Tag Archives: BROS

THE WEEK THAT WAS, ENDING 7-15, TWO DOWNGRADES – with relevant transcripts

THE WEEK THAT WAS, ENDING 7-15, TWO DOWNGRADES – with relevant transcripts

ANDREW STRELZIK downgrades KURA SUSHI to MARKET PERFORM

https://seekingalpha.com/article/4522306-kura-sushi-usa-inc-krus-ceo-hajime-uba-on-q3-2022-results-earnings-call-transcript

DAVID TARANTINO downgrades DUTCH BROS to NEUTRAL

CONFERENCE CALL TRANSCRIPT

https://seekingalpha.com/article/4510397-dutch-bros-inc-bros-ceo-joth-ricci-on-q1-2022-

results-earnings-call-transcript

SLIDE PRESENTATION WITH CONFERENCE CALL

https://seekingalpha.com/article/4510399-dutch-bros-inc-2022-q1-results-earnings-call-presentation

NICOLE REGAN still NEUTRAL on RESTAURANT BRANDS & CHEESECAKE

BRIAN MULLAN still LIKES TEXAS ROADHOUSE

BRIAN VACCARO and JAKE BARTLETT still LIKE DAVE & BUSTER’S

BRIAN BULLAN still LIKES STARBUCKS

THE WEEK TO COME:

ON THURSDAY, 7/21:

DOMINO’S (DPZ) will report BEFORE THE MARKET OPENS

https://edge.media-server.com/mmc/p/atuz98qg

BJ’S RESTAURANTS (BJRI) will report AFTER THE MARKET CLOSES

https://viavid.webcasts.com/starthere.jsp?ei=1558825&tp_key=c6d54850f0

 

DUTCH BROS (BROS)

ANNUAL

QUARTERLY

MOST RECENT CONFERENCE CALL TRANSCRIPT

https://seekingalpha.com/article/4510397-dutch-bros-inc-bros-ceo-joth-ricci-on-q1-2022-results-earnings-call-transcript

MOST RECENT SLIDE PRESENTATION

https://seekingalpha.com/article/4510399-dutch-bros-inc-2022-q1-results-earnings-call-presentation

ROGER’S ARTICLE PRIOR TO IPO

https://www.liptonfinancialservices.com/2021/08/dutch-bros-to-come-public-this-prospectus-is-a-tutorial/

 

UPDATED CORPORATE DESCRIPTIONS: THE ONE GROUP (STKS), WENDY’S (WEN), DUTCH BROS (BROS), BLACK RIFLE COFFEE (BRCC), CARROL’S (TAST), FIESTA RESTAURANT (FRGI), BBQ HOLDINGS (BBQ) – with transcripts

UPDATED CORPORATE DESCRIPTIONS: THE ONE GROUP (STKS), WENDY’S (WEN), DUTCH BROS (BROS), BLACK RIFLE COFFEE (BRCC), CARROL’S (TAST), FIESTA RESTAURANT (FRGI), BBQ HOLDINGS (BBQ) – with transcripts

THE ONE GROUP HIOSPITALITY

https://www.liptonfinancialservices.com/2022/04/the-one-group-hospitality-stks-in-process/

WENDY’S

https://www.liptonfinancialservices.com/2022/03/wendys-updated-write-up/

DUTCH BROS

https://www.liptonfinancialservices.com/2022/01/dutch-bros-bros-in-process/

BRC – BLACK RIFLE COMPANY

https://www.liptonfinancialservices.com/2022/04/black-rifle-coffee-company-brcc/

CARROL’S

https://www.liptonfinancialservices.com/2022/04/carrols-restaurant-group-tast/

BBQ HOLDINGS

https://www.liptonfinancialservices.com/2022/04/bbq-holdings-bbq-in-process/

 

UPDATED CORPORATE DESCRIPTIONS: WENDY’S, DUTCH BROS, DINE BRANDS, POTBELLY, SWEETGREEN AND RED ROBIN

UPDATED CORPORATE DESCRIPTIONS: WENDY’S, DUTCH BROS, DINE BRANDS, POTBELLY, SWEETGREEN AND RED ROBIN with conference call transcripts

Wendy’s (WEN)

https://www.liptonfinancialservices.com/2021/11/wendys-updated-write-up/

Dutch Bros (BROS)

https://www.liptonfinancialservices.com/2022/01/dutch-bros-bros-in-process/

Dine Brands (DIN)

https://www.liptonfinancialservices.com/2022/01/dine-brands-global-din/

Potbelly (PBPB)

https://www.liptonfinancialservices.com/2022/01/potbelly-pbpb-in-process/

Sweetgreen (SG)

https://www.liptonfinancialservices.com/2022/01/sweetgreen-sg-in-process/

Red Robin (RRGB)

https://www.liptonfinancialservices.com/2022/01/red-robin-gourmet-burgers-inc-rrgb-corporate-description/

 

MON. & TUES. – SEVEN RESTAURANT COMPANIES PRESENT AT JEFFERIES CONFERENCE: PTLO, NDLS, FWRG, CHUY, PLAY, STKS, BROS

SEVEN RESTAURANT COMPANIES  PRESENT TODAY & TOMORROW AT JEFFERIES  (VIRTUAL) WINTER CONFERENCE

The following companies present at the indicated times. We have provided the links to the investor relations section of their website.

Portillo’s (PTLO) –  Monday, 1/24, 11:30 EST

https://wsw.com/webcast/jeff222/register.aspx?conf=jeff222&page=porti&url=https://wsw.com/webcast/jeff222/porti/2026350

Noodles (NDLS) –  Monday, 1/24 – 3:00 EST

https://wsw.com/webcast/jeff222/register.aspx?conf=jeff222&page=ndls&url=https%3A//wsw.com/webcast/jeff222/ndls/1848225

First Watch (FWRG) –  Tuesday, 1/25, 9:00 EST

https://wsw.com/webcast/jeff222/register.aspx?conf=jeff222&page=fwrg&url=https%3A//wsw.com/webcast/jeff222/fwrg/1855350

Chuy’s  Holdings (CHUY) –  Tuesday, 1/25, 10:30 EST

https://wsw.com/webcast/jeff222/register.aspx?conf=jeff222&page=chuy&url=https://wsw.com/webcast/jeff222/chuy/1859625

Dave and Buster’s (PLAY) – Tuesday, 1/25, 11:00 EST

https://wsw.com/webcast/jeff222/register.aspx?conf=jeff222&page=play&url=https://wsw.com/webcast/jeff222/play/1855350

Dutch Bros – Tuesday, 1/25 – 12:00 EST

https://wsw.com/webcast/jeff222/register.aspx?conf=jeff222&page=bros&url=https://wsw.com/webcast/jeff222/bros/1855350

The One Group (STKS) – Tuesday, 1/25, 12:00 EST

https://wsw.com/webcast/jeff222/register.aspx?conf=jeff222&page=stks&url=https://wsw.com/webcast/jeff222/stks/1876725

 

 

ICR CONFERENCE APPEARANCES STIMULATE PUBLIC UPDATES, AND INTRA-DAY VOLATILITY IN A SKITTISH STOCK MARKET (BFI, BROS, TAST, NDLS, FWRG, RICK)

ICR CONFERENCE APPEARANCES STIMULATE PUBLIC UPDATES, AND INTRA-DAY VOLATILITY IN A SKITTISH STOCK MARKET

Publicly held restaurant, franchising and retailing companies appear today, again tomorrow and Wednesday morning at ICR’s “must attend” conference, usually in Orlando but held virtually again this year.

Announcements have often preceded the public appearances and the news has sometimes been unsettling, stock prices  reacted accordingly. We provide below links to the news releases that have triggered the largest price changes.

BURGERFI (BFI – consolidating after acquiring Anthony’s Coal Fired Pizza – up 0.35%)

https://seekingalpha.com/pr/18623816-burgerfi-provides-fiscal-year-2021-business-update-sets-initial-guidance-for-fiscal-year-2022

DUTCH BROS INC. (BROS – got hit early, closed up 2.88%)

https://seekingalpha.com/pr/18623655-dutch-bros-inc-announces-preliminary-fourth-quarter-and-fiscal-year-2021-development-and-shop

CARROL’S RESTAURANT GROUP ((TAST – already at a multi-year low – up 0.34%)

https://finance.yahoo.com/news/carrols-restaurant-group-inc-reports-120000517.html

NOODLES (NDLS – announces major multi-unit franchise agreement – up 6.33%)

https://seekingalpha.com/pr/18624041-noodles-and-company-announces-signing-of-55-restaurant-franchise-deal-in-california-warner

FIRST WATCH RESTAURANTS, Inc. (FWRG – finding its footing after IPO – up 2.33%)

https://finance.yahoo.com/news/first-watch-restaurant-group-inc-120000876.html

RCI Hospitality (RICK – presentation fine, just profit taking after recent run – down  3.58%)

https://seekingalpha.com/pr/18624132-rci-reports-club-and-restaurant-sales-of-61_1-million-in-1q22

 

REFLECTION ON ’21, WEBSITE IMPROVEMENTS SET THE STAGE FOR ’22

REFLECTION ON ’21, WEBSITE IMPROVEMENTS SET THE STAGE FOR ’22, CAN’T WAIT FOR TOMORROW BECAUSE WE GET BETTER LOOKING EVER DAY!

Happy New Year!

Our objective is to provide some food for thought (no pun intended). We try to write about topics and provide editorial commentary that you won’t find elsewhere. Looking back over our more than 100 topical articles in the last twelve months, we enjoyed studying and discussing quite a few of the most newsworthy developments. Use the SEARCH function on our Home Page if you would like to review our (unfiltered) commentary regarding:

THEMES such as :

SPACs, the appeal (as suggested by the “players”), and the dangers (hardly ever discussed) of this type of financing.

The economics of third party delivery.

Individual analytical reports on the newest public restaurant companies, namely BurgerFi, Krispy Kreme, Dutch Bros., Sweetgreen, Portillo’s First Watch and Fogo de Chao (pending).

Tilman Fertitta’s attempt to come public through the FAST Acquisition (FST) SPAC

Bitcoin

Inflation, past, current and future.

STOCK PICKING

We don’t get paid for this, except in our own account, but our readers seem to value our opinion so we sometimes provide it. We hope to help our readers avoid predictable mistakes. We continue to be negatively inclined toward the SPAC space and BItcoin. Among the newly public restaurant companies, we might have helped you sidestep BurgerFi (BFI) as well as the Krispy Kreme (DNUT) and First Watch (FWRG) IPOs. Sweetgreen (SG) and Portillo’s (PTLO) were (and are) too rich for our blood, though we are admirers of Dutch Bros (BROS), closer to the IPO price than here in the 50s. As an update, and in full disclosure, we personally took a small position recently in Krispy Kreme, far more interesting in the mid-teens (with JAB buying it back) than it was at the $17 IPO (reduced from the originally contemplated $21-23).

Fundamentals, in a world of FOMO (Fear of Missing Out) and TINA (There is no Alternative), still matter. In terms of documenting that the equity market has not altogether given up on common sense,  we look back at our published analysis of the restaurant stock universe on 11/11/20, after the pandemic psychology had killed the stocks. We’ve provided the link just below to that report, where we pinpointed Papa John’s as an especially undervalued stock, considering the stock and the fundamentals at the bottom of the pandemic. Papa John’s (PZZA) was $77/share on 11/12/19 and today it is at $133 (up 73%). Every situation did not play out as expected, but we also pinpointed Wingstop (WING) at $129 and today it is at $172 (up 33%). The two stocks we suggested as most overvalued at that point (BJ’s and Shake Shack) have gone down, 15% and 10%, respectively, during the same time frame. “Paired trades” are difficult, especially over the short term, so it is gratifying that all four favorite positions (long and short) were profitable.

https://www.liptonfinancialservices.com/2020/11/restaurant-company-stock-higher-than-pre-pandemic-is-it-worth-it/

THE SITUATION TODAY

We are looking at a far different calendar ’22 than we anticipated a year ago, even six months ago. We expected ’21 to be the transition year, with a return to normalcy in calendar ’22, but now “not quite”. The staffing challenge in restaurants is worse than ever, even with a higher wage scale, and the timing of relief continues to be uncertain. Normal volatility in cost of goods has been exacerbated with supply chain distortions, with some products (just as with labor) sometimes unavailable at any cost. However, while a great deal of uncertainty still exists, there is far more clarity than 12-21 months ago. The country is more open for business, vaccines and treatments are now available and generally effective in avoiding the worst possible health consequences. Restaurant operators have learned to manage labor more efficiently, have simplified menus, and have enhanced their off-premise revenue base (with to-go, delivery, curbside pickup and/or ghost brands). While operational challenges accompany the new potential, because labor must be allocated among these new business segments and managed to avoid hampering the dine-in activities, in the best of circumstances operational margins could exceed pre-pandemic levels.

The stocks

Publicly held equities have cooled off from the inflated values of early 2021, a number of well established companies trading in the lower half of their historical valuation ranges. Among the restaurant IPOs of 2021, Krispy Kreme (DNUT)($18.58), after declining from the $17 IPO price to under $13, has recovered,  not in small part due to parent, JAB, buying back millions of shares of stock. Sweetgreen (SG)($31.48) is just above its $28 IPO price, after peaking the first day above $50. First Watch (FWRG)($17.43) came public at $18, traded just briefly to about $22, then bottomed below $16. Portillo’s (PTLO)($40.27) spiked to over $50, collapsed to the low 30s before recovering to the current level. Dutch Bros (BROS)($53.24) ran from its IPO price of $23 to about $75, fell back into the 40s before stabilizing here. The cooling process is also in evidence by the fact that there is no restaurant related SPAC that is trading at a material premium to its IPO price. Especially symbolic is the lack of premium for Danny Meyer’s USHG Acquisition Corp. (HUGS)($10.36), which has announced they will become a “cornerstone partner” with JAB controlled Panera. The uncertainty here is apparently the not yet disclosed relationship between HUGS’ capital and Panera’s valuation but the “smart money” is obviously not willing to bet that HUGS common stock will be compelling after the fact.

Our analysis going forward

For our investment purposes and yours we have updated our website. The “Corporate Descriptions” section now provides, at a glance, for every publicly held restaurant company, the most important parameters relative to current valuation.  For example:

https://www.liptonfinancialservices.com/2021/11/mcdonalds/

From that starting point, our investment process consists of evaluating the current operating fundamentals, whether or not the “on the ground” developments will materially change the financial picture. As part of that summary, we provide a link to the most recent conference call transcript. We are in essence looking for operational inflection points that are not yet reflected in the stock market valuation.

These Corporate Descriptions will be kept current on a quarterly basis.

Further “bookkeeping” improvements

This website will also keep all of us posted, on a weekly basis, which companies are about to report earnings. In conjunction with this weekly update, we will also publish changes in analyst ratings, and a link to the most recent  publicly disclosed “data point”,  the relevant conference call transcript.

In Summary

We thank all of you for your past support and are looking forward to sharing with you a great 2022!

Roger Lipton

UPDATED CORPORATE DESCRIPTIONS – THE ONE GROUP HOSPITALITY (STKS), FIESTA RESTAURANT (FRGI), BURGERFI (BFI), KRISPY KREME (DNUT), PORTILLO’S (PTLO), DUTCH BROS (BROS).

UPDATED CORPORATE DESCRIPTIONS – THE ONE GROUP HOSPITALITY (STKS), FIESTA RESTAURANT GROUP (FRG), BURGERFI (BFI), KRISPY KREME (DNUT), PORTILLO’S (PTLO), DUTCH BROS (BROS)

UPDATED CORPORATE DESCRIPTIONS – SHORTLY WILL INCLUDE VIRTUALLY EVERY PUBLICLY HELD RESTAURANT COMPANY – to be updated each quarter

The summaries we show, while not complete in detail and involve a number of approximations, provide a good starting point for our own investment banking activities and will hopefully do the same for our readers.

https://www.liptonfinancialservices.com/2021/11/the-one-group-hospitality-stks-in-process/

https://www.liptonfinancialservices.com/2021/11/fiesta-restaurant-group/

https://www.liptonfinancialservices.com/2021/11/burgerfi-interational-in-process/

https://www.liptonfinancialservices.com/2021/11/krispy-kreme-dnut-in-process/

https://www.liptonfinancialservices.com/2021/11/portillos-ptlo-in-process/

https://www.liptonfinancialservices.com/2021/11/dutch-bros-bros-in-process/

 

RESTAURANT COMPANIES TO REPORT THIS WEEK: FWRG, DNUT, TAST, RRGB, ARCO,WEN, BROS, FRGI, KRUS

RESTAURANT COMPANIES TO REPORT THIS WEEK: FWRG, DNUT, TAST, RRGB, ARCO,WEN, BROS, FRGI, KRUS

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The following are transcripts from the conference calls following release of earnings:

https://seekingalpha.com/pr/18550394-first-watch-restaurant-group-inc-reports-third-quarter-financial-results

DNUT PRESENTATION- SLIDES

https://seekingalpha.com/article/4468529-krispy-kreme-inc-2021-q3-results-earnings-call-presentation

DNUT CALL

https://seekingalpha.com/article/4467854-krispy-kreme-doughnuts-inc-dnut-ceo-michael-tattersfield-on-q3-2021-results-earnings-call

https://seekingalpha.com/article/4468048-carrols-restaurant-group-inc-tast-ceo-dan-accordino-on-q3-2021-results-earnings-call

https://seekingalpha.com/article/4468136-red-robin-gourmet-burgers-rrgb-ceo-paul-murphy-on-q3-2021-results-earnings-call-transcript

ARCOS SLIDE PRESENTATION

https://seekingalpha.com/article/4468542-arcos-dorados-holdings-inc-2021-q3-results-earnings-call-presentation

ARCOS CALL

https://seekingalpha.com/article/4468067-arcos-dorados-holdings-inc-arco-ceo-marcelo-rabach-on-q3-2021-results-earnings-call

https://seekingalpha.com/article/4467967-wendys-company-wen-ceo-todd-penegor-on-q3-2021-results-earnings-call-transcript

https://seekingalpha.com/article/4468191-dutch-bros-inc-bros-ceo-joth-ricci-on-q3-2021-results-earnings-call-transcript

tps://seekingalpha.com/article/4468744-fiesta-restaurant-group-inc-frgi-ceo-rich-stockinger-on-q3-2021-results-earnings-call

https://seekingalpha.com/article/4468944-kura-sushi-usa-inc-krus-ceo-hajime-uba-on-q4-2021-results-earnings-call-transcript

PORTILLO’S FILES FOR IPO – HOT ON THE HEELS OF (BROS) AND (TOST)

Hot on the Hot Heels of Dutch Bros (BROS) and Toast (TOST) Portillo’s (PTLO) files Preliminary IPO Prospectus

THE MARKET ENVIRONMENT

The financial music is playing so the dancers are taking the floor. The Cost of Capital is negligible so it makes compelling sense to sell (if you can) a small percentage of your company, provide working capital and/or pay off existing debt. Among restaurant companies that have been public for years, Shake Shack (SHAK) sure looks wise in retrospect when, in March of 2021, they sold $225M of seven year ZERO COUPON convertible notes. Their stock (now $84) was trading at about $120 and the notes are convertible at $170/share. At the conversion price, the value would be 269x Shake Shack’s previous high earnings, $0.63 per share in 2019. Back in May we called it the Financial Transaction of the Year in our monthly column within the Restaurant Finance Monitor. Shake Shack’s still-nosebleed valuation (at $84) has now been joined by Dutch Bros (BROS), a fine company, having more than doubled from the IPO price, which is now selling at about 75x the trailing twelve month EBITDA. A technology platform serving the restaurant industry, Toast (TOST), is trading at about $50 (up from the $40 IPO price) and, while growing at about 100%/yr., is valued at about twenty five times trailing twelve month sales. There are no earnings yet. Does anybody else remember 1999-2000?

PORTILLO’s

THE DEAL, and the valuation – The terms of the offering have not been set, nor the percent ownership by the current holders versus the public, a major objective of the IPO is to pay off a material portion of the current $470M in debt. The expected IPO valuation is about $1.4 billion.

THE COMPANY

Originally founded in 1963 in Chicago, purchased in 2014 (with 38 units) by Berskshire Partners, Portillo’s has become an institution in that market, selling a diverse menu featuring Chicago style hot dogs and sausages, Italian beef sandwiches, salads, burgers, crinkle cut fries, homemade chocolate cake and milkshakes. As of 6/30/21, there were 67 company operated locations within nine states (44 in IL, 6 in IN, 4 in AZ, 1 each in Iowa and MI, 3 in FL, MN & WI, 2 in CA). In terms of unit growth: since 2015 compound annual growth has been about 9.3%, and the long term objective is about 10%. Nearly all the restaurants have double drive thru lanes as well as dine-in and carryout service. The restaurants average 8,000 square feet and the new prototype is 7,200-7,800 sq.ft.  Per the prospectus: “Our near-term restaurant growth strategy is focused on leveraging our proven unit economic model primarily in adjacent and national markets outside Chicagoland with favorable macro-economic tailwinds where we already have a presence. We will also add select new restaurants in the Chicagoland market.”

The average ticket/guest is about $9.60. In calendar 2020, drive-thru accounted for 63% of sales (up from 41% in 2019), dine-in was 27% (down from 53% in 2019) and delivery was 10% (up from 6% in 2019). In the first six months of 2021, the percentages were about the same as in calendar 2020. Dayparts are about equal, with 52% of sales at Lunch, and 48% at dinner. Sales are steady through the week as well, from a low of 12% (of weekly sales) on M,T,W, 13% on Th, 17% on Fri, 18% on Sat and 16% on Sunday.

UNIT LEVEL ECONOMICS

AUVs were $7.9M in the TTM ending 6/27/21 with a restaurant level Adjusted EBITDA margins of 28.6%. The initial investment to build a new restaurant ranges from $4.5-$5.0M, excluding pre-opening expenses.  If we assume a cash cost of $5.0M (the high end), and a store level EBITDA of a conservative 25%, $7.9M of revenues generates almost exactly $2.0M, or an obviously handsome 40% cash on cash return.

However: as stated “Restaurants in our Chicagoland market had AUVs of approximately $9.6 million in 2019, $8.7 million in 2020 and $9.1 million in the twelve months ended June 27, 2021 and Restaurant-Level Adjusted EBITDA Margins of 28% in 2019, 31% in 2020 and 32% in the twelve months ended June 27, 2021. Restaurants outside of Chicagoland had AUVs of approximately $6.3 million in 2019, $5.6 million in 2020 and $5.8 million in the twelve months ended June 27, 2021 and Restaurant-Level Adjusted EBITDA Margins of 22% in 2019, 25% in 2020 and 26% in the twelve months ended June 27, 2021. When considering new restaurant locations each year as part of our growth strategy, we target AUVs of approximately $5.8 million and average Restaurant-Level Adjusted EBITDA Margins of approximately 22%, each in the third year of operation, with targeted cash-on-cash returns of approximately 25%, which we calculate by dividing our Restaurant-Level Adjusted EBITDA in the third year of operation by our initial investment costs (net of tenant allowances and excluding pre-opening expenses).”

Revenues/Unit and (predictably) Operating Margins are materially less outside of “Chicagoland”.

HISTORICAL RESULTS – 2019, 2020 and SIX MONTHS OF 2021

Comps in calendar 2020 were down 8.3%, after being up 3.2% in 2019. Corporate Adjusted EBITDA margin was $87M in 2020, up from $79M in 2019 (19.3% of revenues in 2020, up from 16.6% in 2019). Restaurant Level Adjusted EBITDA margin was ($122M in calendar 2020, up from $117M. (26.8% of sales, up from 24.4%). Cost of Goods ran a little over 31% in both 2020 and 2019. Labor was lower in 2020 (25.5% vs. 28.0% in 2019), which is why the EBITDA margin, both store level and corporate, improved, and this was a function of the drive-thru capability during  the pandemic.

In the first six months of 2021: Store Level EBITDA was 28.2%, up from 24.3%. CGS was down 210bp to 29.9%. Labor was down 130bp to 25.4%. Occupancy was down 30bp to 5.4% and Other Operating Expenses were down 20bp to 11.1%. The across the board reduction of expenses, in the first six months of 2021 vs 2020, was due to a 6.2% increase in guest traffic and a 6.8% increase in average check (“driven by both an increase in items per order and menu prices”.) As described by management in the prospectus: lower CGS was due to a reduction in beef costs and an increase in average check, while lower labor % was due to a leaner labor model due to COVID-19 dining room limitations, and the increase in average check.

This chart is specific, month by month. To save you the trouble (and eyesight) in calculating the change in 2021 versus 2019,  the 2021/2019 comp was: Jan. +0.6%, Feb.-8.0%, Mar.+1.6, Apr.+4.4, May +3.6, June +3.0. These two year positive comps are obviously due to a combination of traffic, items per order and menu prices.

MANAGEMENT – the key operating positions

Michael Osanloo, President and CEO, has been in place since August 2018. His previous position, from 2015 to 2018 was CEO at P.F.Chang’s.

Michelle Hook, CFO, has been at Portillo’s since December, 2020. Her previous position was VP of Finance at Domino’s.

Jill Waite, Chief Human Resources Officer, joined Portillo’s in June 2019. Previously, from 2017, she was Senior VP  of Human Resources at 24 Hour Fitness

Sherri Abruscato, Chief Development and Supply Chain Officer, has held her current position since August 2014, and has been with Portillo’s in various positions since 1983.

Derrick Pratt, COO, joined Portillo’s in May, 2021. He was previously in a variety of executive operational positions at Starbucks.

CONCLUSION

First. It is worth noting that the class A common shares that the public owns will have inferior voting rights to the class B shares owned by Berkshire Partners. This is becoming commonplace within recent IPO structures. After all, the public can’t be expected to have equal voting rights (per share) as the previous owner. It is privilege enough to be able to participate in the future growth of such a promising company, even if the valuation is a multiple of what used to be considered reasonable. Since the 2020 Adjusted Corporate EBITDA was $88M, and $51M up from $38M, in the first six months of ’21, the contemplated IPO valuation of about $1.4 billion looks to be  about 14x  the current run rate of  corporate Adjusted EBITDA. We consider this to be relatively reasonable, at least in comparison to the examples (BROS, TOST, and SHAK) provided above. However: (1) the currently contemplated IPO valuation (at $17-20/share) could still be changed,  the stock could go to an immediate premium, as with BROS and TOST, or a discount, as in the case of Krispy  Kreme (DNUT) so this valuation may be moot for most of us (2) Units outside of Chicago have been materially less profitable than those at home, with good but not great unit level economics, and that could come increasingly into play over time (3) Store level margins, now at industry highs and all time records for PTLO, are unlikely to expand further. We, therefore, do not expect EPS  to expand much more rapidly, possibly materially less, than the 10% unit growth rate.  We therefore consider the fundamental risks to be at least real possibilities, so would not be inclined to own PTLO at “any price”. As Warren Buffet famously suggested, “you don’t have to swing at every pitch.”

Roger Lipton