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Portillo’s CEO on expanding in the Sun Belt: ‘We’re following the growth’

Portillo's CEO Michael Osanloo joins Yahoo Finance Live to discuss the chain's expansion in Texas, Florida, and other Sun Belt states, hiring, and rolling out a new plant-based hot dog offering.

Video transcript

BRIAN CHEUNG: Well, if you're craving a Chicago style red hot, you don't need to look any further than Windy City staple Portillo's. It's a fast casual restaurant chain continuing its nationwide expansion, with new locations in Florida and plans to open as well in Texas. So a lot in going on in this space.

Let's bring in Michael Osanloo, Portillo's CEO, for more on this. Michael, great to have you on the program. Your company is young in its life as a publicly traded company, but obviously, a lot of expansion that you're planning going forward. Tell us a little bit about the type of environment that you're trying to expand, and obviously, inflationary pressures, I'm sure, making it more expensive across the board, how you're operating in this uncertain environment.

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MICHAEL OSANLOO: Yeah, well, first, thanks for having me on, Brian. Really, really great to see you. Look, our expansion-- we are, as you said, we're six months into our public journey. But we're a 59-year-old brand that really has stood the test of time. And we're very proud of that. And our expansion plans are pretty deliberate. We really want to expand along the Sun Belt, places like Florida and Texas and Arizona. We have found, as we've gone into Arizona and to Florida, where we now have some scale, that our food works great.

The experience is something that delights our guests. And we think our brand resonates in those markets. And as you said, we're excited to go into Texas in the fourth quarter. We're following growth, Brian. We're going to places where the population is growing, where the economies are healthy, where there's a great environment for companies, and where maybe the labor situation is not quite as challenging in some other markets. So that's what we're doing. We're following the growth.

AKIKO FUJITA: Michael, it's Akiko here. I'm sad to say I have yet to try a Portillo's. One of these days, I'll get there. But let me just ask you about the cost pressures that you're experiencing. Obviously, this is something we've heard from every single company. But how has that weighed on your bottom line? And how are you adjusting right now?

MICHAEL OSANLOO: Well, I mean, we're all facing it. And I think we were early in announcing it to the markets in early this year. We said that we're seeing 13% to 15% commodity inflation. That's what we've been seeing. We saw that in the first quarter. We think the second quarter is going to be consistent with that. What I would say is, we're resilient and we're handling it well. We have a lot of demand for our business. We know that we have-- we're selling more sandwiches, which makes me feel confident that we have more guests eating our food.

I think you've got to be really careful, as a restaurant brand and a consumer brand, how aggressively you price and how much pricing you pass on to the consumer. We are pricing. We're pricing just behind inflation. But we'd like to make sure that we're taking care of our guests, and that they feel a lot of value and choose Portillo's in what's becoming a recessionary environment.

BRIAN CHEUNG: Michael, you were talking just earlier about some of the growth areas and geographies of the United States that you want to go into. And you mentioned that it might be areas where the labor situation is going to be a little bit easier. Can you just expand a little bit what you mean by that? You're still trying-- you're talking about the inability to fill some of these roles, given the labor shortage that we're seeing. Is it because areas like Texas and Florida actually have a better labor situation? What do you mean by that?

MICHAEL OSANLOO: Yeah, so anecdotally, I don't know if this is what everyone experiences, but I'll give you an example. We opened in St. Petersburg, Florida several weeks ago now. And as we were hiring for St. Petersburg, a typical Portillo's is going to have 100 to 110 staff and anywhere from 30 to 40 people on shift at any one time. We're a big business with lots of people.

We staffed up in St. Petersburg with no problem. We hired 125 people really, and we're not-- I think sometimes you can hire people and you're hiring anybody who walks in. We're very selective. We want people who live our values-- family, energy, greatness, fun. And so we have a pretty high bar on what we look for. And we had no problem hiring in St. Petersburg great people. It gave our guests an amazing experience as we've opened up.

And so we're opening in-- we're going to open two more restaurants in Arizona. Early signs are, hiring is going to be very doable for us. We're hiring great people. Now we pay a very fair wage. We pay at or above the market. So in Florida, it's over $15. In Arizona, it's $16 to $17 an hour. But we've been fortunate, Brian. We've been very fortunate in getting great talent.

AKIKO FUJITA: Michael, finally, you got us all talking here in the office yesterday about plant-based hot dogs.

MICHAEL OSANLOO: Yeah.

AKIKO FUJITA: What's the market for that?

MICHAEL OSANLOO: Well, here, I'm going to give you a confession. When the team first pitched this idea to me, I was like, I don't know. No way. We're Portillo's. One of the hallmarks of what we do is that our food has to be absolutely delicious. I don't want to sell something that's better for you, but doesn't taste good, right? If no one eats it, there's no point in doing it. And my mouth convinced me that they were right. The team was right. This is a delicious product.

Forget that it's plant-based. It's got pea proteins. The partner who produces it is world class at doing this. It's just a delicious product. And if there are times when you want-- you're a flexitarian or a vegetarian or a vegan, and you want something a little different. This is delicious. It tastes as good as any of our hot dogs. It just so happens that it's made with plant protein and not animal protein. But I'm a big fan of it now.

BRIAN CHEUNG: Well, and of course, the Chicago dog, it's all about the toppings as well. It's not just about that, although I think Akiko and I will probably have to make a trip out to Chicago to give that a try-- or St. Petersburg. We can go to any of those locations.

AKIKO FUJITA: A little closer.

BRIAN CHEUNG: Yes, yeah, exactly. Michael Osanloo of Portillo's, thanks so much for joining us this morning. Really appreciate it.