Portillo’s Reveals Real Estate Strategy for Expansion

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Portillo’s Reveals Real Estate Strategy for Expansion (Read Here)

REAL ESTATE STRATEGY: Portillo's CFO, Michelle Hook, explained the three categories where the chain seeks real estate: areas with high foot traffic, good visibility, and easy access.

• Draw to the Area: Portillo's aims to build restaurants in locations where people gather and congregate.

• Visibility: The chain avoids being buried in corners or inconspicuous areas.

• Convenient Access: Due to the high volume of customers, Portillo's requires good ingress and egress.

EXPANSION: Portillo's has expanded beyond the Midwest to Arizona, Florida, and Texas, with a focus on the Sun Belt region. The chain plans to enter the Atlanta, Denver, and Las Vegas markets next.

• Scale in New Markets: Portillo's aims to rapidly achieve a minimum scale of at least six restaurants in new markets within 24 to 36 months.

• Infill Strategy: The chain has opened a pick-up only unit with no seating as an infill strategy.

• Reducing Restaurant Size: Portillo's has been working on reducing the size of its restaurants to improve efficiency.

ONGOING GROWTH: Portillo's plans to open two more restaurants this year, bringing the total to 84. The company aims for each new restaurant to achieve at least $7 million in average unit volume.

DIGITAL ORDERING: Approximately 22% of Portillo's sales come from digital orders, with 40% through the drive-thru, 40% dine-in, and 20% from other channels.

DELIVERY RESILIENCY: Despite the current environment, the delivery channel has remained steady, accounting for around 13% to 14% of sales.

Portillo's: Founded in 1963, the chain operates more than 80 restaurants across 10 states.

🧠 EDITOR’S THOUGHTS

Portillo’s net leased cheat sheet:

• Corporate Guaranty (NASDAQ: PTLO): 80+ Locations in 10 States

• Lease Type: NNN Ground Lease

• Rent Increases: Base Term and Options

• Base Term: 20 Years plus Options (12-Year Base recently)

• Average Rent: $260,000

• Lot Size Requirement: 1.5 -3 Acre Average

• Building Size: 8,000 - 9,000 SF Average

• Average Unit Volume: $7M ($8.5M in Chicagoland)

TRIPLE NET TENDIES

🧠 Thought Leader: Alicia Kelso shares thoughts about McDonald’s Invsestor Day

👂 Ear Hustle: Glen Kunofsky sits down with Joe Koicim to talk NNN and 1031

💎 Web Gem: 9 Prototypes that restaurants are rolling out

NET LEASE NUGGIES

• The Brass Tap plans expansion and offers Instagrammable food menu. The craft brewery started with beer and wine, but now emphasizes food, with 40% of sales coming from food. To address customer demand for seasonal variety, The Brass Tap introduced a new "food truck" menu with five Instagrammable items and five value-based options. This menu will change quarterly. The brand also invested in a technology system to track beers across all locations and has plans for further expansion and brand refinement. (Read More)

• Restaurant real estate market faces challenges amid high demand and delays. The restaurant industry is grappling with high demand and limited inventory, particularly for drive-thru locations. Construction costs and delays have also added to the complexity. Despite these challenges, concepts that survived or thrived during the pandemic are adapting their strategies. Some brands are focusing on conversions, which are more cost-effective and have faster permitting processes. Others are implementing timeline buffers and becoming more selective with site selection. Supply chain improvements are anticipated to ease development challenges in 2024. (Read More)

• Restaurant brands innovate with new designs and drive-thru strategies. Despite supply chain challenges and pandemic-related delays, major restaurant brands have successfully executed new prototype designs in 2023. From double drive-thru lanes to food locker distribution, companies are focused on appealing to customers and driving sales. McDonald's introduced its new CosMc's with four order bays funneling into one drive-thru lane, while Whataburger's Whataburger Digital Kitchen prototype eliminated drive-thru lanes in favor of kiosk ordering and food lockers. Other brands, such as Portillo's and Church's Texas Chicken, are reimagining their restaurant footprints to increase efficiency and offer a faster return on investment. (Read More)

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