Dive Brief:
- Portillo’s CEO Michael Osanloo is departing the chain, and the board has named Michael Miles, chairman of the board at Portillo’s, as interim-CEO, according to a Monday press release. Osanloo will remain as an advisor for 90 days.
- Miles and three other board members — Paulette Dodson a long time , former Red Robin CEO G.J. Hart, and former Darden CEO Gene Lee, who joined Portillo’s board following activist investor pressure earlier this year — will oversee the search for a new permanent CEO in tandem with an executive search firm.
- Osanloo’s abrupt departure follows a period of slow growth in same-restaurant sales and investor pressure for the brand, which has seen its stock price plunge by about 75% since its IPO, as of Monday evening.
Dive Insight:
Miles, who has served on the board of the 90-unit hot dog brand since 2014, has served as interim-CEO at the chain before, from 2014 to 2015, while both Hart and Lee have extensive experience leading restaurant chains.
Osanloo served as CEO for about seven years, a long tenure for a publicly traded restaurant firm. While Portillo’s has high average unit volumes and is in the process of developing streamlined, smaller units, the chain’s recently opened units in Texas have underperformed expectations.
That underperformance led Portillo’s to cut its projected openings and its same-store sales forecast from 1% to 3% growth to a decrease of 1% to 1.5% earlier this month.
William Blair analyst Sharon Zackfia wrote in an emailed statement that Osanloo helped grow the brand’s storecount by 75% and significantly improved employee satisfaction, despite some of the strategic problems identified by activist investors.
“Hindsight suggests Portillo’s should have moved faster to shrink its box and move more deliberately into new markets,” Zackfia wrote. “Osanloo’s most important contribution to Portillo’s was the solidification of its people pipeline to lead new restaurants, which had been lacking prior to his tenure.”
Miles said the board thanked Osanloo for his long tenure and the role he played in preparing Portillo’s for its IPO and in bringing it to new markets.
“Our recent performance has not measured up to expectations,” Miles said. “After careful consideration, the Board believes, and Michael agrees, that now is the right time for a leadership transition.”
Last summer, Engaged Capital began pressuring on the chain to undertake changes it believed would improve cash returns — including building smaller stores and, potentially, shifting away from direct ownership of stores. Portillo’s, at the time, was struggling to decrease its drive-thru speed of service, which lagged pre-pandemic levels for several years. In April, Portillo’s reached a deal with the investor to stop its pressure campaign. In exchange, Portillo’s appointed Gene Lee to the board.
