9/25/2025
With CEO's Abrupt Exit, Portillo's Braces for an Activist-driven Overhaul
Crain's Chicago Business (09/25/25) Marotti, Ally
When Portillo’s (PTLO) went public in 2021, it had big growth plans. The Illinois-based Italian beef and hog dog chain believed that in 25 years, it could grow its 67 restaurants to more than 600. Two years later, tasting some success in new markets such as Texas, it boosted those plans. The target became 920 restaurants in 20 years. Those plans, however — and Portillo’s overall performance — have not panned out as expected. Portillo’s longtime CEO Michael Osanloo resigned earlier this week, effective immediately, shortly after the company reset its growth plans. “Our recent performance has not measured up to expectations,” Michael A. Miles Jr., the former chairman of the board who is taking over as acting CEO, said in a statement. “After careful consideration, the board believes, and Michael agrees, that now is the right time for a leadership transition." Founder Dick Portillo sold the company to private equity firm Berkshire Partners for $1 billion in 2014. Osanloo came on board as president and CEO in 2018. He took the company public in October 2021. The day Portillo's debuted on the Nasdaq exchange, shares landed at $29.10. Portillo’s stock passed $50 in the following weeks. But headwinds mounted, as post-pandemic inflation ripped through the food industry. Consumers pinched their pennies and cut back on dining out. Experts say competitors in the fast-food industry were better able to win consumers with value meals. The costs of opening Portillo’s restaurants also increased with inflation. Portillo’s stock was trading at about $6.50 today midday. “(Osanloo) made progress on the chain's operating problems, but the expansion was failing,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “It's not just that the stores are big. It's also that not everybody loves Chicago's favorite foods as much as Chicagoans love their food.” The expansion strategy Portillo’s laid out when it went public has become familiar: open restaurants in new markets full of Chicago snowbirds — largely, Sun Belt states such as Florida, Texas, and Arizona. Build out those markets to gain supply chain efficiencies. Pepper in new formats, like pickup-only spots. Then, let the people fall in love with Portillo’s. It went well at first. Portillo’s had an uncanny ability to get people through the line quickly. Combine that with the large footprints many of its Chicago stores had, and going into its IPO, its sales volumes were dwarfing competitors. Its locations averaged $7.5 million in annual sales in 2020, surpassing even McDonald’s $2.9 million average. Portillo’s grew that number to $9.1 million in 2023. That was the year it opened its first Texas location, outside of Dallas in The Colony. It found instant demand. So much that Portillo’s dialed back marketing efforts in later openings in the state — but that plan backfired. During a second-quarter earnings call on Aug. 5, the company reported that Texas had become a potential drag on its growth strategy. Second quarter revenue was almost flat, increasing 3.6% year-over-year to 188.5 million. “I think we’re lulled into a false sense of security with the success of The Colony,” Osanloo said during the call. Earlier this month, Portillo’s announced a strategic reset of its growth plans. It halted a breakfast pilot in Chicago, said it planned to “reinforce value” in its menu offerings and reduced its targeted restaurant openings to eight from 12 in fiscal year 2025. The next day, activist investor Engaged Capital bought more Portillo’s shares, establishing itself as the fifth-largest shareholder with 7% of the company. The hedge fund has been pushing for changes since it first took a stake in Portillo’s just over a year ago. It wants the company to continue expanding but slash the costs of doing so by shrinking new restaurant sizes and restructuring the way it deals with landlords. “After the bad quarterly news with the downward revisions to the company's projections, you sensed (Osanloo’s) remaining days were few,” Gordon said. “Shareholders, activist and passive, have limited patience.” It's likely whoever fills Osanloo’s shoes will likely be friendly to Engaged Capital’s requests, said Aaron Allen, founder and CEO of global chain restaurant advisory, Aaron Allen Associates. The focus going forward likely will be cost-cutting. “That’s what an activist investor does,” he said. “Whether they’re right or wrong, they’re paying attention and forcing others to pay attention to improve the performance — in the short term, at least.” Portillo’s has 95 restaurants in 10 states. The openings slated for 2026 are set to be among its most diverse formats yet. It will open its first restaurant in an airport, for example. Portillo’s will need to focus on finding the right footprint for its new locations, said Jim Salera, equity research analyst at investment bank Stephens. It also needs to strike the right balance between quality and value. “Getting the real estate strategy right, getting the pricing strategy right, those are going to be the two big areas of focus,” he said.
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