Portillo's Cuts Non-Local Stores After Corporate Layoffs

Portillo’s has decided to close a select group of underperforming restaurants outside the Chicago area, a move that follows a major reduction in its corporate workforce just three months ago. The Oak Brook-based company announced the plan in its third-quarter earnings release on Thursday, stating it expects to close a mid-to-high single digit number of locations. The board of directors approved the strategy on Wednesday, according to a filing with the U.S. Securities and Exchange Commission.

The decision reflects a shift in how the company manages its expansion and financial health. CEO Brett Patterson explained that the team evaluated every restaurant in the system to identify locations that were not meeting performance standards. He noted that the closures aim to improve portfolio quality and strengthen returns on invested capital. The company is currently reviewing lease options for these specific sites, which means it has not yet determined the exact timing or the specific states where the closures will occur.

Restaurants in Lake and McHenry counties, including those in Gurnee, Vernon Hills, Deerfield, Crystal Lake, and Algonquin, remain safe from the cuts because they are located within the Chicagoland area. The chain operates 109 restaurants across 11 states. While the company has not named the specific closures, it cited poor locations, cannibalization from new nearby openings, and low brand awareness in new markets as reasons for the struggles. Patterson pointed out that customers in markets like Texas often drive long distances to find a location, whereas Chicago residents have one available every few miles.

The financial impact of the closures will include material cash and non-cash charges, such as lease costs, employee separation fees, and asset impairment. This follows a July 31 announcement where Portillo’s laid off 18% of its corporate headquarters workforce. At that time, Patterson described the cuts as necessary to operate more efficiently. The company recorded $1.4 million in restructuring charges in the third quarter tied to that earlier workforce reduction. Field management positions were also eliminated, but no restaurant-level workers were affected by the July cuts.

Despite the closures, Portillo’s reported strong third-quarter results. Revenue reached $194.1 million, a 7% increase from the same period last year. Net income rose to $4.8 million from $782,000 in the prior year, and same-restaurant sales grew by 1.4%. The company raised its full-year forecast for adjusted EBITDA to a range of $98 million to $101 million, up from the previous estimate of $92 million to $96 million. Patterson cautioned, however, that one quarter does not establish a long-term trend.

Looking ahead, Portillo’s is implementing a new strategy that includes stricter site selection standards and a smaller restaurant design. Starting in 2028, new locations will measure about 4,600 square feet, which is more than 40% smaller than the current average. These smaller designs require about 1.5 acres of land compared to the historical standard of three acres. The company plans to open four to six new restaurants in 2027, focusing on existing markets and nearby areas. It will file an updated report with the SEC once it can estimate the total cost of the upcoming closures.