🌭The best-in-class restaurant you've never heard of

Portillo's: A recipe for success or just another dish on the menu?

Investing in restaurants can be a bit like cooking, the recipe is simple, but execution is key.

Today, we’re taking a closer look at a newcomer, but standout example from the restaurant world: Portillo’s. It’s an intriguing company, with an impressive track record and a future that depends on perfect execution. But what makes Portillo's, or any other restaurant chain for that matter, an interesting investment opportunity?

Simply put, the restaurant business can be surprisingly easy to understand, it all boils down to three core elements: execution, people, and operations. Let’s break it down.

Portillo’s

Portillo’s is a fast-casual restaurant chain known for its Chicago-style street food. It serves up classic favorites like hot dogs, Italian beef sandwiches, burgers, fries, and their famous chocolate cake.

What sets them apart is their focus on high-volume operations, making the most of every restaurant they open. With annual revenues per location exceeding $9 million, Portillo’s produces some of the highest Average Unit Volumes (AUVs) in the industry. Some stores in the Chicago-area do up to $11.3 million in AUV!

For context, McDonald’s typically comes in around $3.5 million per store, Shake-Shack around $4 million and Chipotle around $3 million. The only one that comes close is Chick-fil-A, with around $7 million in AUV. This makes Portillo’s performance truly stand out.

It all started back in 1963, when Dick Portillo opened his first hot dog stand called Dog House, with just $1,100 in hand.

Over the decades, it expanded across Chicago and eventually went public in 2021, using the IPO proceeds to clean up its balance sheet and fund its growth.

What makes this journey even more interesting is how straightforward the business model is. As we'll see, restaurant businesses like Portillo's can be extremely lucrative investments if they get the basics right, and, so far, Portillo's has.

Deep dive into Portillo’s

A few weeks ago, we recorded our company deep dive with Brett from

Chit Chat Stocks

for our TDI-members. Brett knows all about Portillo’s and owns the company himself. If you're interested in hearing more about the investment potential of Portillo’s, the full breakdown is available for TDI members on our platform.

There are just 4 days left to claim your 30% lifetime discount on any membership. The price you lock-in with, will never increase. Use code: FIRST30 to claim your deal.

The highest AUV restaurants in the U.S.

One of the key reasons Portillo’s is so compelling as an investment is its ability to scale a single concept while maintaining incredible financial efficiency. Portillo’s has an (average) AUV of over $9 million, far surpassing its competitors.

This impressive figure is the result of Portillo’s operational excellence, but it also shows how popular their food actually is. The company runs a high-volume, fast-casual model with a focus on throughput and efficient use of space. Their restaurant-level margins sit around 24%, and as they continue expanding, this allows them to generate substantial revenue from each new location. Portillo’s itself says they expect to generate between 25% and 35% (eventually), cash-on-cash returns.

However, there's a key challenge: Can Portillo’s maintain these strong numbers as it expands outside its home base in Chicago? The company’s performance in new markets like Texas and Florida will be critical. If they can maintain their high AUVs in these new areas, Portillo’s could grow into a significant national chain, and potentially even an international brand. This will be answered by us and Brett in the podcast on Portillo’s, available on our TDI-Dashboard.

Why restaurants (can) be great investments

Here’s the thing about restaurant businesses: they're simple at their core. A restaurant serves food and the customers either love it, or they don’t. And whether it’s a family-owned café or a national chain, restaurant businesses often follow a predictable formula.

The most successful restaurant brands tend to have a few key traits:

1. Strong unit economics: Great restaurants keep costs under control and maintain solid margins.

2. Operational consistency: Customers expect the same experience, whether they’re in Chicago or Florida.

3. Scalable models: If you can replicate the concept without losing quality or profitability, you're in for the long haul.

Take Chipotle or Texas Roadhouse, for example, both brands have proven that with a strong concept, consistent execution, and operational efficiency, they can grow to hundreds or even thousands of locations. The same holds for Portillo’s. If the company can continue executing at a high level, there’s ample opportunity to scale for years to come.

Expanding your investing universe

If you're looking to expand your investing universe beyond the usual suspects, we highly recommend you have a look at the companies we analyzed.

Over 100 investors receive an in-depth analysis every Friday. We help you turn over far more rocks than you do now. By consistently providing you with deep dives, your chances of finding hidden gems increase dramatically.

Whether it's looking at restaurant chains like Portillo's, understanding the semiconductor industry, with companies like ASML or Taiwan Semiconductor, we believe in expanding the horizon to discover great investments that others may overlook.

Just like we welcomed dozens of fellow long-term investors, we would like to welcome you.

Claim your 30% lifetime discount on any membership. The price you lock-in with, will never increase. Use code: FIRST30 to claim your deal.

So, what’s next for Portillo’s?

Portillo’s is a business that exemplifies the simplicity and scalability of the restaurant industry. With its high-volume, operationally efficient model, it has the potential to become a major player in the restaurant world. The company’s solid unit economics, impressive margins, and loyal customer base set it apart from many of its competitors.

But, like any great investment, success depends on execution. If Portillo’s can continue expanding with care, ensuring that each new location maintains high AUVs and operational excellence, it could become a major player in the fast-casual space.

As restaurant businesses like Portillo’s prove, the fundamentals may be simple, but success is anything but. By focusing on execution, people, and operations, Portillo’s has the potential to be a long-term growth story, and one worth keeping on your radar.

If you’re looking for more investment insights and opportunities like Portillo’s, join us at The Dutch Investors and expand your investing universe today. There's a whole world of great companies out there waiting to be discovered.

Have a wonderful day and happy investing.

The Dutch Investors.