Hot Dog Chain Sees Hot IPO as Differentiated In-Restaurant Experience Offsets Mid-Tier Digital Efforts

Villa Park, Illinois-based hot dog chain Portillo’s, which operates around 70 locations across nine states, is generating huge interest from investors following its initial public offering (IPO) Thursday (Oct. 21), bolstered by the chain’s consistent ability to generate sales at its restaurants and maintain a highly devoted following.

From a digital perspective, the brand is about par for the course in terms of sales mix. Portillo’s generated around 20% of its sales through digital channels in 2020, per the company’s prospectus filing with the United States Securities and Exchange Commission (SEC). The brand is helped by the membership of major restech provider Olo’s CEO Noah Glass on its board.

“We have a long-standing relationship with Olo in which they have allowed us to customize their software to support our needs,” the prospectus states. “One such customization allows us to route select delivery orders to our restaurants for processing, which allows us to operate our delivery sales channel more efficiently.”

Additionally, the company notes for comparison that its average delivery volume in 2020 was roughly equal to delivery giant Domino’s Pizza and that its average delivery volume for the 12 months ending after the second quarter of 2021 actually exceeded Domino’s.

Research from PYMNTS’ How We Eat Playbook, created in collaboration with Carat, from Fiserv, finds that delivery remains a significantly less popular than pickup or in-store purchasing, with 76% of consumers reporting that they had ordered for pickup in the last month, 63% reporting that they had purchased restaurant meals in stores, and only 47% reporting that they had ordered for delivery.

See also: Up for Grabs: Restaurants and Grocers See Path to Picking up 200 Million New Customers

While the brand is competitive in the digital space, it is not yet a leader. Even with its forays into the ghost kitchen space, the brand has been far from aggressive. While competitors have been announcing deals to open tens or hundreds of new delivery-only kitchens, Portillo’s has so far opened only one. Instead, the brand highlights more traditional factors as its key differentiators.

“We compete primarily with quick service and fast casual concepts, and to a lesser extent, full-service restaurants,” the prospectus states. “We believe competition with these restaurants is based primarily on food quality, taste, ambiance, convenience, service speed, price, and value.”

The company highlights its “cult-like following,” which it attributes in part to its restaurants’ branding, “designed to engage the senses” with retro-themed furniture and décor. Additionally, Portillo’s notes that its average drive-thru sales for the 12 months ended second quarter of 2021 were more than triple those of quick-service restaurant (QSR) leader McDonald’s and that its dine-in sales in the same period were 75% of fast-casual giant Chipotle’s.

With this strength of its restaurants, the company will likely continue to thrive on the public market, especially with its ambitious growth pipeline, planning to open 600 restaurants in the next 25 years. So far, the company’s track record supports the restaurants’ consistency, with the prospectus stating that Portillo’s has never closed a restaurant since its founding in 1963. In the more near-term future, the company plans to open seven new restaurants in FY2022.

“I think we’ve kind of future-proofed and de-risked our business going forward,” Derrick Pratt, the company’s chief operating officer, told the Chicago Sun Times. “I think our shareholders are going to love the way we bring that to fruition.”

The chain’s stock price soared more than 50% the day of its IPO, and the price continues to rise Friday (Oct. 22).