Portillo’s learns its opening lesson

Portillo’s learned a tough lesson on the need for soft opens. / Photograph: Shutterstock.

We’re emptying our notebook after attending the ICR Conference in Orlando this week. On tap: an important lesson from Portillo’s; El Pollo Loco’s marketing focus; Twin Peaks’ expensive restaurants; some skepticism on Red Robin and an unexpected protest.

Soft opens are good: Why should you do a soft open for your hot restaurant chain? Ask Michael Osanloo.

The CEO of Portillo’s relayed a story, explaining the company’s strategy for its new unit openings. “We do soft opens,” he said at the ICR Conference this week. “It’s really important, especially when there’s pent-up demand.”

That may seem obvious, but it’s not something the company always did. In 2017, the Oak Brook, Ill.-based chain opened its first location in Minnesota, in the St. Paul suburb of Woodbury. “We did $360,000 the first week,” Osanloo said.

Good right? Nope. “It set the business back,” he said. “It was a disaster.”

In short, the restaurant featured a new general manager and a new team. And the immense level of business proved brutal for the workers. Some customers waited 90 minutes for their food. “It doesn’t matter how good your food is, if you’re waiting an hour and a half, you don’t come back,” Osanloo said.

And those employees didn’t come back, either. “We had 400% turnover the first month,” he said. “It was a massive operational gaffe.”

Soft opens, or when a restaurant opens with no marketing, are often a good thing. That’s especially true for a concept like Portillo’s, which operates large-scale restaurants and is opening many restaurants in locations like Texas or Arizona where there are a lot of former Chicago residents who missed their hometown chain. When the company recently opened in a Dallas suburb, the chain did a soft open and still had a long line of customers waiting when it opened. 

El Pollo Loco loves the kids. Restaurant chains really love young people because who doesn’t? So it’s no surprise that the California-based El Pollo Loco is targeting younger consumers.  

Specifically, the quick-service chain’s recent Beef Birria tacos apparently did the trick. “It did phenomenally with younger consumers,” CEO Larry Roberts told attendees at the conference.

The company has also shifted its marketing spending to largely target younger consumers. It used to spend 85% of its marketing dollars on television. That’s down to 50%, with more being targeted at social media, particularly TikTok.

“We think we appeal to a younger consumer base,” Roberts said. “Our focus has been on how to attract younger consumers.”

Red Robin skepticism. Red Robin’s stock is up 22% over the past week, likely reflecting enthusiasm for CEO GJ Hart’s strategy for the brand’s revitalization, including a plan to add grills to the chain’s restaurants. But not everyone was impressed.

One operator we spoke with suggested that the plan is the latest in a series of disruptions for the casual dining chain. The company eliminated bussers, for instance. It implemented Donatos Pizza as a subbrand, requiring franchisees to pay additional royalties for such sales. Now the company is changing the way it makes its burgers.

Peak building costs. Think construction inflation is bad? Imagine how bad it is for Twin Peaks.

It cost a lot more for the casual dining chain to build and open one of its restaurants these days. It used to cost the company $5.5 million to buy the land, get permits and construct the building. Today it’s $7 million. “There’s definitely been an uptick in costs,” Andy Wiederhorn, CEO of parent company Fat Brands, told investors.

He still believes it is worth it but Wiederhorn is nevertheless looking to buy an entire casual dining chain, which it would then convert to Twin Peaks.

The protest. During Darden Restaurants’ presentation, some loud chanting emerged from the neighboring room, where another presentation was taking place.

The presentation was for the retailer Urban Outfitters. Animal rights protesters holding signs jumped on the stage, yelling “Urban stop exploiting animals!” Security ultimately led them off the stage.

Once they left, Urban Outfitters executives returned. “Sixteen minutes left,” the moderator said.

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