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Portillo’s Franchise Opening Near You?

Written by: Parth Parth
Last Updated by Rocío Torres: September 20, 2022
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portillos

Portillo’s was founded in 1963 by Dick Portillo. After returning from serving in the Marines, Portillo gathered money from his savings and from an investment from his brother Frank to open a hot dog stand. He continued the process of learning by visiting different competitors. By 1967, The Dog House was in good standing, was upgraded to a larger trailer, and was renamed “Portillo’s”. The Portillo’s chain grew again in 2010 with Honey-Jam Café. There are currently 67 Portillo’s locations.

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Contents

What is the industry that Portillo’s operates in?

Portillo’s is part of the food and beverage industry. The Food and Beverage industry in the USA accounts for 13% of all manufacturing employment in the country. Around 1.46 million people get employed in this industry. Food franchises make up to 36% of the total franchise establishments in the USA and it is expected to create 1.6million more jobs by 2027. The annual growth rate in the industry is around 2% and the EBITDA multiplier is around 3x.

Is Portillo’s a Profitable Venture?

 Fiscal Years Ended
December 26, 2021December 27, 2020
Revenues$534,952 – 100.0%$455,471 – 100.0%
Cost and Expenses
Restaurant Operating Expenses
Cost of goods sold, excluding depreciation and amortization$166,764 – 31.02%$142,446 – 31.3%
Labor$138,788 – 25.9%$115,991 – 25.5%
Occupancy$28,060 – 5.2%$24,920 – 5.5%
Other operating expenses$59,258 – 11.1%$50,169 – 11.0%
Total restaurant operating expenses$392,870 – 73.4%$333,524 – 73.2%
General and administrative expenses$87,089 – 16.3%$39,854 – 8.8%
Pre-opening expenses$3,565 – 0.7%$2,209 – 0.5%
Depreciation and amortization$23,312 – 4.4%$24,584 – 5.4%
Net income attributable to equity method investment$(797) – (0.1)%$(459) – (0.1)%
Other income, net$(1,099)  – (0.2)%$(1,537) – (0.3)%
Operating Income$30,012 – 5.6%$57,294 – 12.6%
Interest expense$39,694 – 7.4%$45,031 – 9.9%
Loss on debt extinguisment$7,265 – 1.4%
(Loss) Income Before Income Taxes$(16,947)  – (3.2)%$12,263 – 2.7%
Income tax benefit$(3,531) – (0.7)%
Net (Loss) Income$(13,416) – (2.5)%$12,263 – 2.7%
Less: Redeemable preferred units accretion$(21,176) – (4.0)%$(20,524) – (4.5)%

Portillo’s is a loss-making venture. It saw a loss of $13.4 million in 2021 but this might have to do more with the pandemic as it saw a profit of $12.2 million in the year before.

portillos franchise

Comparison of 3 Month Cumulative Total Return

 10/21/202111/01/202112/01/202112/26/2021
Portillo’s INC$100.00$143.51$127.94$131.75
S&P 500$100.00$107.01$106.26$111.03
S&P 500 Restaurants$100.00$99.46$99.75$108.31

Can I start a Portillo's franchise?

Portillo's is currently not franchising but it might do so in the future. In the meantime, you can look at the alternatives that we discuss below.

What are some alternatives to Portillo's?

Domino's Pizza

dominos pizza
  1. Domino’s is an American multinational pizza and fast-food chain founded in 1960. President David Brandon and CEO Richard Allison are currently leading the company. Its headquarters are in Ann Arbor, MI. Domino’s has stores in 92 countries which number more than 18,300. It has over 1,200 stores in the United Kingdom, 1,500+ in India, and almost 6,600 in the US.

The initial Domino’s Franchise Fee is between $0 and $10,000. You have to pay this upfront fee when opening a Domino’s franchise. Many Domino’s franchisees were working in a Domino’s restaurant in a management capacity before being awarded a franchise license. The estimated total investment necessary to begin the operation of a Domino’s Franchise ranges from $156,450 to $682,500.

Based on the net AUV for Domino’s franchise locations, at an average of a 15% profit margin, it will take around 4.5 years to recoup your investment. This is shorter than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment.

Domino’s offers people the opportunity to be a part of a business that has good returns and isn’t likely to die soon. However, Domino’s has a strict requirement of having been with the company in a certain role or higher for a year, which you need to fulfill in order to own a Domino’s franchise.

Be sure to talk to at least 3 to 5 other Domino’s franchise owners to get an idea of the business and what the experience of owning a franchise is like.

Mc Donald's

2. McDonald’s is the quintessential American fast-food chain restaurant. It was founded in 1940 as a restaurant operated by Richard and Maurice McDonald in San Bernardino, California, United States. Since then, they have been serving hamburgers, chicken nuggets, french fries, milkshakes, and ice cream. In the present day, it has over 36,000 locations in over 100 countries around the world.

McDonald’s has been a franchising company since 1955 and has relied on its franchisees to play a major role in the system’s success. Currently, about 95% of all U.S. restaurants are franchised to independent franchisees and about 5% are company-owned.

The total investment to begin the operation of a traditional McDonald’s franchise ranges from $1,366,000 to $2,450,000, which includes an initial franchise fee of $45,000– that must be paid to the franchisor. The initial franchise fee for satellite locations is $500 (none if it’s on a Walmart location), for STR/STO locations is $22,500 and Franchisees with a ten-year term or less agreement will get a prorated initial fee.

The median annual sales volume of franchised McDonald’s restaurants open at least 1 year as of December 31, 2021, was $3,366,000 during 2021 —a $458,000 increase compared with the amount recorded in the previous FDD regarding 2020 numbers.

There are over 36,000 McDonald’s franchises around the world with about 13,000 of them in the United States. The company has a long history of franchising dating back to 1955 which has played a big role in its success over time.

With an average initial investment of about $1.8 million, it would take you 8.5 years or less to recoup your investment with a 10% or more profit margin. These figures are calculated from the 2020 average median net sales from a McDonald’s franchise in the US which is about $2.9 million. The number of franchised outlets has continued to increase in the US apart from 2019 and 2020 when 207 outlets closed down. This could be attributed to the negative economic effects of the Covid-19 pandemic which saw a lot of small businesses around the country shut down. To the franchisor, McDonald’s is a very profitable business with net incomes averaging over $2 billion annually.

KFC

3. Another alternative in the Food and Beverage industry is KFC. Kentucky Fried Chicken was founded by Harland Sanders in 1930 when he inaugurated the first Sanders Court & Café in Corbin, Kentucky. After six years of success, Sanders was awarded the Kentucky Colonel position for supplying extensive resources to his community. By 1952, his business had outgrown itself. It had expanded to such an extent that he decided to grant KFC’s first franchise to his friend, Pete Harman. In turn, he opened the first KFC franchise later that year in Salt Lake City, Utah. Throughout these 68 years, the franchise has expanded to over 20,000 stores in 145 countries which are committed to spreading the unique Colonel Sanders chicken dinners both domestically and internationally.  KFC is currently headquartered in Plano, Texas, and is run by CEO, Sabir Sami. As of 2021, KFC has 3900+ locations across the USA.

The estimated total investment necessary to begin the operation of a KFC Franchise ranges from $1,440,600 to $3,163,550. You need a minimum net worth of $1.5 million and liquid assets worth over $750,00 to start a KFC franchise.

Based on the median sales provided by KFC’s franchise locations, at an average of a 15% profit margin it will take around 13.5 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment.

KFC offers people the opportunity to be a part of a business that has established itself firmly in the industry. Fried chicken and KFC are terms that are becoming synonymous in parts of the U.S.A. and the world. KFC is a strong franchisor and depending on location, you might make much more than the median sales.

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