Portillo's (PTLO) risk factors, FY2024 10-K

Risks Related to Our Business, Industry and Growth Strategies

1. 01We are vulnerable to changes in economic conditions, increases in food and commodity costs and consumer preferences
2. 02Portillo's Inc. Form 10-K | 2
3. 03We may fail to open new restaurants or establish new markets or our new restaurants may not perform as well as anticipated, may not be profitable, or may close
4. 04We employ operating and financial targets, but new restaurants may not meet these targets or may take longer than anticipated to do so. If our new restaurants do not perform as planned, it could have a material adverse effect on our Results
5. 05Our growth plans and ongoing capital expenditure ("capex") needs require us to spend capital, which may not be readily available
6. 06Our same-restaurant sales may be lower than we expect in future periods
7. 07Our marketing programs and any limited time or seasonal offerings may be unsuccessful and could fail to meet expectations, and our new menu items, advertising campaigns, heavy reliance on social media and restaurant designs and remodels may not generate increased sales or profits
8. 08which could have a material adverse effect on our Results
9. 09Incidents involving food-borne illness and food safety could have an adverse effect
10. 10We face significant competition for guests, and our inability to compete effectively may affect our traffic, our sales and our operating profit margins, which could have a material adverse effect on our Results
11. 11Our restaurant base is geographically concentrated in the Midwestern United States, and we could be negatively affected by conditions specific to that region
12. 12Damage to our reputation and negative publicity could have a material adverse effect on our Results
13. 13The digital and delivery business, and expansion thereof, is uncertain and subject to risk
14. 14Due to the concentration of our suppliers and distributors (“our vendors”), the cancellation, disruption, delay or inability of these suppliers to deliver these products to our restaurants for any reason may materially and adversely affect our operations until we establish an alternative
15. 15Any prolonged disruption in the operations of our two commissaries could harm our business
16. 16We depend on our executive officers and certain other key team members, the loss of whom could have a material adverse effect on our business
17. 17Failure to maintain our corporate culture as we grow could have a material adverse effect on our business
18. 18Matters relating to employment and labor law could have a material adverse effect, result in litigation or union activities, add significant costs and divert management attention
19. 19Portillo's Inc. Form 10-K | 6
20. 20Labor quality, labor shortages or increased labor costs could have a material adverse effect on our Results
21. 21We are exposed to risks associated with leasing property including long-term, non-cancelable leases and potential inability to renew expiring leases
22. 22Our business is subject to risks related to our sale of alcoholic beverages
23. 23An impairment in the carrying value of our goodwill, indefinite-lived intangible assets or long-lived assets could have a material adverse effect on our business
24. 24Portillo's Inc. Form 10-K | 7
25. 25Natural disasters, unusual weather conditions, pandemic outbreaks, political events, war and terrorism could disrupt our business and result in lower sales, increased operating costs and capital expenditures
26. 26The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation, and adversely impact our Results
27. 27Our inability or failure to execute on a comprehensive business continuity plan at our Restaurant Support Center following a disaster or force majeure event could have a material adverse impact on our Results

Risks Related to Our Indebtedness

1. 28Our level of indebtedness could have a material adverse effect on our business and limit our ability to plan for or respond to changes in our business

Risks Related to Our Organizational Structure

1. 29The interests of Berkshire may conflict with our interests or the interests of the holders of our Class A common stock in the future
2. 30Delaware law and our organizational documents, as well as our existing and future debt agreements, may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium for their shares
3. 31We are a holding company and our principal asset is our ownership of LLC Units in Portillo’s OpCo. Accordingly, we are dependent upon distributions from Portillo’s OpCo to pay dividends, if any, and taxes, make payments under the Tax Receivable Agreement and pay other expenses
4. 32In certain circumstances, Portillo’s OpCo will be required to make distributions to us and the other holders of LLC Units, and those distributions may be substantial
5. 33Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the TRA Parties that will not benefit holders of our Class A common stock to the same extent that it will benefit the TRA Parties, including substantial cash payments
6. 34We will not be reimbursed for any payments made to the TRA Parties under the Tax Receivable Agreement in the event that any tax benefits are disallowed
7. 35Our business and operations could be negatively affected if we become the target of any securities litigation or shareholder activism efforts, which could cause us to incur significant expenses, hinder execution of our growth strategy and impact our stock price

Risks Related to Intellectual Property, Information Technology, and Data Security

1. 36The failure to protect and maintain our intellectual property, including our trademarks, could have a material adverse effect on our business
2. 37Portillo's Inc. Form 10-K | 11
3. 38The rapid development and integration of artificial intelligence ("AI") and emerging technologies into our processes poses risks to our business
4. 39Failure to comply with existing and new federal and state laws and regulations relating to privacy, data protection, advertising and consumer protection, could have a material adverse effect
5. 40Portillo's Inc. Form 10-K | 12

Risks Related to Legal and Regulatory Matters

1. 41We are subject to many federal, state and local laws with which compliance can be both costly and complex
2. 42Tariffs and other trade policies could have a substantial impact on our business
3. 43We can incur liabilities arising from environmental laws and compliance with environmental laws could increase our operating expenses
4. 44We could be party to litigation that could distract management, increase our expenses or subject us to material monetary damages or other remedies
5. 45As a public company, we incur significant costs to comply with the laws and regulations affecting public companies which could harm our business and results of operations
6. 46If we fail to maintain effective internal controls over financial reporting, or if our internal controls are ineffective, our ability to produce timely and accurate financial information or to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could be impaired
7. 47Portillo's Inc. Form 10-K | 14

General Risks

1. 48Fluctuations in our tax obligations, effective tax rate, and realization of our deferred tax assets may result in volatility of our results of operations
2. 49Our insurance may not provide adequate levels of coverage against claims
3. 50Changes in accounting principles applicable to us could have a material adverse effect on our Results
4. 51Our current certificate of incorporation provides that, absent our written consent, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any action asserting a claim arising under the Securities Act or the rules and regulations promulgated thereunder
5. 52Portillo's Inc. Form 10-K | 15
6. 53Our annual and quarterly results of operations may fluctuate, and if our operating and financial performance in any given period does not meet the guidance that we have provided to the public or the expectations of our investors and securities analysts, the trading price of our Class A common stock may decline