Activist investor gets tough on Portillo's

Chicago Tribune

03-03-2025

Chicago's hometown hot dog giant Portillo's is in the midst of an ambitious national expansion, and now a proxy fight may be brewing in its boardroom.
Activist investor Engaged Capital, which took a nearly 10% stake in the Oak Brook-based company last year, said Monday that it has nominated two independent candidates to the company's board.
Engaged said it was 'forced' to resort to the public nominations of former Wingstop CEO Charlie Morrison and marketing executive Nicole Portwood after months of private discussions around adding Morrison to the board didn't go anywhere. 'We remain ready and willing to reach a constructive resolution that spares all stakeholders an election contest,' Engaged said in a news release Monday.
Portillo's is in the midst of an ambitious national expansion plan, with a goal to grow its fleet of just under 100 restaurants by hundreds over the next two decades. The company, which has been opening restaurants in Texas, Arizona and elsewhere, hopes to transform itself from a mostly regional chain to a truly national one, betting that Italian beef sandwiches and Chicago-style hot dogs will have wide appeal outside the Midwest.
But the company has struggled with its stock valuation, which despite an approximately 50% jump since the start of the year is still down more than 60% since it was taken public by Boston-based private equity firm Berkshire Partners in 2021.
Representatives for Portillo's did not immediately return a request for comment Monday morning.
Engaged has maintained it thinks the company can succeed, but only if it makes changes to how it does business. Engaged, which previously led an activist campaign at Shake Shack, has pushed Portillo's to open smaller stores, for instance.
The activist, which called the company's marketing practices 'ineffective' in the Monday news release, thinks Portillo's needs to increase its brand awareness outside the Chicago area, perhaps by opening in high-visibility locations, such as airports, people familiar with the matter told the Tribune last year.
Portillo's has previously shown willingness to listen to Engaged, which now owns about 8% of the company. Last month, Portillo's announced it was adding Chipotle executive Jack Hartung to its board after being introduced to him by Engaged.
Still, Engaged said Monday that Portillo's still needs to 'refine its approach to new unit development, modernize restaurant operations and related technology, and deploy targeted marketing investments to increase awareness and drive traffic.'
Portillo's revenue increased 4.5% in 2024, the company said in fourth-quarter earnings release last week. But that growth primarily came from new restaurant openings. Same-store sales declined 0.6% during the same period.
When Engaged announced it had taken a stake in the company last summer, people familiar with the matter said conversations between the parties were constructive, and that a leadership change was not on the table. For the time being, Engaged is not focused on making management changes at Portillo's, people familiar with the matter said.
Portillo's, which was founded in a Villa Park parking lot in 1963, was family-owned until it was acquired by Berkshire about a decade ago.