Q4 2024 Portillo's Inc Earnings Call

John: [music].

Operator: Hello and thank you for standing by. Welcome to the fiscal fourth quarter 2024 conference call and webcast.

Hello, and thank you for standing by and welcome to the fiscal fourth quarter 'twenty 'twenty four conference call and webcast I would now like to turn the call over to Kyle Hanson, Vice President of Investor Relations at Portland to begin.

Kyle Nelson: I would now like to turn the call over to Kyle Nelson, Vice President of Investor Relations at Portillo's to begin. Thank you. Thank you, operator.

Speaker Change: Thank you.

Speaker Change: Thank you operator, good morning, everyone and welcome to our fiscal fourth quarter 2024 earnings call. You can find our 10-K earnings press release and supplemental presentation on investors that Portola is dot com with me on the call today is Michael assign little President and Chief Executive Officer, and Michelle Hook.

Kyle Nelson: Good morning, everyone, and welcome to our fiscal fourth quarter 2024 earnings call. You can find our 10K earnings press release and supplemental presentation on investors.portillos.com.

Kyle Nelson: With me on the call today is Michael Osanloo, President and Chief Executive Officer, and Michelle Hook, Chief Financial Officer. Any comments made here about our future results and business conditions are forward-looking statements, which are based on management's current expectations and are not guarantees of future performance. We do not update these forward-looking statements unless required by law.

Speaker Change: Chief Financial Officer.

Speaker Change: Any comments made here about our future results and business conditions are forward looking statements, which are based on management's current expectations and are not guarantees of future performance.

Speaker Change: We do not update these forward looking statements unless required by law or 10-K identifies risk factors that may cause our actual results to vary materially from these forward looking statements.

Kyle Nelson: Our 10-K identifies risk factors that may cause our actual results to vary materially from these forward-looking statements.

Kyle Nelson: Today's earnings call will make reference to non-GAAP financial measures, which are not an alternative to GAAP measures. Reconciliations of these non-GAAP measures to their most comparable GAAP counterparts are included in this morning's posted materials.

Speaker Change: Today's earnings call will make reference to non-GAAP financial measures, which are not an alternative to GAAP measures reconciliations of these non-GAAP measures to their most comparable GAAP counterparts are included in this morning's posted materials.

Kyle Nelson: Finally, after we deliver our prepared remarks, we will open the lines for your questions.

Speaker Change: Finally, after we deliver our prepared remarks, we will open the lines for your questions now, let me turn the call over to Michael all of a sudden loh, President and Chief Executive officer of portfolios.

Michael Osanloo: Now let me turn the call over to Michael Osanloo, President and Chief Executive Officer of Portillo's. Thank you, Kyle. Good morning, everyone. Thank you for joining us for our year-end call. Now, before I dive into our results, I do want to take a moment to recognize and thank our incredible restaurant team members. Their hard work, dedication, and passion are what makes Portillo's special. Every day they bring energy to our guests, delivering the unrivaled experience that keeps people coming back. Their commitment to excellence has been instrumental in elevating our brand, and I'm very grateful for everything they do to drive our success.

Speaker Change: Good morning, everyone. Thank you for joining us for our year end call.

Speaker Change: Now before I dive into our results I do want to take a moment to recognize and thank our incredible restaurant team members for their hard work dedication and passion are what makes porcello special.

Speaker Change: Every day, they bring energy to our guests and delivering the unrivaled experience that keeps people coming back their commitment to excellence has been instrumental in elevating our brand and I'm very grateful for everything they do to drive our success.

Michael Osanloo: Now for the fourth quarter, our same restaurant sales were up 0.4% and our full year comp was a negative 0.6%. Total revenue for the quarter was $184.6 million and full year revenue was $710.6 million. Restaurant level adjusted EBITDA for the fourth quarter was $45.2 million and $168.1 million for the full year with a margin of 23.7 percent. We saw good top-line momentum in Q4, especially with the addition of kiosks at all of our restaurants. They are driving a comp lift of more than 1% through MIX. We believe there's still a lot of untapped potential with kiosks, and we're excited to continue exploring their role in our business.

Speaker Change: Now for the fourth quarter, our same restaurant sales were up 0.4% and our full year comp was a negative 0.6%.

Speaker Change: Total revenue for the quarter was $184 6 million and full year revenue was $710 6 million.

Restaurant level adjusted EBITDA for the fourth quarter was $45 2 million and $168 1 million for the full year with a margin of 23, 7%.

Speaker Change: We saw good top line momentum in Q4, especially with the addition of kiosks at all of our restaurants.

Speaker Change: They are driving a comp lift of more than 1% through mix. We believe there is still a lot of untapped potential with kiosks and we're excited to continue exploring their role in our business.

Michael Osanloo: Our team has also done a nice job of controlling costs, particularly in labor and G&A. This has enabled us to drive strong cash flow in the business. We carried solid traction into January, but industry headwinds, including weather in February, muted some of our early momentum, similar to what you've heard from others in the restaurant industry.

Speaker Change: Our team has also done a nice job of controlling costs, particularly in labor and G&A. This has enabled us to drive strong cash flow in the business.

Speaker Change: We carried solid traction into January but industry headwinds, including weather in February muted some of our early momentum similar to what you've heard from others in the restaurant industry.

Michael Osanloo: Looking ahead to the rest of the year, we're really excited about the plans we're executing. Our four key traffic driving strategies are number one, expansion of kiosk usage and functionality. Number two, advertising beyond Chicagoland to increase brand awareness. Number three, the launch of our Portillo's Perks Loyalty Program, and number four, simply better operations, including further improving speed in the drive. This is how we'll drive traffic, improve margins, and deliver industry-leading unit economics for our shareholders.

Speaker Change: Looking ahead to the rest of the year, we're really excited about the plans we are executing our four key traffic driving strategies, our number one expansion of kiosk usage and functionality number two advertising beyond Chicago land to increase brand awareness.

Speaker Change: Number three the launch of our Portillo perks loyalty program and number four simply better operations, including further improving speed and the dry FICO.

Speaker Change: This is how we'll drive traffic improve margins and deliver industry, leading unit economics for our shareholders.

Michael Osanloo: Now, of course, opening new restaurants remains critical to our growth, with a focus on building efficient restaurants that deliver strong returns. In 2024, we open 10 new restaurants, two of which are our new, more compact, Restaurant of the Future format. This smaller footprint reduces our restaurant size from approximately 7,700 square feet to 6,250. And importantly, lowers the average build cost by over a million dollars. We expect these to come in at 5.2 to 5.5 million.

Speaker Change: Now of course opening new restaurants remains critical to our growth with a focus on building efficient restaurants that deliver strong returns.

Speaker Change: In 2024, we opened 10, new restaurants, two of which are new more compact restaurant of the future format.

Speaker Change: This smaller footprint reduces our restaurants size from approximately 7700 square feet to 62 50.

And importantly, lowers the average build costs by over $1 million. We expect these to come in at five two to $5 5 million.

Michael Osanloo: In 2025, we plan to open 12 new restaurants, all of which will be restaurant of the future. This includes our first restaurant in Georgia, located in the Atlanta suburb of Kennesaw. The majority of the other new restaurants in 2025 will be in Texas, where we'll continue to build scale and awareness. Openings in 2025 will still be more concentrated in the back half of the year with the majority opening towards the end of the year, but we're optimistic that our strong pipeline will lead to 2026 being more balanced.

Speaker Change: In 2025, we plan to open 12, new restaurants, all of which will be restaurant of the future. This includes our first restaurant in Georgia located in the Atlanta suburb of Kennesaw.

Speaker Change: The majority of the other new restaurants in 2025 will be in Texas, where we will continue to build scale and awareness.

Speaker Change: Openings in 2025, we will still be more concentrated in the back half of the year with the majority opening towards the end of the year, but we're optimistic that our strong pipeline will lead to 2026 being more balanced.

Michael Osanloo: Looking ahead, we continue to develop additional restaurant formats with an eye toward further improving new restaurant economics, including a more efficient operating model for our restaurant team. These include an even smaller Restaurant of the Future 2.0 that will roll out in 2026, as well as airport and walk-up locations. On the advertising front, we're working to build brand awareness in Texas to capitalize on the untapped potential of large audiences who don't know us yet. In late January, we launched our first market-wide ad campaign in Dallas-Fort Worth. The ads focus on introducing Portillo's to new guests. We're telling them who we are, what makes us iconic, and where to find us.

Looking ahead, we continue to develop additional restaurant formats with an eye towards further improving new restaurant economics, including a more efficient operating model for our restaurant teams.

These include an even smaller restaurant of the future to point out that will rollout in 2026, as well as airport and walk up locations.

Speaker Change: On the advertising front, we're working to build brand awareness in Texas to capitalize on the untapped potential of large audiences, who don't know us yet.

Speaker Change: In late January we launched our first market wide AD campaign in Dallas Fort worth the ads focus on introducing port tillers to new guests were telling them, who we are what makes us iconic and where to find us we're bringing the buzz and energy of a portal experience to encourage people to visit.

Michael Osanloo: We're bringing the buzz and energy of a Portillo's experience to encourage people to visit. Our past experience marketing outside Chicago gives us great optimism that this campaign will drive a meaningful lift.

Speaker Change: Our past experience marketing outside Chicago gives us great optimism that this campaign will drive a meaningful lift.

Michael Osanloo: Additionally, we're launching the Portillo's Purse Loyalty Program next month. This program is intended to drive traffic and engagement across Portillo's. We're initially focused on driving enrollment with the goal to hit 1.5 to 1.7 million members by July. Portillo's Perks is not a typical punch card program, it lives in your digital wallet and uses a targeted one-to-one marketing approach to drive specific behaviors based on guest habits and buying patterns. For example, in Chicagoland, where we're well known, we might focus on encouraging visit frequency, whereas in new markets, we can focus on building brand awareness and excitement.

Speaker Change: Additionally, we are launching the port till those perks loyalty program next month.

Speaker Change: This program is intended to drive traffic and engagement across port tell us.

Speaker Change: We're initially focused on driving enrollment with the goal to hit one five to $1 7 million members by July.

Speaker Change: <unk> is not a typical punch card program. It lives in your digital wallet and uses a targeted one to one marketing approach to drive specific behaviors based on guests habits and buying patterns.

Speaker Change: For example, in Chicago land, where we're well known we might focus on encouraging visit frequency, whereas the new markets. We can focus on building brand awareness and excitement.

Michael Osanloo: We can gamify frequency through badging, we can elicit trial of new menu items, or we can offer discounts to drive incremental visits. Because this is not a points-based program, we can customize the richness of the offer to suit the needs of the business and our guests.

Speaker Change: We can game of five frequency through Badging, we can elicit trial of new menu items or we can offer discounts to drive incremental visits.

Speaker Change: This is not a points based program, we can customize the richness of the offer to suit the needs of the business and our guests.

Michael Osanloo: To keep our guests coming back, we know we need to continue delivering an unrivaled experience across our restaurants. That's why our new COO, Tony Darden, has a three-pronged approach to strengthen operational excellence further. First is improving our drive-through efficiency. With the target of reducing drive-thru time an additional 45 seconds, we've expanded our AI-powered drive-thru camera pilot to more locations. This tool is showing promise by providing better real-time insights for restaurant leaders to optimize speed. Second, Tony is focused on training and elevating accountability and engagement within our teams to deliver a more consistent Portillo's experience across the chain.

Speaker Change: To keep our guests coming back we know we need to continue delivering an unrivaled experience across our restaurants.

Speaker Change: It's why our new CLO, Tony Darden has a three pronged approach to strengthen operational excellence further.

Speaker Change: First is improving our drive through efficiency with a target of reducing drive through time and additional 45 seconds. We've expanded our AI powered drive thru camera pilot to more locations. This tool is showing promise by providing better real time insights for restaurant labor leaders to optimize speed.

Speaker Change: Second Tony is focused on training and elevating accountability and engagement within our teams to deliver a more consistent portillo his experience across the chain.

Michael Osanloo: That means restaurant and market leaders getting more shoulder-to-shoulder time with team members, coaching in the moment, reinforcing fundamentals, being attentive, hustling, and responding to guests with urgency and energy. All the things that make our experience uniquely great. Third, he's identified off-premise order accuracy as an opportunity. Ensuring guests receive exactly what they ordered is critical. Tony's already implementing processes to strengthen accuracy, ensuring we uphold the same high standards across all our channels.

Speaker Change: That means restaurant and market leaders getting more shoulder to shoulder time with team members coaching and the moment reinforcing fundamentals being attentive hustling and responding to guests with urgency and energy all the things that make our experience uniquely great.

Speaker Change: Third he has identified off premise order accuracy as an opportunity.

Speaker Change: Ensuring guests received exactly what they ordered as critical Tony is already implementing processes to strengthen accuracy, ensuring we uphold the same high standards across all our channels.

Michael Osanloo: We're excited by the plans we have in place and remain focused on driving sales and transactions. With continued innovation and an unwavering focus on operational excellence, we're confident these efforts will drive the results we're aiming for and set us up for even greater success in 2025.

We're excited by the plans we have in place and remain focused on driving sales and transactions with continued innovation and an unwavering focus on operational excellence. We're confident these efforts will drive the results, we're aiming for and set us up for even greater success in 2025.

Michelle Hook: With that, let me hand it over to Michelle. Great. Thank you, Michael, and good morning, everyone.

Speaker Change: With that let me hand, it over to Michelle.

Michelle Hook: Great. Thank you Michael and good morning, everyone. As a reminder, from a year on year comparable basis. The fourth quarter of fiscal 2024 was a 13 week quarter and the fourth quarter of fiscal 2023 was a 14 week quarter.

Michelle Hook: As a reminder, from a year-on-year comparable basis, the fourth quarter of fiscal 2024 was a 13-week quarter, and the fourth quarter of fiscal 2023 was a 14-week quarter. During the fourth quarter, revenues were $184.6 million, reflecting a decrease of $3.2 million, or 1.7% compared to last year. Total revenue was negatively impacted by $13.9 million due to an additional operating week in the fourth quarter of 2023. Excluding the impact of the 53rd week, revenues grew 6.1% in the fourth quarter versus last year. Our revenue growth in the fourth quarter was driven by growth from non-comp restaurants and same restaurant sales growth.

Michelle Hook: During the fourth quarter revenues were $184 6 million, reflecting a decrease of $3 2 million or one 7% compared to last year total revenue was negatively impacted by $13 9 million due to an additional operating week in the fourth quarter of 2023.

Michelle Hook: Excluding the impact of the 50 <unk> week revenues grew six 1% in the fourth quarter versus last year.

Michelle Hook: Our revenue growth in the fourth quarter was driven by growth from non comp restaurants.

Michelle Hook: Same restaurant sales growth.

Michelle Hook: Restaurants Not In Our Comparable Restaurant Base contributed $8.6 million in revenue growth during the fourth quarter. Same restaurant sales increased 0.4%, which drove revenues up approximately $600,000 in the quarter. The same restaurant sales was attributable to an increase in average check of 4.1%, partially offset by a 3.7% decrease in transactions. The higher average check was driven by an approximate 4.7% increase in certain menu prices, partially offset by product mix. comp on a two year stack basis was 4.8%. We did not raise prices in the fourth quarter, keeping our overall price increase at 4.7%. In January 2025, we implemented a 1.5% price increase.

Michelle Hook: Restaurants, not in our comparable restaurant base contributed $8 6 million in revenue growth during the fourth quarter.

Michelle Hook: Same restaurant sales increased <unk>, 4%, which drove revenues up approximately 600000 in the quarter.

Michelle Hook: The same restaurant sales was attributable to an increase in average check of four 1%, partially offset by a three 7% decrease in transactions.

Michelle Hook: The higher average check was driven by an approximate four 7% increase and certain menu prices, partially offset by product mix.

Michelle Hook: Comp on a two year stack basis with four 8%.

We did not raise prices in the fourth quarter, keeping our overall price increase at four 7%.

Michelle Hook: In January 2025, we implemented a one 5% price increase.

Michelle Hook: Since we had a price increase in January last year roll-off, our effective price increase for the first quarter of 2025 is now approximately 4.4 percent. We also made pricing adjustments in March and June of last year, and we'll continue to assess pricing throughout the year. Our goal is to ensure we continue to provide a strong value proposition to our guests.

Michelle Hook: Since we had a price increase in January last year roll off our effective price increase for the first quarter of 2025 is now approximately four 4%.

Michelle Hook: We also made pricing adjustments in March and June of last year, and we will continue to assess pricing throughout the year.

Michelle Hook: Our goal is to ensure we continue to provide a strong value proposition to our guests.

Michelle Hook: As we look to 2025, we expect our revenue growth to continue to be driven by the opening of new restaurants combined with modest comp sales growth in the range of flat to 2%. During the first quarter of 2025, we will open one of our 12 targeted new restaurants in the Houston market. As Michael mentioned, we enter January with strong traction, but challenges like February's weather has tempered some of our early momentum. Coming into 2025, we anticipated softness in the first half of the year with the goal of driving improvement in the latter half as we evolve kiosk adoption, launch of our Portillo's Perks program, increase brand awareness in our outer markets, and improve our speed in the drive.

Michelle Hook: Yes, we'd like to 2025, we expect our revenue growth to continue to be driven by the opening of new restaurants, combined with modest comp sales growth in the range of flat to 2%.

Michelle Hook: During the first quarter of 2025, we will open one of our 12 targeted new restaurants in the Houston market.

Michelle Hook: As Michael mentioned, we entered January with strong traction, but challenges like February weather has tempered some of our early momentum.

Michelle Hook: Coming into 2025, we anticipated softness in the first half of the year with a goal of driving improvement in the latter half as we evolve kiosk adoption launch of our Portela Perks program increased brand awareness and our auto markets and improve our speed on the drive thru.

Michelle Hook: Now moving on to our cost. Food, beverage, and packaging costs as a percentage of revenues decreased to 34.1% in the fourth quarter of 2024 from 34.8% in the fourth quarter of 2023. This decrease was due to the increase in our average check partially offset by a 1.8% increase in our commodity prices. In the fourth quarter, we experienced increases in produce, dairy, and chicken products. We are estimating commodity inflation of 3 to 5% in 2025, with the most significant pressures coming from Labor as a percentage of revenues decreased to 24.6% in the fourth quarter of 2024 from 25.4% in the fourth quarter of 2023.

Michelle Hook: Now moving on to our costs.

Michelle Hook: Food beverage and packaging costs as a percentage of revenues decreased to 34, 1% in the fourth quarter of 2024 from 34, 8% in the fourth quarter of 2023. This decrease was due to the increase in our average check partially offset by one 8% increase in our commodity price.

Michelle Hook: Yes.

Michelle Hook: In the fourth quarter, we experienced increases in produce dairy and chicken products.

Michelle Hook: We are estimating commodity inflation of 3% to 5% in 2025 with the most significant pressures coming from beef.

Michelle Hook: Labor as a percentage of revenues decreased to 24, 6% in the fourth quarter of 2024 from 25, 4% in the fourth quarter of 2023.

Michelle Hook: This decrease was driven by the increase in our average check and lower variable-based compensation, partially offset by incremental investments to support our team members, including annual rate increases. hourly labor rates were up 2.2% in the fourth quarter of 2024. We are estimating labor inflation of 3 to 4% in 2025. Other operating expenses increased $1.6 million, or 8%, in the fourth quarter of 2024, compared to the fourth quarter of 2023, which was primarily driven by the opening of new restaurants and an increase in repair and maintenance expense. offset by a decrease in insurance expense. As a percentage of revenues, other operating expenses increased to 12% from 10.9% in the prior year.

Michelle Hook: This decrease was driven by the increase in our average check and lower variable based compensation, partially offset by income incremental investments to support our team members, including annual rate increases.

Michelle Hook: Hourly labor rates were up two 2% in the fourth quarter of 2024.

Michelle Hook: We are estimating labor inflation of 3% to 4% in 2025.

Michelle Hook: Other operating expenses increased $1 6 million or 8% in the fourth quarter of 2024 compared to the fourth quarter of 2023, which was primarily driven by the opening of new restaurants, and an increase in repair and maintenance expense.

Speaker Change: Set by a decrease in insurance expense.

Speaker Change: As a percentage of revenues other operating expenses increased to 12% from 10, 9% in the prior year.

Michelle Hook: Occupancy expenses increased $0.4 million or 5.3% in the fourth quarter of 2024 compared to the fourth quarter of 2023, primarily driven by the opening of new restaurants. As a percentage of revenues, occupancy expenses increased 0.3% compared to the prior year. Restaurant Level Adjusted EBITDA decreased 1.1% to $45.2 million in the fourth quarter of 2024. The comparison was negatively impacted by $3.5 million due to the additional operating week in the fourth quarter of 2023. Excluding the impact of the 53rd week, restaurant level adjusted EBITDA grew 7.1% in the fourth quarter versus last year. restaurant level adjusted EBITDA margins increased 20 basis points to 24.5% in the fourth quarter of 2024 versus 24.3% in the fourth quarter of 2023.

Speaker Change: Occupancy expenses increased <unk> 4 million or five 3% in the fourth quarter of 2024 compared to the fourth quarter of 2023, primarily driven by the opening of new restaurants.

Speaker Change: As a percentage of revenues occupancy expenses increased <unk>, 3% compared to the prior year.

Speaker Change: Restaurant level adjusted EBITDA decreased one 1% to $45 2 million in the fourth quarter of 2024.

Speaker Change: The comparison was negatively impacted by $3 5 million due to the additional operating week in the fourth quarter of 2023.

Speaker Change: Excluding the impact of the 50 <unk> week restaurant level adjusted EBITDA grew seven 1% in the fourth quarter versus last year.

Speaker Change: Restaurant level adjusted EBITDA margins increased 20 basis points to 24, 5% in the fourth quarter of 2024 versus 24, 3% in the fourth quarter of 2023, we are estimating a restaurant level adjusted EBITDA margins to be in the range of 22, 5% to 23%.

Michelle Hook: We are estimating our restaurant level adjusted EBITDA margins to be in the range of 22.5% to 23% in 2025. Our general and administrative expenses decreased by $1.2 million to $20.3 million or 11% of revenue in the fourth quarter of 2024 from $21.6 million or 11.5% of revenue in the fourth quarter of 2023. The decrease was primarily driven by the 14th week in 2023, lower variable-based and equity-based compensation, partially offset by an increase in advertising expense of $0.3 million. We will continue to invest in advertising in 2025, as well as other strategic initiatives, but will remain disciplined in our investment approach.

Speaker Change: In 2025.

Speaker Change: Our general and administrative expenses decreased by $1 2 million to $20 3 million or 11% of revenue in the fourth quarter of 2024 from $21 6 million or 11, 5% of revenue in the fourth quarter of 2023 the decrease.

Speaker Change: This was primarily driven by the 14th week in 2023, lower variable based and equity based compensation, partially offset by an increase in advertising expense of <unk> 3 million.

Speaker Change: We will continue to invest in advertising in 2025, as well as other strategic initiatives, but well remain disciplined in our investment approach. We are estimating G&A expenses to be between $82 million to $84 million in 2025.

Michelle Hook: We are estimating G&A expenses to be between $82 million to $84 million in 2025. Pre-open expenses were flat in the fourth quarter of 2024 compared to the fourth quarter of 2023. We are estimating pre-opening expenses to be in the range of $11 to $12 million in 2025. All this led to adjusted EBITDA of $25.2 million in the fourth quarter of 2024 versus $26.1 million in the fourth quarter of 2023, a decrease of 3.6%. The comparison was negatively impacted by $2.4 million due to the additional operating week in the fourth quarter of 2023. Excluding the impact of the extra week, adjusted EBITDA grew 6.3% in the fourth quarter versus last year.

Speaker Change: Preopening expenses were flat in the fourth quarter of 2024 compared to the fourth quarter of 2023.

Speaker Change: We are estimating preopening expenses to be in the range of $11 million to $12 million in 2025.

Speaker Change: All this led to adjusted EBITDA of $25 2 million in the fourth quarter of 2024 versus $26 1 million in the fourth quarter of 2023, a decrease of three 6%. The comparison was negatively impacted by $2 4 million due to the additional operating week in the fourth quarter of 2020.

Speaker Change: Three excluding the impact of the extra week adjusted EBITDA grew six 3% in the fourth quarter versus last year.

Michelle Hook: Below the EBITDA line, interest expense was $6 million in the fourth quarter of 2024, a decrease of $0.9 million from the fourth quarter of 2023. This decrease was driven by a lower effective interest rate, partially offset by additional borrowings on the Revolver facility. On January 27th, we reduced our term loan from $300 million to $250 million and increased our revolver credit facility from $100 million to $150 million. The interest rate on the term debt has been lowered by approximately 40 basis points. The loans under the new agreement will mature on January 27, 2030.

Speaker Change: Below the EBIT line interest expense was $6 million in the fourth quarter of 2024, a decrease of <unk> 9 million from the fourth quarter of 2023 <unk>.

Speaker Change: This decrease was driven by a lower effective interest rate, partially offset by additional borrowings on the revolver facility.

Speaker Change: On January 27th we reduced our term loan from $300 million to $250 million and increased our revolver credit facility from $100 million to $150 million.

Speaker Change: The interest rate on the term debt has been lowered by approximately 40 basis points.

Speaker Change: The loans under the new agreement will mature on January 27, 2030.

Michelle Hook: This new credit agreement gives us more financial flexibility to support our growth strategy and other strategic initiatives. As of today, our outstanding borrowings under the Revolver credit facility are $69 million, which includes approximately $39 million that was transferred over from our term loan facility and used to pay loan costs as part of our debt amendment in January. Our effective interest rate on the term loan and Revolver was 7.5% versus 8.4% for 2023. Income tax expense was $1.9 million in the fourth quarter of 2024, an increase of $2.3 million from the fourth quarter of 2023. Our effective tax rate for the fourth quarter was 13.3%.

Speaker Change: This new credit agreement gives us more financial flexibility to support our growth strategy and other strategic initiatives.

Speaker Change: As of today, our outstanding borrowings under the revolver credit facility, our $69 million, which includes approximately $39 million that was transferred over from our term loan facility and used to pay loan costs as part of our data Amendment in January.

Speaker Change: Our effective interest rate on the term loan and revolver was seven 5% versus eight 4% for 2023.

Speaker Change: Income tax expense was $1 9 million in the fourth quarter of 2024, an increase of $2 3 million from the fourth quarter of 2023 or.

Speaker Change: Our effective tax rate for the fourth quarter was 13, 3%.

Michelle Hook: Our effective tax rate for the year was 16.2% versus 11.5% in 2023. The increase in our effective income tax rate was primarily driven by an increase in the company's ownership interest in Portillo's OpCo. Our future effective tax rate will fluctuate as Class A equity ownership increases and as equity-based awards are exercised in VASTA. Cash from Operations increased by 38.5% year over year to $98 million year to date. We ended the quarter with $22.9 million in cash.

Speaker Change: Our effective tax rate for the year was 16, 2% versus 11, 5% in 2023.

Speaker Change: The increase in our effective income tax rate was primarily driven by an increase in the company's ownership interest in portola as opco.

Speaker Change: Our future effective tax rate will fluctuate as class a equity ownership increases and as the equity based awards are exercised invest.

Speaker Change: Cash from operations increased by 38, 5% year over year to $98 million year to date.

Michael: We ended the quarter with $22 9 million in cash we continue to believe that we are well positioned with our balance sheet to support our growth and new restaurant openings. This year and beyond Thank you for your time and with that I'll turn it back to Michael.

Michelle Hook: We continue to believe that we are well positioned with our balance sheet to support our growth in new restaurant openings this year and beyond. Thank you for your time.

Michael Osanloo: And with that, I'll turn it back to Michael. Thanks, Michelle. We remain committed to driving world-class economics in our restaurants and lightening our capital spent. Our focus is on accelerating revenue, expanding margins, and ensuring that every dollar we invest, whether in new restaurant builds, technology, or operation, delivers strong returns. With the deployment of our loyalty program, a revamped approach to marketing, and a sharpened focus on operational excellence, we are building durable traffic drivers that we can leverage quarter after quarter. With a disciplined approach to development and an emphasis on efficiency, we will continue to grow profitably while strengthening the guest experience.

Michael: Thanks Michelle.

Michael: We remain committed to driving world class economics in our restaurants and lightning or capital spent.

Michael: Our focus is on accelerating revenue expanding margins and ensuring that every dollar we invest whether a new restaurant builds technology, our operation delivers strong returns.

Michael: With the deployment of our loyalty program <unk>.

Michael: Revamped approach to marketing and a sharpened focus on operational excellence. We are building durable traffic drivers that we can leverage quarter after quarter with a disciplined approach to development and an emphasis on efficiency. We will continue to grow profitably while strengthening the guest experience. This is how we will deliver 2002.

Michael Osanloo: This is how we'll deliver 2025.

Michael Osanloo: Thank you.

Michael: 25, thank you.

Michael: Thank you that concludes our formal remarks as always thank you for your interest in <unk> at this time, we will open up the line for questions.

Michael Osanloo: That concludes our formal remarks. As always, thank you for your interest in Portillo's.

Kyle Nelson: At this time, we will open up the line for questions. We ask that you limit your queries to one question and one follow-up question.

Michael: Ask that you limit your inquiries to one question and one follow up question.

Sharon Zackfia: The first question comes from the line of Sharon Zackfia with William Player. Good morning. I guess just one clarifying question, Michelle, on the the weather year today, is it fair to think, is there any way to quantify the weather impact you've had through late February? Or maybe just tell us if we should expect the first quarter to be below the full year guidance? Yeah, Sharon, we're we're not haven't quantified the weather impact. As we sit here today, we're, you know, just starting to get into I think, some warmer weather here in Chicagoland in the Midwest.

Speaker Change: The first question comes from the line of Sharon Zackfia with William Blair. Please go ahead.

Sharon Zackfia: Good morning, I guess, just one clarifying question Michelle on the.

Speaker Change: Weather year to date I mean is it fair to think is there any way to quantify the weather impact you've had through late February or more.

Speaker Change: Maybe just tell us what we should expect the first quarter to be below the full year guidance.

Speaker Change: Yes, Sharon we're we're not haven't quantified the weather impact as we sit here today, we're just starting to get into I think some warmer weather here in Chicago land in the Midwest.

Speaker Change: <unk>.

Michelle Hook: Our trends, as we said, in January, we came out of the gate stronger. February has been impacted. We still have a whole month to go, Sharon. So, you know, it's hard at this stage to really say definitively, knowing that we have that. But, you know, we're confident that, you know, for the full year, we're going to be in the zero to 2% range. So that's what I can definitively at least say at this moment. But, you know, we're comfortable with the trends, the underlying strength of the business. And as we said, I believe that the momentum we have with loyalty, as well as the advertising that took effect in Dallas, will take hold as we come out of Q1.

Speaker Change: Our trends as we said in January we came out of the gate.

Speaker Change: A stronger February has been impacted.

Speaker Change: We still have a whole month ago, Sharon So it's hard at this stage to really say definitively knowing that knowing that we have that but we're confident that for the full year, we're going to be in the zero to 2% range.

Speaker Change: So that's what I can definitively at least say at this moment, but.

Speaker Change: Where we're comfortable with the trends the underlying strength of the business.

Speaker Change: And as we said I believe that the momentum we have with loyalty as well as the advertising that took effect in Dallas will take hold as we come out of Q1.

Sharon Zackfia: Thanks for that.

Speaker Change: Thanks for that and then I did have a question about the drive thru speed. So that 45 seconds that you're seeking and cheery too is there any kind of rule of thumb on what that does for you in terms of.

Sharon Zackfia: And then I did have a question about the drive-through speed.

Sharon Zackfia: So that 45 seconds that you're seeking to recoup, is there any kind of rule of thumb on what that does for you in terms of, you know, throughput or incremental, you know, traffic you can get through the drive-through?

Speaker Change: Throughput or incremental.

Speaker Change: Traffic you can get through the drive through and is there any gating factor to kind of rolling out this test.

Sharon Zackfia: And is there any gating factor to kind of rolling out this test pretty quickly across the rest of the system if it continues to be successful?

Speaker Change: Quickly across the rest of the system. If it is continues to be successful.

Sharon Zackfia: Hi, Sharon. Good morning. Yes, we're really excited about the drive-thru speed. And as a rule of thumb, every 30 seconds of improved throughput in the drive-thru is equivalent to one point of comp. So the test is going very well. It's relatively straightforward for us to expand and deploy as quickly as possible. You always run into a little bit of permitting issues, things like that. But my expectation is that if the test continues as well as it has been, we will get this deployed and it will have a full impact for the back half.

Speaker Change: Hi, Sharon good morning, Yes, we're really excited about the drive thru speed and as a rule of thumb every 30 seconds of improved throughput in the drive thru is equivalent to one point of comp.

Speaker Change: The test is going very well.

Speaker Change: It's relatively straightforward for us to expand and deploy as quickly as possible.

Speaker Change: There is a little you always run into a little bit of permitting issues things like that but.

Speaker Change: My expectation is that if the test continues as well as it has been we will get this deployed and it will have.

Speaker Change: A full impact for the back half of the year.

Sharon Zackfia: Okay, thank you. You bet.

Speaker Change: Okay. Thank you.

Speaker Change: You bet.

Sharon Zackfia: Thank you.

Speaker Change: Thank you next question comes from the line of David Tarantino with Baird. Please go ahead.

David Tarantino: Next question comes from the line of David Tarantino with Baird. Please go ahead. Hi, good morning. I was wondering if you could elaborate on what you're seeing in the restaurant of the future prototype, you know, in particular. Sales, and Margins, as you look at kind of the initial performance. And I know it thoroughly, but any insight you could offer would be helpful.

Speaker Change: Yeah.

David Tarantino: Hi, Good morning, I was wondering if you could elaborate on what youre seeing in the restaurant of the future prototype you know in particular.

David Tarantino: Sales and margins as you look at kind of the initial performance and I know, it's early but any insight you can offer would be helpful. Thanks.

Michael Osanloo: Here's what I'd say, I'd say there's no, like in terms of revenue, traffic, the feel, the ability to operate and execute, we're thrilled. There's no difference really between that and a more traditional prototype. It feels like a really good restaurant. It provides a Portillo's experience, so we're really excited by that. I think it's emboldened us to be more aggressive with 2.0. I think we feel like there's still some space that we can take out of the restaurants and that even the restaurant of the future is, you know, it's still plenty built and so that we feel like we can get a little bit more capital efficient in the next iteration.

David Tarantino: Here's what I'd say I'd say there is no.

David Tarantino: In terms of revenue traffic the feel the ability to operate and execute well.

David Tarantino: We're thrilled.

David Tarantino: There's no difference really between that and a more traditional prototype it feels like a really good restaurant. It provides the portfolio's experience. So we're really excited by that.

David Tarantino: It's emboldened us to be more aggressive with 2.0, I think we feel like Theres still some space that we can take out of the restaurants and that even the restaurant of the future is is it still.

David Tarantino: <unk> built and set so that we feel like we can get a little bit more capital efficient in the next iteration.

Michael Osanloo: I think you were referring, there's a question behind your question, David. We have not pushed the needle yet on operational efficiency in the restaurant of the future. It's still early and we're evaluating, but, you know, we do expect and plan to generate some incremental efficiencies, given it's a smaller restaurant, given that there's less need for labor, given there's less need for utility and energy usage.

David Tarantino: I think you were referring there's a question behind your question, David we have not pushed the needle yet on.

David Tarantino: Operational efficiency in the restaurant of the future. It's still early and we're evaluating but we do we do expect and plan to generate some incremental efficiencies given it's a smaller restaurant given that there's less need for labor given there's less need for utility and energy usage. So we're very excited by.

Michael Osanloo: So we're very excited by that and we'll, you know, we'll reveal what's going on with that once we feel. Great.

David Tarantino: And we will we'll reveal.

David Tarantino: What's going on with that once we feel comfortable.

Speaker Change: Great and I think Michael you.

Michael Osanloo: And I think, Michael, you've Streamlined the menu and some of the new locations. So could you comment on what you're seeing? from that exercise and what the benefits of that. Yeah, it's a it's a great question. So as you as you noted, in Houston, we have conducted a test with a streamlined menu. We took a somewhere between 15 and 20% of the skews out. And it tends to be the tail, the things that are low P mix. The only negative feedback from guests were on our Italian sausage and our Maxwell Street, our Polish sausage. So we've actually quickly added those back into Houston to some great fan favor.

Speaker Change: <unk> streamlined the menu and some of the new locations. So could you comment on what Youre seeing.

Speaker Change: From that exercise and what the benefits of that might be.

Speaker Change: Yes.

Speaker Change: It's a great question. So as you as you noted in Houston, we have conducted a test with the streamlined menu.

Speaker Change: We took a somewhere between 15% to 20% of the Skus out.

Speaker Change: And it tends to be the tail the things that are low P mix theres been.

Speaker Change: The only negative feedback from guests we're on.

Speaker Change: Our Italian sausage at our Maxwell Street, our Polish sausage. So we've actually quickly added those back into Houston to.

Speaker Change: To some great fan favor.

Michael Osanloo: But there's been no impact with the rest of the tail. And so we're really excited about that. As I'm sure you can imagine, it reduces complexity in the kitchen. It's an aid to throughput. It's an aid to accuracy and it streamlines supply chain and supply chain costs. So we think that we have unlocked something important there. It frankly is also an enabler to achieving Restaurant of the Future 2.0, when you just don't have to store that much stuff in your coolers and your freezers. And it does help you reduce some kitchen equipment. So we've been watching that very carefully.

Speaker Change: But theres been no no impact with the rest of the tail and so we're really excited about that as I'm sure you can imagine it reduces complexity in the kitchen, it's an aid to throughput it as an aid to accuracy and a streamlined supply chain and supply chain costs. So we think that we have unlocked something important there at <unk>.

Speaker Change: Frankly is also an enabler to achieving restaurant of the future to point out when you just don't have to store that much stuff in your coolers and freezers.

Speaker Change: And it does help you reduce some kitchen equipment, so where we've been watching that very carefully we're very excited by it and I think.

Michael Osanloo: We're very excited by it. And I think there's an unlock there for us going forward.

Speaker Change: I think theres, an unlock there for us going forward.

Speaker Change: Yeah.

Michael Osanloo: I might go over my limit here, but are you thinking about streamlining the menu elsewhere, maybe in some of your more mature locations as a result of what you're seeing in those locations? I think for now, we're thinking of it as a new new markets strategy. We're not going to go back. We're not going to like try to take away beer from our Chicago guests. I think that would cause riots in a restaurant. Fair enough. Thank you. You bet.

Speaker Change: I might go over my limit here, but are you thinking about streamlining the menu elsewhere, maybe in some of your more mature.

Speaker Change: Occasions, as a result of what you're seeing in those locations.

Speaker Change: I think for now we're thinking of it as a new.

Speaker Change: New markets strategy we're.

Speaker Change: We're not going to go back we're not going to like try to takeaway beer from our Chicago guests I think that would cause riots in a restaurant.

Speaker Change: Yeah.

Speaker Change: Fair enough. Thank you.

Speaker Change: Beth.

Speaker Change: Thank you next question comes from the line of Andy Barish with Jefferies. Please go ahead.

Andrew Barish: Next question comes from the line of Andy Barish with Jeffries. Please go ahead. Hey guys, good morning. Just a clarification, I think I was remembering from ICR that the zero to two does not include the kiosk contribution. Am I remembering that correctly? Now that Andy that does include the kiosk contribution that's in the estimate. What what we have said is, you know, generally, we weren't modeling, you know, significant lifts in the front part of the year, because a lot of the strategies, such as loyalty, etc, are going to start to roll out as we go into q2.

Andy Barish: Hey, guys good morning.

Just a clarification I think Garrett was remembering from ICR.

Andy Barish: Zero to two did not include.

Andy Barish: The kiosks contribution of my remembering that correctly.

Andy Barish: No that Andy that does include the kiosk contribution that's in the estimate.

Andy Barish: What what we have said is generally we weren't modeling significant lifts in the front part of the year because a lot of the strategies such as loyalty et cetera are going to start to roll out as we go into Q2, but it does include the kiosk left.

Michael Osanloo: But it does include the kiosk list. Okay, thanks for that. And then, um, Anything on I know the drive through channels been tougher and that's a big focus, obviously, and more impacted by you know, $5 QSR promotions and things like that. But was there anything to read from the off-premise order accuracy focus? Have you seen a little bit of weakness in that channel or is the weakest channel still really, you know, kind of drive through and some of these operational improvements can start to stem the tide there? Yeah, Andy, we definitely see, as we continue to say, more softness in the drive through, right?

Speaker Change: Okay. Thanks for that and then.

Anything on.

Speaker Change: I know the drive thru channel has been tougher and that's a big focus obviously and more impacted by.

Speaker Change: $5, <unk> promotions and things like that but was there anything to read from the off premise order accuracy focus have you seen a little bit of weakness in that channel or is it is the.

The weakest channel still really kind of drive through in some of these operational improvements can start to stem the tide there.

Speaker Change: Yeah, Andy we definitely see as we continue to say more softness in the drive through right. When you think of overall the state of the business and the channels, we're seeing that channel a little bit more pressured than and as we've talked about that channel.

Michael Osanloo: When you think of overall, you know, the state of the business and the channels, we're seeing that channel a little bit more pressured. And, and, and as we've talked about, that channel is is more competitive with QSR in that lower income consumer. But but definitely, as we think about just order accuracy in general, that's, you know, the number one, you know, reason why guests are dissatisfied. So speed would be, you know, the number two reason, but accuracy, you know, generally speaking, is what we need to continue to focus on in the drive through. But then when we look at our just off premise channels, in general, those, generally speaking, and we're not, we're not alone in this, in this category, from a restaurant standpoint, have lower OSAT scores or customer satisfaction scores than your dine in or drive through channels.

Speaker Change: Is is more competitive with <unk> and that lower income consumer.

Speaker Change: But definitely as we think about just order accuracy in general that's the number one.

Speaker Change: Reason why gas are dissatisfied so speed would be.

Speaker Change: The number two reason by accuracy generally speaking is what we need to continue to focus on in the drive thru, but then when we look at our just to off premise channels in general those generally speaking and we're not and we're not alone in this in this category from a restaurant standpoint have lower <unk>.

Speaker Change: SaaS scores, our customer satisfaction scores than your dine in or drive through channels. So as we look at those off premise channels, whether it's picking up in the restaurant are those delivery channels, we have to focus on guest satisfaction in those channels and then specifically focusing on gastro coverage. So when we talk about order accuracy.

Michael Osanloo: So as we look at those off premise channels, whether it's picking up in the restaurant or those delivery channels, we have to focus on guest satisfaction in those channels, and then specifically focusing on guest recovery. So when we talk about order accuracy, we have to make sure that when we do make mistakes, which we know we're going to make mistakes, that we recover that guest and treat them appropriately.

Speaker Change: We have to make sure that when we do make mistakes, which we know we're going to make mistakes that we recover that guest and treat them appropriately. So that's our focus.

Michael Osanloo: So that's a focus. Yeah, I mean, Andy said another way, it's relatively straightforward to correct a mistake that we make in the dining room. It's it's kind of doable, even in the drive through, because the guests will notice, it becomes increasingly difficult to correct a mistake when it's for third party delivery. And that's why I think for us, we're acknowledging that the bar has to be higher. And we need to make fewer mistakes for third party delivery, because those are very challenging to correct and make the guests happy. Thanks, helpful.

Andy Barish: Andy said another way, it's relatively straightforward to correct a mistake that we make in the dining room.

Andy Barish: It's kind of doable, even in the drive through because of guests will notice it becomes increasingly difficult to correct a mistake when it's for third party delivery and that's why I think for US we're acknowledging that the bar has to be higher and we need to make fewer mistakes for third party delivery because those are very challenging to correct and and make the guest.

Andy Barish: <unk>.

Andy Barish: Thanks helpful. And then just finally on <unk>.

Michelle Hook: And then just finally, on on your three to 5% commodity inflation, Michelle, how much of beef is locked up at this point? Yeah, on the flats, Andy, we have about 50% locked for the full year. Okay, and anything just, you know, shape wise, we should expect? Or is it kind of that inflation spread out evenly through the year? Yeah, as we think about inflation over the course of the year, I it's it's looking pretty even at this stage, Andy, I think a little bit more pressures, at least what we're seeing as we get into Q3, and then maybe a little bit easing into Q4.

Speaker Change: On your 3% to 5% commodity inflation, Michelle how much of beef is locked up at this point.

Speaker Change: Yeah on the flaps, Andy we have about 50% lax offer the full year.

Speaker Change: Okay and anything.

Speaker Change: Shape, why we should expect or is it kind of that inflation spread out evenly through the year.

Yes, we think about inflation over the course of the year.

Speaker Change: It's looking pretty even at this stage A&D I think a little bit more pressures at least what we're seeing as we get into Q3, and then maybe a little bit easing into Q4, but in terms of <unk>.

Michelle Hook: But in terms of, you know, it's not, you know, extremely roller coaster ish, I would say, but a little bit more pressures in Q3, versus the other quarters.

Speaker Change: It's not extremely rollercoaster ish, I would say, but a little bit more pressures in Q3 versus the other quarters.

Michelle Hook: Thank you. Yep.

Speaker Change: Thank you.

Speaker Change: Yep.

Speaker Change: Yes.

Speaker Change: Thank you next question comes from the line of.

Brian Mullan: Next question comes from the line of... Brian Harbour with Morgan Stanley. Yeah, thanks. Morning, guys. Um, good. The same for Phil's got it for this year.

Speaker Change: Brian Huberty with Morgan Stanley. Please go ahead.

Speaker Change: Yeah.

Speaker Change: Yeah. Thanks, good morning, guys.

Speaker Change: The same store sales guide for this year.

Brian Mullan: Sorry if you had mentioned this, but what was sort of the, I guess I'll ask this more directionally, just sort of the assumptions for kind of pricing and mix and different pieces. I know that traffic is a big focus this year, but I mean, presumably you feel like mix is kind of helped by the kiosks and then, you know, pricing. I don't know if you're thinking it would fade a bit or whatnot. Could you just comment directionally on that? Yeah, Brian. So pricing, obviously, is going to continue to be very fluid for us. But obviously, we expected to take price this year, as we as we indicated, we expected to have positive mix this year.

Speaker Change: Sorry, if you had mentioned this but what was sort of the.

Speaker Change: I'll ask was more directionally.

Speaker Change: Just sort of the assumptions for kind.

Speaker Change: Pricing and mix of the different pieces I know the traffic is a big focus this year, but I mean, presumably.

Speaker Change: Do you feel like mix has kind of helped by the kiosks.

Speaker Change: Pricing I don't know if youre thinking it would fade a bit or whatnot could you just kind of directionally on that.

Yeah, Brian So pricing, obviously is going to continue to be very fluid for us but.

Speaker Change: Obviously, we expect it to take price this year as we as we indicated we expected to have positive mix. This year and we expected to come out of the gate with negative traffic as we entered this year with that improving over the course of the back half of the year, but that guide implies pricing a little bit <unk>.

Brian Mullan: And we expected to come out of the gate with negative traffic, as we entered this year with that improving over the course of the back half of the year. But that guide implies, you know, pricing, a little bit positive mix and negative traffic for the year. That's what that guide implies, with the traffic trends, again, improving as we get into the back half of the Yes. Okay. Sounds good.

Speaker Change: Positive mix and negative traffic for the year, that's what that guide implies with the traffic trends again, improving as we get into the back half of the year.

Speaker Change: Yeah, Okay sounds good thanks could you talk a little bit about the advertising that you're.

Brian Mullan: Thanks.

Michael Osanloo: Can you talk a little bit about the, the advertising that you're, you're doing in Texas? And I guess, you know, other plans for, for this full year, what that looks like, and just kind of the timing of that. Yeah, you know, in Texas, it's really, we, we have a great opportunity ahead of us on increasing awareness. We're just, the awareness, you know, when I look at the awareness in DFW versus Arizona, for example, there's a material opportunity for us and awareness directly correlates to sales in our restaurants. So that's what this is about. There's outdoor, which are large billboards.

Speaker Change: Youre doing it in Texas and I guess.

Speaker Change: Other plans for for this full year or what that looks like I'm, just kind of the timing of that.

Speaker Change: Yes.

Speaker Change: Texas is really we.

Speaker Change: We have a great opportunity ahead of us on increasing awareness. We're just the awareness you know when I look at the awareness in DFW versus Arizona. For example, there is a material opportunity for us and awareness directly.

Speaker Change: Correlates to sales in our restaurants. So that's what this is about there's outdoor which are large billboards they're conveniently located on very busy highways.

Michael Osanloo: They're conveniently located on very busy highways, pointing out where the closest Portillo's is and announcing to the Texas community that we're open. The marketing campaign itself is on TV and it's on, you know, it's, we know that when we are on TV in our outer markets, it's, it works really well. We've done it in the past when we were penetrating Minneapolis, Indianapolis. We've done it in Arizona. We've done it multiple times in Chicago. And so there's a TV campaign, which is a lot of crowdsourced material from social media, which I think is a wonderful dynamic of using traditional media and current social media to get the best of on TV.

Speaker Change: Pointing out where the closest port pillows and announcing to the Texas community that were open.

Speaker Change: The marketing campaign itself is on television and it's on.

Speaker Change: We know that when we're on TV in our outer markets. It works really well we've done it in the past when we were penetrating Minneapolis, Indiana Indianapolis, we've done it in Arizona, we've done it multiple times in Chicago, and so Theres a television campaign, which is a lot of crowd sourced material from.

Speaker Change: Social media, which I think is a wonderful dynamic of using traditional media and current social media to get the best of on television.

Michael Osanloo: So we're, we're optimistic about it. It's, it's been on the air just a few weeks and we will definitely report out on how we felt about it towards the end of the quarter. The sahabah.

Speaker Change: So we're optimistic about it.

Speaker Change: <unk> been on the air just a few weeks and.

Speaker Change: And we will definitely report out on how we felt about it towards the end of the quarter.

Mr Hubbard: Mr Hubbard.

Kyle Nelson: Are you done with the questions? Yes, thank you. Thank you.

Speaker Change: Are you done with your questions.

Speaker Change: Yes. Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you.

Brian Mullan: Next question comes from the line of Brian Mullan with Piper Sandal, please hold. Hey, thanks. Question on development. I'm wondering if you could update us on the drive-thru only or non-traditional format, you know, where does that stand? I think you opened one last year.

Speaker Change: Next question comes from the line of Brian Mullan with Piper Sandler. Please go ahead.

Hey, Thanks, a question on development I Wonder if you could update us on the drive thru only or non traditional format. You know where does that stand I think you opened one.

Michael Osanloo: Do you feel like you've got that format fully ready to go, or do you need to see another iteration or two before you move forward in a more rapid way with those? Just any update on that format. Yeah, we did open one in Orland Park, which is a southeast suburb of Chicago. We've been very happy with it so far, and I think we're getting awfully close on a great format. It's got the restaurant of the future kitchen in it, so it's a smaller, more compact kitchen. But at this point, that concept is we're fine-tuning it, making it great.

Speaker Change: Last year do you feel like you've got that format fully ready to go or do you need to see another iteration or two before you.

Speaker Change: Move forward in a more rapid way with those just any update on that format.

Speaker Change: Yeah.

Speaker Change: Yes that we did open one in Orland Park, which is a self.

Speaker Change: Southeast suburb of Chicago, we've been very happy with it so far and I think we're getting awfully close on a great format.

Speaker Change: Got the restaurant of the future kitchen in it so it's a smaller more compact kitchen.

Speaker Change: But at this point those that concept is is we're fine tuning it making it great. It's not so much being super aggressive with it but being I think thoughtfully growing those and they make a lot of sense in places, where we have density and saturation for an incremental occasion.

Michael Osanloo: It's not so much being super aggressive with it, but being, I think, thoughtfully growing those. And they make a lot of sense in places where we have density and saturation for an incremental occasion. So, we're going to keep building them in Chicagoland for sure, and, you know, we're actively looking at a couple of other markets where we feel we have brand awareness and scale to justify the pickup-only location. There was a point, I don't know, I don't want to overcook it, but we are looking at in-line locations and airport locations this year. And so, we'll communicate that as we have more certainty around those.

Speaker Change: So we're going to keep building them in Chicago in for sure and we're actively looking at a couple of other markets, where we feel we have brand awareness and scale to justify.

Speaker Change: The pick up only location there was a point.

Speaker Change: I don't know I don't want to Overcook. It but we are we are looking at in line locations and airport locations. This year and so we'll we will communicate that as we have.

Speaker Change: More certainty around those but I.

Michael Osanloo: But I am excited to do a walk-up location, you know, more of a, think of a busy downtown location or a denser population location with a walk-up. So, we're excited to try one of those. Okay, thank you.

Speaker Change: I am excited to do a walk up location some more of it.

Speaker Change: Think of a busy.

Speaker Change: Busy downtown location or a denser population location with a with a walk up so we're excited to try one of those.

Speaker Change: Okay. Thank you and then a question on loyalty.

Michael Osanloo: And then a question on loyalty, which is new, maybe talk about the decision, I think you went with an app-less loyalty program. Just any background there and how we should think about why this was the best option for Portillo's versus maybe a more traditional app-based approach that we might be more used to seeing? So just any color on that would be great to understand. I think everything that the advisors told us and every bit of consumer research that we invested in would suggest that consumers are approaching app fatigue and opening yet another restaurant-based app is just something that they're not as interested in doing and that the typical usage pattern consolidates down to a couple apps.

Speaker Change: As new maybe talk about the decision I think you went with an Atlas loyalty program.

Speaker Change: Any background there.

Speaker Change: How we should think about why this was the best option for word pillows versus maybe a more traditional AD based approach that we might be more used to seeing so just any color on that.

Speaker Change: Yes, it would be great.

Speaker Change: Yes.

Speaker Change: I think everything.

Speaker Change: Everything that the advisers told us and every bit of consumer research that we invested in would suggest that.

Speaker Change: Consumers are approaching app fatigue, and opening yet another restaurant base App is just something that they're not as interested in doing and that the typical usage pattern consolidates down to a couple of apps. So we don't we don't want to try to compete against that and App less.

Michael Osanloo: So we don't want to try to compete. An App Less Loyalty Program sits in your Apple wallet or your Google wallet, and it allows us to communicate to you one-on-one in a very convenient manner. So if you're going in and looking for an airline ticket, a concert ticket, you want to use Apple Pay for something. The program sits there. It tells you what offers you have. If you want us to or allow us to, we can communicate to you proactively. So if I know you're going into your second favorite burger joint, I can remind you how great our burgers are and I can send you an offer real time if it's geofenced.

Speaker Change: Loyalty program sits in your Apple wallet or your Google wallet.

Speaker Change: And it allows us to communicate to you one on one.

Speaker Change: In a very convenient manner, so if youre going in and looking for an airline ticket a concert ticket you want.

Speaker Change: Use apple pay for something.

Speaker Change: The program sits there. It tells you what offers you have.

Speaker Change: If you want us to or allow us to we can communicate to you proactively so if I know youre going into Europe.

Speaker Change: Your second favorite Burger joint I can remind you how great. Our burgers are and I can send you an offer real time, if it's geofence. So it allows us to do a level of one to one customer relationship management that is truly special and unique and.

Michael Osanloo: So it allows us to do a level of one-to-one customer relationship management that is truly special and unique. And it's, we think that, you know, we've picked the pieces, the best pieces of what all the great restaurant companies are doing and assembled something unique.

Speaker Change: We think that we've we've picked the pieces the best pieces of what all the great restaurant companies are doing and assembled something unique.

Michael Osanloo: Thank you.

Speaker Change: Okay. Thank you.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Thank you next question comes from the line of Jim Suva with Stephens. Please go ahead.

Jim Salera: Next question comes on the line of Jim Salera with Stephen Inc. Please go ahead. I wanted to maybe drill down on your expectations for QSR traffic growth in 25 because if I just kind of do, you know, back-of-the-envelope math with pricing and the positive mix commentary, it implies, you know, kind of down traffic for you guys down, you know, high-low single digits to maybe low-mid single digits and at least the commentary we've heard is like QSR traffic for the industry is going to be down like, you know, call it 50 to 100 basis points. And so I don't know if you guys have maybe a more conservative forecast on the industry or if you anticipate your traffic to be less than the industry.

Jim Suva: Hey, good morning, Thanks for taking my questions.

Jim Suva: I wanted to maybe drill down on your expectations for <unk> traffic growth and 25.

Jim Suva: Just kind of do back of the envelope math was pricing and the positive mix commentary.

Jim Suva: Applies kind of down traffic for you guys down.

Jim Suva: High low single digits, maybe low mid single digits.

Jim Suva: At least the commentary referred as like <unk> traffic.

Jim Suva: For the industry is going be down like call. It 50 to 100 basis points.

Jim Suva: So I don't know if.

Jim Suva: You guys have maybe a more conservative forecast on the industry or if you anticipate your traffic to be less than the industry you any color on that would be helpful.

Michael Osanloo: Any color on that would be helpful. I think there's just an acknowledgment of the fact that we ended Q4 last year down negative 3.7 on traffic. And so we believe that we will have some traffic momentum this year, especially with rolling out loyalty program, with the marketing that we're doing, with operational improvements. I mean, we've talked about. But, you know, you're not going to flip the switch overnight. So it's not like you're going to go from negative 3.7 to positive in the first quarter, especially with some of the weather in February. So what I think, Jim, what we're saying is expect us to steadily improve on traffic over the course of the year.

Jim Suva: I think I think there is.

Jim Suva: Just an acknowledgement of the fact that we ended Q4 last year down negative $3 seven on traffic.

Jim Suva: And so we believe that we will have some traffic momentum this year, especially with rolling out loyalty program with the marketing that we're doing with operational improvements I mean, we've talked about this but.

Jim Suva: Youre not going to flip the switch overnight so its not like youre going to go from negative $3 seven to positive in the first quarter, especially with some of the weather in February So what I think Jim what we're.

Jim Suva: We're saying is expect us to steadily improve on traffic over the course of the year.

Michelle Hook: And that, you know, that algorithm is what gets you to the zero to 2% same store sales with some modest pricing. We don't want to, you know, no one wants to be aggressive on pricing. We're excited about the mixed improvements, but it's modest pricing, some mixed improvement, and positive momentum over the course of the year on traffic to get to that zero to two. Yeah, I would just add on it, obviously, to what Michael said, not all quarters are going to be created equally, right. And so as we, again, implement these strategies, we expect to see traffic improvement throughout the year, and then driving that positive trend as we get into the back half of the year and exit the year.

Jim Suva: And that that algorithm is what gets you to the zero to 2%.

Jim Suva: Same store sales with some modest pricing, we don't want no one wants to be aggressive on pricing. We're excited about the mix improvements, but it's modest pricing some mix improvement and.

Jim Suva: Positive momentum over the course of the year on traffic to get to that zero to two.

Speaker Change: I would just add on it obviously to what Michael said not all quarters are going to be created equally right and so as we again implement these strategies, we expect to see traffic improvement throughout the year and.

Speaker Change: And then driving that positive trend as we get into the back half of the year and exit the year, but obviously with we didn't expect some of the impacts that we've seen in February so that creates a little bit more headwinds in Q1 that then I think we and others in the industry anticipated, but I don't think that that's an indicator.

Jim Salera: But obviously, we didn't expect some of the impacts that we've seen in February. So that creates a little bit more headwinds in Q1 that then I think we and others in the industry anticipated. But I don't think that that's an indicator of the fundamentals of the business. But we want to be, obviously, we want to acknowledge, Jim, what the trends are in the industry, what the consumer is feeling. And I think you see some of that as well built into the, what we believe a conservative guide is for the year.

Speaker Change: The fundamentals of the business, but we want to be obviously, we want to acknowledge Jim what the trends are in the industry what that what the consumer is feeling and I think you see some of that is while built into the what we believe are conservative guidance for the year.

Jim Salera: Okay, great.

Speaker Change: Okay, great and maybe shifting gears, a little bit thinking about the new location in Atlanta.

Jim Salera: And maybe shifting gears a little bit, thinking about the new location in Atlanta. Any thoughts on what quarter we should see that open up? And I know, obviously, it's not in place now, but just any thoughts on, should we expect that opening to be kind of similar to the colony in Dallas? Or is there maybe another good comp we should think about as you enter a new market? And that's kind of the what I assume is the flagship store. I think it's, I think I referenced earlier that it's in the back half of the year, unfortunately, with our pipeline right now for 25, most of our restaurant openings are in the back half of the year.

Speaker Change: Any thoughts on what quarter, we should see that open up and I know obviously, it's not in place now, but just any thoughts on.

Should we expect that opening to be kind of similar to the colony in Dallas or is there maybe another good comp we should think about as you enter a new market and that's kind of what I assume is the flagship store.

Speaker Change: Okay.

Speaker Change: It's.

Speaker Change: I think I referenced earlier that it's in the back half of the year. Unfortunately with with our pipeline right now for 25, most of our restaurant openings are in the back half of the year. So that's I can't even hazard a guess what kennesaw is going to do to be totally honest with you.

Michael Osanloo: So that's, I can't even hazard a guess what Kennesaw is going to do, to be totally honest with you. You know, we do seem to have a lot of pent up demand when it's a first in market restaurant. So we're obviously not built, we're obviously excited by it, and we hope that it does well, but you know, the volumes are just very, very difficult to produce.

We do seem to have.

Speaker Change: A lot of pent up demand when it is a first in market restaurants. So.

Speaker Change: We're obviously not where obviously excited by it and we hope that it does well but.

Speaker Change: The volumes are just very very difficult to predict.

Jim Salera: Okay, great. I'll hop back into the queue. Thanks, guys. Thank you.

Speaker Change: Okay, Great I'll hop back in queue. Thanks, guys.

Speaker Change: Thanks.

Speaker Change: Thank you next question comes from the line of Chris <unk> with Stifel. Please go ahead.

Chris Ogle: Next question comes from the line of Chris Ogle with Stifel. Please go ahead. Yeah, good morning, guys. I apologize if I missed this.

Chris: Yes, good morning, guys.

Speaker Change: I apologize if I missed this but Michael when do you expect to start using the new loyalty program to kind of drive frequency in the Chicago area and then have you tested any programs or offers to determine what could be most effective and I'm just curious what those might be.

Michael Osanloo: But Michael, when do you expect to start using the new loyalty program to kind of drive frequency in the Chicago area? And then, have you tested any programs or offers to determine what could be most effective? And I'm just curious what those may be. It's in, I don't think you missed it because I haven't actually said it, but it's in soft launch right now. We're rolling it out to test with our team members and sort of friends of friends, but we expect to be in full launch mode at the beginning of March. And so my expectation is you will start seeing a positive impact in Q2 as we roll it out and then start using it to drive traffic, frequency, etc.

Chris: It's in.

Chris: I don't think you missed it because I haven't actually said it but it's in soft launch right now we're rolling it out to test with our team members and sort of friends of friends.

Chris: But we expect to be in full launch mode at the beginning of March and so my expectation is you will start seeing a positive impact in Q2 as we roll it out and then start using it to drive traffic frequency et cetera. So we have a whole host of things that we're planning on doing Chris.

Michael Osanloo: So we have a whole host of things that we're planning on doing, Chris, but it would be a little premature for me to share all that. Okay. Thanks guys. You bet. Thank you.

Chris: But it would be a little premature for me to share all of that.

Speaker Change: Okay. Thanks, guys.

Speaker Change: You bet.

Speaker Change: Thank you next question comes from the line of Gregory Frankfurt with Guggenheim Partners. Please go ahead.

Gregory Francfort: Next question comes from the line of Gregory Francfort with Guggenheim Partners. Please go ahead. Hey, thank you very much. I have two questions.

Gregory Frankfurt: Hey, Thank you very much I had two questions. My first is Michael.

Gregory Francfort: My first is, Michael, can you just maybe update us on what the new store maturity curve is looking like in Texas, and how those stores are comping as they enter the store base and maybe year two, three performance there? Yeah, I would say it's the newest restaurants in Texas are performing much more like in a more mature market. I think that our strategy of Quickly achieving density in Dallas-Fort Worth has been very effective. We now have, you know, we have seven restaurants, we feel like we have good scale, and we feel like we can actively market and, you know, sort of shout our brand to the world.

Gregory Frankfurt: Can you just maybe update us on what the new store maturity curve is looking like in Texas.

Gregory Frankfurt: How those stores are comping as they enter the store base and maybe your two or three.

Gregory Frankfurt: Performance there.

Gregory Frankfurt: Yes, I would say it's.

The newest restaurants in Texas are performing much more like.

Gregory Frankfurt: In a more mature market I think that our strategy of.

Gregory Frankfurt: Quickly achieving density in Dallas Fort worth has been very effective we now have we have seven restaurants, we feel like we have good scale and we feel like we can actively market and sort of shout our brand to the world. So.

Michael Osanloo: So the, you know, the first, you saw that the first couple had these extraordinary curves where enormous volume and then it built, it came down, but the more recent ones are much more consistent with what we expect in a mature market, where it starts off at a relatively modest pace, but then picks up from there. So there's less of a curve, more of a ramp on the more recent.

Gregory Frankfurt: The first you saw that the first couple had these extraordinary curves were enormous volume and then it came down but the more recent ones are much more consistent with what we expect in a mature market where it starts off.

Gregory Frankfurt: At a relatively modest pace, but then picks up from there. So there's less of a curve more of a ramp on the more recent ones.

Gregory Frankfurt: Okay.

Michael Osanloo: Just as a reminder on what entering the camp base this year that's in Texas. So the colony, our first in market enters the camp base in Q1. Then the next one doesn't enter the camp base until Q3, which is in Allen. And then we only have one more that enters the camp base in Q4, which is Arlington. So just as a reminder of what's entering the camp base this year. That's what the cadence is for the Texas restaurants, those three. Thank you. That's helpful.

Speaker Change: Sorry, just as a reminder on what.

Entering the comp base this year, that's in Texas, So the colony or.

Gregory Frankfurt: Our first end market enters the comp base in Q1.

Gregory Frankfurt: On the next one doesn't enter the comp base until Q3, which is an Alan and then we only have one more that enters the comp base in Q4, which is Ireland 10. So just as a reminder of what's entering the comp base. This year.

Gregory Frankfurt: <unk>.

Gregory Frankfurt: That's what that's what the cadence is for the Texas restaurants those three.

Thank you that's helpful. And then just the other question I had was as you go into Colorado, and Georgia Youre starting to sign leases are those going to be the 6000 square foot.

Michael Osanloo: And then just the other question I had was, as you go into Colorado and Georgia, you're starting to sign leases. Are those going to be the 6,000 square foot boxes? Or is that going to be the bigger boxes? And I guess, any changes to kind of the pacing or strategy versus maybe Dallas as a good example? On the size of the box, so everything we're building this year is already that smaller box, what we're calling Restaurant of the Future. And you know as well as we do that the process to get a new restaurant in place is anywhere from, you know, 18 months to it can be as much as 30 months.

Gregory Frankfurt: Boxes or is that going to be bigger boxes.

Gregory Frankfurt: I guess any changes to kind of the pacing or strategy versus maybe Dallas is a good example.

Gregory Frankfurt: On the size of the box. So everything we're building. This year is already that smaller box, what we're calling a restaurant of the future and.

Gregory Frankfurt: As well as we do that the process to get a new restaurant in places anywhere from.

Gregory Frankfurt: 18 months to it can be as much as 30 months and so we're actively in permitting for the class of 26, that's what we're doing now and so that's why we're.

Michael Osanloo: And so we're actively in permitting for the class of 26, that's what we're doing now. And so that's why we're, you know. We say go on Restaurant of the Future 2.0 today, it's still going to be mid-26 before you see that restaurant, just as a function of permitting and construction cycle. So everything in 25 is Restaurant of the Future, which is that 6250 square foot format with the lower build costs, etc. Everything in 26 will be Restaurant of the Future either 1.0 or 2.0. And so you'll get a blend of lower cost, lower size restaurants there.

Gregory Frankfurt: We say go on restaurant of the future to point out today, it's still going to be mid 'twenty six before you see that restaurant, just as a function of permitting and construction cycles. So everything in 'twenty five is restaurant of the future, which is at $62 50 square foot format with the lower build costs.

Gregory Frankfurt: Et cetera, everything in 'twenty, six will be restaurant of the future either one point or two point out and so youll get a blend of lower cost lower sized restaurants there.

Gregory Frankfurt: One important thing to note too by the way.

Michael Osanloo: One important thing to note too, by the way, we're not building these restaurants to do smaller volumes. We're building these restaurants to do the volumes that we're comfortable that a Portillo's can and should do, but we're very conscious of what the cash on cash return is on these and maybe to increase potentially the white space longer term.

Gregory Frankfurt: Building these restaurants to do smaller volumes were building these restaurants to do the volumes that we're comfortable that our portfolio can and should do but we're very conscious of what the cash on cash return is on these restaurants.

Gregory Frankfurt: And maybe to increase potentially the <unk>.

White space longer term.

Michael Osanloo: And just, Michael, just a follow up on that strategy. Any changes from maybe how you entered Dallas-Fort Worth in terms of pacing or marketing or anything like that? I love getting to some efficient scale because then it allows us to very efficiently market and start increasing awareness. You know, like it took us a better part of 10 years to get to an awareness level in Arizona that is sort of reasonable. We're, our goal is to achieve that in Texas in two years. And so we're just dramatically increasing the speed with which people get to know us, so that we can, you know, stabilize the business and become a steady, durable transaction and comp driver out of these markets.

Michael: And it just Michael just a follow up on that.

Speaker Change: Strategy any changes from maybe how you entered Dallas Fort worth in terms of pacing or marketing or anything like that.

Michael: But what I, what I I.

Michael: I love getting to us some efficient scale. Because then it allows us to very efficiently market and start increasing awareness.

Michael: It took us better part of 10 years to get to an awareness level in Arizona that is sort of reasonable.

Michael: Sure.

Michael: Goal is to achieve that in Texas in two years and so we're just dramatically increasing the speed with which people get to know us. So that we can stabilize the business and become a steady durable transaction and comp driver out of these markets.

Michael Osanloo: So I like getting to scale quickly, Greg. I think it's very important for us. You got to follow it on with aggressive marketing to build awareness, but one without the other doesn't really work well. Thanks for the perspective. Thanks, Michael.

Michael: So I'd like getting to scale quickly Greg I think it's very important for US you got to follow it on with aggressive marketing to build awareness, but.

Michael: One without the other doesn't really work well.

Speaker Change: Thanks for the perspective, Thank you Michael.

Michael Osanloo: You bet. Thank you.

Michael: You bet.

Speaker Change: Thank you.

Operator: A reminder to all the participants that you may press star and 1 to ask a question.

Speaker Change: All the participants plus doesn't want to ask a question.

Operator: Thank you.

Speaker Change: Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: At todays teleconference. You may disconnect your lines at this time, thank you for your participation.

Ray Piquion: We have a question. Do you want to take it? Who is it?

Speaker Change: We have a question do you want to take it.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Who is.

Michael Osanloo: It's Ray Piquion from Morgan Stanley. Sure, yeah. Hi, how are you?

It's a rate.

Speaker Change: <unk> from Morgan Stanley.

Speaker Change: Sure Yes.

Speaker Change: Please go ahead hi.

Speaker Change: How are you my question is more focused on the drive thru.

Ray Piquion: My question is more focused on the drive-thru. What are some of the fundamental changes that you're making to the drive-thru as it stands today? Just some side comments before I answer that. Like in the Chicago area, in the suburbs, in the colder weather, the way the drive-thru window is situated, it's real close to the food. And I noticed that when I go through the drive-thru, there's, you know, the kids are talking to each other with the window open and the food gets very cold when it's delivered. Not the end of the world, but not the greatest way to do things.

Speaker Change: What are some of the fundamental.

Speaker Change: Changes that youre, making to the drive thru as it stands today to some comments before you answer that.

Speaker Change: And then Chicago land area and the software on the <unk>.

Speaker Change: Older weather.

Speaker Change: The way to drive the drive through window is situated it's real close to the food and I noticed that when I go through the drive thru.

Speaker Change: Kids are talking to each other with the window open and the food gets very cold.

Speaker Change: Delivered not the end of the world, but not the greatest way to do things.

Ray Piquion: Secondly, I mean, pre-COVID, I noticed that the lines were long because there was a lot of business coming through and during COVID, a lot of business coming through. And I used to drive through thinking to myself, man, look how long those lines are. But when I'd get in the line, the line would go really fast, kind of like Chick-fil-A goes through now. And, you know, the drive-through has improved, but it's still not as fast as the pre-COVID time period. And I feel that's an intangible that's that if it was. just a little bit more efficient.

Speaker Change: Secondly, I mean pre COVID-19.

Speaker Change: I noticed that the drive the lines are long because there was a lot of business coming through.

Speaker Change: During COVID-19 a lot of business coming through.

Speaker Change: And I used to drive through thinking to myself men look how long those lines are but when I get in line. The line would go really fast kind of like <unk>.

Speaker Change: <unk> goes through now.

Speaker Change: And the drive through has improved but it's still not as fast as the pre COVID-19 time period, and I feel that's a intangible that's being missed that if it was.

Speaker Change: Just a little bit more efficient I'd be looking at the wrong line thing.

Ray Piquion: I'd be looking at the long line saying, oh man, look at it. There's an intangible, you go through that line and you're like, holy cow, look how long it is. And you're saying, that's a lot of business and you're excited, and then when you get in the line, it goes fast. You're excited to be a part of it. But when the line goes slow, you're no longer excited to be a part of it. That is such an intangible nuance, but it's hugely important. And I think you guys are missing a lot of. return business, residual business that could add up to a lot of money.

Speaker Change: There is an intangible youll be through that line and you're like Holy Cow, That's how long it is and Youre, saying Thats a lot of business. We are excited and then when you get the line. It goes fast you are excited to be a part of it but when the line goes slowly no longer excited to be a part of it that is such a tangible intangible nuance, but it's hugely important and I think you guys are missing a lot of <unk>.

Speaker Change: Return business residual business that could add up to a lot of money and it's a real basic I guess question one of the fundamental things that Youre doing old school.

Ray Piquion: And it's a real basic, I guess, question. What are the fundamental things that you're doing, old school, that are going to prove that drive through as it stands today?

Speaker Change: To prove that drive through as it stands today.

Speaker Change: Okay.

Michael Osanloo: So Ray, nice to meet you. This might be better in an offline conversation. But let me just respond quickly to some of the things that you said. I think we've acknowledged on the last three or four calls that we have gotten slower. And it's one of the emphasis on why we're reclaiming that 45 seconds. We're about 45 seconds slower than pre COVID. So 100% agree with you. We acknowledge that. It's why we have a number of different initiatives in the drive through to get that 45 seconds back. We were actually a minute, we gained 15 seconds, we have active initiatives to get that other 45 seconds back.

Speaker Change: So nice to meet you.

Speaker Change: This might be better in an offline conversation, but let me just respond quickly to some of the things that you said I think we've acknowledged on the last three or four calls that we have gotten slower and it's one of the emphasis on why we are reclaiming that 45 seconds, where about 45 seconds slower than pre COVID-19, so 100% agree with you.

Speaker Change: We acknowledge that it's why we have in a number of different initiatives in the drive thru to get that 45 seconds back we were actually a minute. We've gained 15 seconds, we have active initiatives to get that other 45 seconds back.

Michael Osanloo: I'm a I'm hoping that you had an one off idiosyncratic experience when you're talking about the windows being open and kids chit chatting and stuff. So maybe offline, if you can let us know what restaurant you were at, because that is certainly not normal at a Portillo's and is not acceptable at a Portillo's. So we can certainly coach up any teams that are doing that because, you know, those those windows are automatic, they open and shut with motion sensor, and it is meant to only open when you're passing food in and out. In our newer restaurants, you may or may not have seen that we're actually using a side door with an air curtain that keeps all the heat inside.

Speaker Change: I'm, hoping that you had one off idiosyncratic experience when you are talking about the windows being open.

Speaker Change: Kids Chit chatting and stuff. So maybe offline if you could let us know what restaurant you were at is that is certainly not normal at a port till those and it is not acceptable at a portfolio. So we can certainly coach up any teams that are doing that because.

Speaker Change: Those windows are automatic they open and shut.

Speaker Change: With motion sensor and it is meant to only open when youre passing food in and out and our newer restaurants, you may or may not have seen that we're actually using a side door with an air curtain that keeps all the heat inside and Thats, how we are facilitating food to the guest so.

Michael Osanloo: And that's how we're facilitating food to the guests.

Ray Piquion: So sounds like you have some local experience with Portillo's happy to hear more about it and figure out what went wrong with your experience. Generally, no, I'm very happy with Portillo's. The food is fantastic. It's just, I know that the drive-through is. so many more. I agree with you 100%. Not only does it need to be where it was but our goal is to get better than we ever were. I appreciate your comments. Well, thank you for the information. You bet. Thank you.

Speaker Change: It sounds like.

Speaker Change: You have some local experience with <unk> happy to hear more about it and figure out what went wrong with your experience.

Speaker Change: Generally no I'm very happy with Quintiles. The food is fantastic. It's just I know that the drive thru is so.

Speaker Change: So key to everything.

Speaker Change: Yes, I love more driving ranked.

Speaker Change: I have noticed an improvement it's funny, you said 15 seconds, because I would say, it's about 25% better than it was but not quite where it needs to be.

Speaker Change: I agree with you, 100% it needs it not only is it need to be where it was but our goal is to get better than we ever work.

Speaker Change: Well I appreciate your comments well thank you for the information.

Speaker Change: You bet.

Speaker Change: Thank you.

Speaker Change: Okay. Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Sure.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: [music].