Portillo’s to close outside Chicagoland and reset its growth strategy

By Daniel Okafor

Portillo’s will close a mid-to-high single-digit number of underperforming restaurants outside Chicagoland, with most of the closures set for fiscal Q4 2026, CEO Brett Patterson said on the chain’s third-quarter 2026 earnings call last week. The company did not disclose an exact count.

Patterson said the company had taken “an honest look at our business over the past several months” and confronted a hard reality: Portillo’s “has not delivered the returns our investors expected.” The admission resets a strategy built on rapid expansion.

The hot-dog chain has struggled in recent years to grow same-store sales and produce strong returns at new units. Q3 comparable sales rose 1.4%, but pricing drove most of that growth while traffic fell 0.7%.

Several other fast-food and fast-casual brands posting Q3 comps gains also leaned more on price and mix than traffic, putting Portillo’s performance in a wider industry pattern. Patterson said: “I am encouraged by the early progress, but let me be clear, one quarter is not a trend. We have significant work ahead.”

He said the chain will continue shifting its business and strategy in coming quarters to establish sustainable growth. That reset starts with pruning restaurants, although Portillo’s gave investors no estimate of closure costs, sales impact or savings.

A managed retreat beyond the core market

Closures will target underperforming locations, with the majority in fiscal Q4 2026. They may cluster in markets where Portillo’s awareness is thin or restaurant density is too high, two risks Patterson tied to its rapid rollout.

Texas is the clearest example. Patterson said the chain entered new markets quickly, added infill restaurants and failed to invest enough in brand awareness to build a fanatical customer base.

Underperformance in new markets, particularly Texas, contributed to the departure of CEO Michael Osanloo in 2025. Patterson said the fast ramp and infill effort redistributed sales from those areas, putting pressure on the business models.

He also conceded that branding failed to show what Portillo’s serves: some restaurants carried only the Portillo’s name. The chain’s FAQ lists locations outside Chicagoland in California, Texas, Florida, Georgia and Arizona.

Smaller prototypes change the capital plan

Portillo’s is shrinking the footprint of its next store class at the same time. After years developing prototypes with smaller kitchens, the chain announced its 2023 Restaurant of the Future at 5,500 to 6,000 square feet, compared with 7,700 to 11,000 square feet for prior models; those locations required up to three acres.

The 2028 prototype cuts further to 4,600 square feet on 1.5 acres. Portillo’s expects lower development costs, while standardized design and greater site flexibility should improve throughput and productivity.

Capital spending will favor existing restaurants rather than aggressive unit growth, including technology and maintenance intended to keep sites clean, safe and well-maintained. The company did not disclose a capital-spending figure, expected savings or projected margin effect.

Recent cost moves reach from the corporate center to real estate:

• Right-sized the corporate structure.
• Formalized research to deepen its understanding of guests.
• Identified operational and supply-chain savings.
• Tightened site selection and canceled real-estate agreements for future units with low return potential.

What changes at existing restaurants?

Portillo’s reduced the number of restaurants assigned to each regional leader and made regions geographically compact. The aim is to let field leaders spend more time in each restaurant and provide focused, hands-on support to restaurant teams.

The chain has overhauled training programs Patterson previously described as underdeveloped. It will put greater emphasis on well-trained team members and managers, while evaluating new equipment and technologies that could improve efficiency.

The economics remain only partly disclosed. Portillo’s has not provided a margin, product-cost or labor-cost bridge showing how pricing, closures and smaller builds will change store-level profitability. For guests and operators, the immediate shift is from adding units to putting more field support and technology behind existing restaurants.

The forward test is whether smaller prototypes, tighter site selection and reinvestment in existing restaurants can turn a 1.4% comp gain and a 0.7% traffic decline into sustainable returns without another rapid expansion push.