, 2023, we had a total of $313.8 million and $309.4 million, respectively, in outstanding borrowings under o ur 2023 Term Loan and 2023 Revolver Facility, excluding unamortized debt discount and deferred issuance costs. See Note 9.
Many states and localities are also passing laws regulating employment practices and working conditions which could have a material adverse effect on our labor costs in those areas. Portillo's Inc. Form 10-K | 35 Table of Contents
Increases in minimum wage and market pressure may also result in increases in the wage rates paid for non-minimum wage positions. Many states and localities are also passing laws regulating employment practices and working conditions which could have a material adverse effect on our labor costs in those areas. Portillo's Inc. Form 10-K | 35 Table of Contents
A well-balanced portfolio of varying risk management approaches related to supplier partner management assists in ensuring varying degrees of cost mitigation. These platforms vary from long-term, fixed price agreements to commodity market-based indexed pricing programs.
A well-balanced portfolio of varying risk management approaches related to supplier partner management assists in ensuring varying degrees of cost mitigation. These platforms vary from long-term, fixed price agreements to commodity market-based indexed pricing programs. In addition, a portion of the leases for our restaurants provide for contingent rent obligations based on a percentage of sales.
The market for labor in the United States is competitive and has resulted in pressure on wages and may continue to do so in the future. Increases in minimum wage and market pressure may also result in increases in the wage rates paid for non-minimum wage positions.
We operate in many states and localities where the minimum wage is significantly higher than the federal minimum wage. The market for labor in the United States is competitive and has resulted in pressure on wages and may continue to do so in the future.
Interest Rate Risk Our credit facilities incur interest at a floating rate. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.
St ructured programs within our organization exist to mitigate adverse impacts and proactively direct risk management strategies across our portfolio of key products, services and energy platforms. Interest Rate Risk Our credit facilities incur interest at a floating rate. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.
In order to minimize the impact of fluctuations in price and availability, we monitor the primary commodities we purchase and may enter into purchasing contracts and pricing arrangements when considered to be advantageous. St ructured programs within our organization exist to mitigate adverse impacts and proactively direct risk management strategies across our portfolio of key products, services and energy platforms.
In an effort to minimize the impact of fluctuations in price and availability, we monitor the primary commodities we purchase and may enter into purchasing contracts and pricing arrangements when considered to be advantageous.
Removed
While we have historically been able to partially offset inflation and other changes in operating expenses through productivity improvements, strategic menu prices increases and more efficient sourcing practices, there can be no assurance that we will be able to continue to do so in the future.
Added
Debt for individual balances for our 2023 Term Loan and 2023 Revolver Facility as of December 29, 2024 .
Removed
Labor Costs Increases in minimum wage, health care and other benefit costs may have a material adverse effect on our labor costs. We operate in many states and localities where the minimum wage is significantly higher than the federal minimum wage.

Other PTLO 10-K year-over-year comparisons