May 2015Dick Portillo Reflects on Sale of Eponymous Restaurant Chain
Chicago, Illinois, May 22, 2015 — Visit a Portillo's restaurant at lunchtime and you'll see a steady stream of customers ordering Italian Beef sandwiches, Chicago-style hot dogs, french fries and chocolate cake shakes. Recent patrons might have caught a glimpse of Dick Portillo placing his own less decadent order: a single hard boiled egg. There was a reason for his restraint. The founder of the eponymous chain had a big dinner celebration later that night and he didn't want to be too full.
That discipline and methodical planning shows up in other facets of Portillo's life, including how he picked a private equity firm to take over his self-made empire. As his business hit 51 years in April 2014, he said he was proud of what he had accomplished. But to take Portillo's to the next level, he knew he needed outside financing. "I was very leery of who I talked to," said Portillo, 75. "I wanted to see who would baby this more, and keep the culture."
A self-proclaimed "systems junkie," Portillo put the chain's 38 locations up for sale last year. He quickly had two dozen suitors trying to get their hands on the popular chain. Berkshire Partners was the winning bidder even though, Portillo said, its offer was lower than some others. He said he dismissed a higher offer because it included plans to quickly take Portillo's public; he worried the firm would make hasty changes to try and grow too quickly.
One of the things he liked about Berkshire was that it wasn't a restaurant operator looking to replace Portillo's tried-and-true methods with its own restaurant operating systems. A Berkshire official echoed those ideals."We don't have any desire to change the formula at all," said Mike Miles, who is now executive chairman of the Portillo's chain. "The last thing you'd want to do is mess with that formula and mess with that business." Miles said Portillo now is helping him interview prospective CEOs for the chain.
Portillo said his restaurant's large menu and various processes, which include preparing nearly everything but the french fries at massive commissaries, differs from chains such as Chipotle Mexican Grill, which has a more limited menu and list of ingredients. "It is complex, it's very complex. It's also extremely successful."
The history buff — he has retraced the sailing path of Christopher Columbus, among other adventures — compares the success of Portillo's business model to building a moat outside a medieval castle to block enemies. "My moat is the complexity of the business and it helps keep the competition away," Portillo said.
Portillo's revenue per store is unheard of in fast-food or fast-casual restaurants. An average McDonald's in the United States, for example, brings in nearly $2.5 million in annual revenue. The average newer Portillo's brings in $7 to $8 million. A higher-volume location in Downers Grove sells around $2 million of salads a year, one of many statistics Portillo rattles off. Portillo sees his restaurants as more of a special destination than other fast casual chains. The wide variety means families linger, even with no kids' menus or toys. The company has shipped its food to every state for in-home celebrations.
Neither Portillo nor Miles would discuss the financial terms of last summer's acquisition nor the chain's profitability. But Miles, an advisory director at Berkshire Partners with years of restaurant and retail expertise, was quick to say that Portillo's "single unit economics are better than anything I've ever seen." Selling the chain has at times been difficult for Portillo, though he said he still believes it was the right decision at the right time. "I have some regrets occasionally, it's not all of the time. It was a big emotional thing for me," Portillo said of selling his business. His journey started 52 years ago, when he scraped together $1,100 to set up a hot dog stand in a 6- by 12-foot trailer with no running water.
Through his new company R&S Growth Management, Portillo oversees real estate investments. Those investments include the land under most of Portillo's restaurants — he leases the space back to Berkshire Partners — along with other ventures such as shopping centers and apartments. Portillo said he aims to buy the land for future Portillo's locations where the space is for sale and would then lease the space to Berkshire Partners. He does not own the land for the upcoming Rockford and Homewood locations, the first new Portillo's set to open in nearly two years.
Portillo continues to have connections to his former staff and customers. On a recent weekday, he posed for photos with patrons at the Downers Grove location. His fans include Scott Winch, a landscaper who said he visits the restaurant daily and is partial to the jumbo char dog. "We miss ya boss, we miss ya," Winch, 47, told Portillo as they embraced. "You're the man." One worker brought Portillo a handful of flowers, while another quickly delivered his meal — that single egg — to his table.
After coffee, a "good breakfast" such as oatmeal with sliced banana, and a berry, almond milk and protein smoothie, Portillo's typical lunch is fruit and fat-free cottage cheese. He tends to wake up between 4:30 and 5:30 a.m., work out each morning and eat healthy meals, albeit with some indulgence. After all, one of his investments is an 18 percent stake in the Oak Brook location of Gibsons Bar & Steakhouse, where he planned to dine later that same night. More often, however, dinner is lighter. He said he eats at Chipotle a lot, and is a fan of its black beans and brown rice.
Portillo, a former Marine Corps member and marathon runner, said he was also ready to slow down and "enjoy life" a little bit." There was no balance in my life. It was pretty much all work until about 10 years ago. And I've started going to more funerals than weddings," Portillo said as his sat in his former Oak Brook office. "I would like to spend more time with my grandchildren and children, more time on my boat, and at the same time see the name all over the country, if possible. That could not happen if I would have remained in the position I was in."
Portillo has a new office in Oakbrook Terrace with a view of the Chicago skyline, roughly 2-1/2 miles from Portillo's headquarters. The new office serves as meeting place for Portillo, his chief administrative officer and the managing director of R&S. It's also a place to showcase everything from Han Dynasty swords to guns and machetes used by U.S. Marines. Photos of Portillo's family, his restaurants and his adventures adorn tables and walls throughout the space. There are also a few quotations that highlight Portillo's thinking and business strategy. Two sayings get prominent placement on both his new desk and in Oak Brook, where his former office has been transformed into a meeting area. The top silver plaque reads D.W.Y.S.Y.G.T.D. – short for "Do what you say you're going to do." Below it, another plaque reads, "When You Have Somebody By The Balls Don't Let Go To Get A Better Grip."
In a hallway outside his Oakbrook Terrace office sits a sculpture titled Self Made Man. The piece, by Bobbie Carlyle, depicts a man carving himself out of stone. It was a Christmas gift from Portillo's wife, Sharon, whom he married in 1959. Portillo showcases his commitment to her outside each restaurant, with "Dick Loves Sharon" carved into the sidewalk cement, and hides the same message in the decor of new restaurants.
He still spends time working on the Portillo's business as a consultant to Berkshire Partners, work that includes helping the firm interview potential CEOs for Portillo's. One of Portillo's sons, Michael, still works for the restaurant, training managers. Portillo plans to attend the grand opening events for the chain's Rockford location, which is set to open on June 9.
Portillo said the two toughest and most important things Berkshire needs to focus on are site selection — "so far I've been using my gut instincts" — and training. He recalls having to pull aside managers who were not treating workers properly, whether that was overhearing swearing in the kitchen or stopping by a drive-thru lane where an order taker outside on a sub-zero night was not relieved of the frigid duty quickly enough. Portillo said he made the manager gear up and stand outside for the same long 45 minutes.
Berkshire Partners is getting ready to open three locations in 2015, with plans for five in 2016. It's paying close attention to places with Chicago transplants, much as Portillo himself did by opening units in Arizona, for example. So fans on the west coast of Florida, along with those in parts of Wisconsin and Texas, will "probably see" Portillo's restaurants in the next five years, Miles said. "We're very conscious about not trying to go too quickly," said Miles, who said that for now there are no plans to franchise any locations or to take the company public.
Meanwhile, Portillo spends more of his days taking adventurous vacations, such as a one-month tour of Alaska and a trip through the Panama Canal, both on the 112-foot Westport yacht he got in May. "I'm looking for a bigger one," he says, laughing. Like his prior boats, the latest white yacht carries the name Top Dog. The license plate of his black SUV, meanwhile, reads DPTD, for Dick Portillo Top Dog.
Portillo credited his passion for much of his success. "Sometimes it just gave me more energy to go further, to push." He has photos of the Francis Cabrini housing project on Mohawk Street where he spent part of his childhood on the wall of the new office, just a few feet from photos of one of his homes, a mansion in Oak Brook. "We want to keep Dick as involved as possible," said Miles, who said he meets with Portillo weekly when the septuagenarian is in town. "I don't think his passion for the business has waned at all."
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Source: The Chicago Tribune
Title: Dick Portillo Reflects on Sale of Eponymous Restaurant Chain
Date Published: May 22, 2015
Date Accessed: May 27, 2015