New owners and a new CEO hope to take regional chain to new heights
Walk into the Portillo’s in Downers Grove, Ill., and you’ll be greeted by an enthusiastic customer service representative, perhaps Mary Craig, who will write your order on the back of a paper bag.
Don’t expect to understand any of the writing. While many restaurants devise their own systems to manage customers, Portillo’s has its own language.
Want a hot dog with everything? Then Craig will write an “E.” Want that hot dog with everything and ketchup? That’s “E K,” because ketchup doesn’t come on hot dogs unless you really want it. Craig then sends it through the assembly line, where workers read the language and prepare the hot dogs, the beef sandwiches and the chocolate cake.
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The system works: The location once greeted a busload of 225 people and served all of them in 11 minutes.
“We can handle more orders at a time than almost anyone else on the planet,” Craig said.
This process is part of a meticulous operations system designed over the past 50 years by Dick Portillo, a former marine who got into the hot dog business before he even knew how to cook a hot dog. In the process, Portillo created one of Chicago’s most popular restaurant concepts.
Portillo's order line & counter. Photo: Portillo's
The system enables Portillo’s to operate with massive unit volumes and an awful lot of menu items. At a time when most fast-casual chains are growing with simple menus and small locations, Portillo’s goes big, opening supersized restaurants with $8 million unit volumes — more than a McDonald’s restaurant, a Chick-fil- A restaurant and a Chipotle restaurant, combined.That’s the kind of unit volume that attracted Boston-based Berkshire Partners to pay close to $1 billion in 2014 for the chance to take this popular chain national — an eye-popping sum for a concept that had only 38 locations.
It’s now up to Berkshire, along with Keith Kinsey, who joined the chain as CEO after the acquisition, to guide Portillo’s as it accelerates its expansion outside of its home state of Illinois — and does so while maintaining high unit volumes and a complex operating system.
Dick Portillo was raising a family in 1963 when he spent $1,100 to buy a six-by- 12- foot trailer to start a hot dog stand in Villa Park, Ill. The trailer had no running water, so Portillo either had to bring water from home or use a nearby spigot.
Dick Portillo and Keith Kinsey. Photo: Elizabeth Nord
Portillo also had no idea how to run a restaurant. “I did it backwards,” he said. “I opened the trailer and started selling hot dogs. And then I tried to find out how to do it.”He bought everything from a local grocer and washed the dishes in the bathtub of his home. Eventually, Portillo snuck into the back door of another hot dog restaurant and looked at the boxes in the storeroom to find out where to source hot dogs and buns and mustard.
Portillo named the shack “The Dog House.” But he moved into a bigger shack in 1967 and renamed the concept Portillo’s. He opened his first location with a bathroom in 1971.
As the company moved into a bigger building, it started adding other menu items, such as Italian beef and Italian sausage cooked on a grill — because they had higher margins.
“Business started doubling every year — doubling, doubling, doubling — after we built the second trailer,” Portillo said.
Over the following years, the company expanded the menu, adding items like hamburgers and chocolate cake and the “Cake Shake” while spending little on advertising.
Portillo’s built a loyal following of customers who would drive for many miles to go to one of its restaurants.
“We have an amazing, cult-like following,” Portillo said. “Portillo’s hardly ever advertised. My way of thinking is that the best advertisement is word of mouth. But we spent a lot of money on training people.”
Differentiated with a diverse menu
As Portillo’s added more menu items, it built large restaurants on two acres near retail areas that have busy drive thrus. Portillo’s operates massive quick-service palaces.
They’re big restaurants with gaudy decorations, each of them with a different theme, like a ’50s diner or Prohibition-era gangsters with a 1928 model truck suspended from the ceiling.
Portillo’s serves large menus from kitchens fully visible to the customer. At the Downers Grove location, a sign on the window separating customers from the prep area reads, “Other fast food places prepare their food behind closed doors.
Portillo's closed door sign. Portillo's
Hmmmm. Makes you wonder doesn’t it?”The large restaurants have big menus. Hot dogs, hamburgers, sausage, beef sandwiches and desserts like chocolate cake, strawberry shortcake and the Cake Shake. And yet 12 percent of sales are salads.
Portillo's bacon double cheeseburger meal. Photo: Portillo's
This expanded menu goes against the grain in the restaurant business, where simplicity is increasingly the name of the game. Portillo’s Oak Brook neighbor,McDonald’s Corp., has been criticized in recent years for the size of its menu.
Portillo sees things differently. “I built a moat around Portillo’s,” he said. “The moat is our complexity. I wanted to make it complex to eliminate the competition and create a brand nobody else had.”
The different elements within Portillo’s fit together to create something unique, said Kinsey.
“There are certain elements you can copy,” he said. “But when you put the pieces together, it’s really different.”
At the same time, the size of the menu gives customers more reasons to go to the restaurant.
“You can come here seven days a week and never order the same thing twice,” Portillo said.
Portillo’s doesn’t advertise much, and never has. Portillo himself is a big believer in the power of word-of- mouth advertising. Instead, he spent money on training.
“We train and train, and then we train,” Kinsey said.
Workers start with 80 hours of training in their first two weeks, and a lot of that is training on those ordering abbreviations. Even Kinsey got that language training when he started at the chain in 2014 — though he admits he has a bit to go before he’s fluent. “Oh, God, I’m not there yet,” he said.
The training is vital because ensuring that customers have a good time when they dine at Portillo’s is the chain’s biggest advertisement.
“When you walk out the door, you can go left, right, forward or back,” Portillo said.
“What’s going to make you go back? Your last experience.”
The focus on training also enables the chain to operate with speed and efficiency despite its large menu and complex system.
Portillo's sweet hot beef sandwich. Photo: Portillo's
Kinsey said the chain takes no shortcuts. The sliced beef for the beef sandwiches is separated, slice-by- slice, before it’s put into gravy kept at precisely 180 degrees — hot, but not boiling. Hot dogs aren’t boiled because that could split the dog.Even the menu items the company delivers to homes across the country come with detailed instructions on how to prepare them without hurting the quality. Along with the beef and the hot dogs include directions that say “do not boil” in large, red letters.
“It’s all critical,” Kinsey said. “The size of the onions, the cut of the tomatoes, the chocolate cakes. What those things need to look like and taste like. The heat of the fries and temperature is so critical. It should almost burn my hand.”
To serve all of its customers and still maintain the chain’s meticulous standards for preparation, workers are kept on stations where they get better and faster, and complete tasks with speed and precision.
“It’s like going onto the basketball court,” Kinsey said. “As long as people understand their positions, things will go well. There are no shortcuts. There’s no faster way to make a beef sandwich. It’s all about staying the course.”
All of these systems were developed under Portillo’s watch over the years. While he didn’t know the restaurant business when he started, he did understand the importance of working within a system.
“I’m a former marine,” he said. “I learned the value of training, teamwork and organization.”
Time for a sale
Portillo admits that he spent most of his life working very long hours, and didn’t have good work-life balance until about 20 years ago. And then, in 2014 and in his 70s, and eager to spend more time on his boat, Portillo decided to sell.
It was a good time, too. Private-equity groups were throwing big dollars at growth chains. Portillo saw his concept as a growth chain.
“The timing was right,” he said. “I’m in my 70s. I knew the brand would travel.
“Nobody is going to give me a lot of money for 38 units. They’re going to give me a lot of money to take those 38 units and take it nationwide.”
Berkshire’s purchase of Portillo’s was widely reported to approach $1 billion.
The sum raised a lot of eyebrows. Portillo’s is largely a Chicago concept. But it has opened locations in other markets, like California and Arizona, and those markets have matched, at least, the chain’s sky-high unit volumes.
Portillo said that 24 different private-equity groups bid for the chain. He chose Berkshire, at least in part, because the private-equity group didn’t have a lot of experience in restaurants.
“If somebody in the restaurant business has several units, the only way they know the business, to take it nationwide, is to simplify it,” Portillo said. “It won’t work with Portillo’s because Portillo’s is unique.”
He felt that Berkshire, which ultimately won the bidding, understood that Portillo’s wouldn’t succeed if it took the easy approach to growing the chain.
“They understood the value of training,” Portillo said, who still works with his namesake restaurant as a consultant.
“I hope to God they do succeed. Nobody would be happier than me. But they have to do it right. If they maintain the culture they bought, the training and don’t let the real estate get ahead of the training. So far it looks like they’re doing it right.”
The job of expanding the chain and maintaining standards falls to Kinsey, who has a lengthy career in the restaurant business in both finance and operations, working with some of the country’s most successful concepts.
He came to Portillo’s from Noodles & Company, where he was chief financial officer and then chief operating officer. Before that, he worked in operations at Chipotle Mexican Grill.
He had also worked with other restaurant concepts, including the big one near Portillo’s, McDonald’s.
Kinsey clearly understands the importance of the chain’s culture and heritage.
“The biggest thing you could do in my role is screw it up,” Kinsey said. “It’s lasted 53 years and endured cycles and changes, and has come out to be such a strong brand.”
Currently, Portillo’s has 42 locations. But it is working to expand that number, albeit at a measured pace. The company is planning 10 to 12 new locations per year, Kinsey said.
But while the company is a Chicago chain, it has already proven itself in markets far beyond the Midwest. It opened its first location in California in 2005. Then it opened in Indiana the next year, and in 2013 went to Arizona. This year, it opened in Florida.
The chain can make these regional jumps because in 1999, the company started Portillo’s Home Kitchen and began shipping many of its menu items nationwide. The shipments include detailed instructions to ensure that the product maintains quality, so as to not hurt the brand’s image.
Some items don’t ship because they don’t travel nearly as well as, say, Portillo’s hot dogs or Italian beef. The chain controls the products that get shipped to maintain that quality. “It’s absolutely critical,” Kinsey said.
“So many brands have a private label,” he said, noting the intricate care put into packaging. “We make sure it meets our specifications.”
The Home Kitchen also provides Portillo’s with a wealth of data that it uses to decide where to open next.
“Because we do a fair amount of business online, we’re finding out where the transplants are,” Kinsey said.
Many Chicago natives move to other areas and order Portillo’s online, and they tell friends who also become fans of the chain. So before the concept opened in Brandon, Fla., it knew from looking at its own online sales numbers that it had plenty of fans who relocated to the Sunshine State.
Having a loyal base of customers also helps with the opening. Before the Brandon opening, the company sent out invitations to nearby customers and urged them to invite friends and neighbors. That way, the company was able to serve 14,000 people during its testing days to train workers and ensure things went smoothly. During those days, many customers wore their Chicago Bulls or Chicago Cubs outfits. And many already knew the menu.
Indeed, said Kinsey, many loyal customers helped other, newer customers with the menu. “They’re our ambassadors,” he said.
The restaurants far outside of Chicago easily maintain the chain’s per-unit average.
“It’s all about nostalgia,” Kinsey said. “It’s about the families. The nostalgia is something the family at the table can talk about. That, along with the food, is so comforting. They’re feeling good about something.”
Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze
