Dick Portillo - Out of the Dog House

To my wife, who put up with all my crazy ideas.

And a special thanks to Patty Sullivan. Without her help, this book would never have been finished.

Contents

1. Humble Beginnings

Long lines dont impress me; long lines that move fast impress me.

This particular long line wasnt moving fast, but I wanted to see what the fuss was about. TCBY, an American chain of frozen yogurt stores, had opened in 1981 in Arkansas. The company began franchising the following year and stores were being built around the country at a rapid pace, and one opened near our home in Oak Brook, Illinois.

My wife, Sharon, thought we needed to invest in TCBY. I had never been in one of their stores, but Sharon, myself, and my parentswho were in visiting from Floridahad been out for dinner and we usually stopped somewhere for dessert. We decided to get in line with other customers and try a frozen yogurt.

When we reached the counter to place our order, I knew immediately it was not a brand that wed invest in. I told Sharon, See those machines? She said, Yes. I explained it was a simple concept, too simple in fact, and pretty much everyone is going to have a machine like that. Theres no science behind it. It was an easy approach that competitors can quickly copy.

I was right.

New frozen yogurt establishments were being built and TCBYs sales cooled off after its strong start. In 2001, there were 1,777 TCBY locations across the country. By 2011, according to newspaper accounts, there were just 405, and TCBY was listed among Americas disappearing restaurant chains by USA Today .

Thats why I built what I called a moat around Portillos. That moat protects Portillos from the competition, the enemy. The moat is the complexity of the business. It is filled with ideas and our core principles and it makes it very, very difficult for the competition, the enemy, to cross the moat to get to Portillos and duplicate our business model.

History has shown that when somebody gets a good idea everyones going to jump on it and think they can do it better and all that. So, I had to make mine so unique and complicated but at the same time it had to be trainable. In other words, it couldnt be so complicated that the average person thats in this business couldnt grasp what I was trying to do with the culture.

That moat has allowed Portillos to maintain a competitive advantage over its competitors and protect our long-term profits.

We have come a long way from the 6 x 12 trailer hot dog stand I opened in Villa Park in 1963 from which we sold hot dogs, fries, tamales, and soda. The Dog House had no running water and was launched with $1,100 in savings that Sharon had earmarked for a house with a white picket fence but grew to average more than $8 million in sales per restaurant annually, with our largest-volume locations doing more than $17 million in annual sales.

We are famous for our Chicago-style hot dogs, Italian beef sandwiches and the creative dcor of our dining rooms. No two Portillos restaurants have the same look. To some people, it would make sense to use the same set of plans, at least from a financial standpoint. But that is not what I wanted or envisioned for Portillos. If you walked into a McDonalds or a Wendys across the country, it would probably look the same as any of their restaurants in the state of Illinois.

What I had to do was create something that was more unique, more interesting than what they were doing at McDonalds, Burger King, Wendys, and others. I had to separate myself and get out of that way of thinking. People told me, Well, you know, McDonalds does this and McDonalds does that. But I responded, I am not a McDonalds. I dont want to be a McDonalds because I dont want to think like they do. It was a different ballgame. I had to establish something thats so different than McDonalds and Burger King and all those other guys who dont even know how to compete with me. The average Portillos has higher sales than the average McDonaldsand thats without us serving breakfast.

Remember, the restaurant business is not just about the food. The restaurant business should be an experience. I wanted every one of our restaurants to offer a unique customer experience. When you walk into a Portillos, youre going to see something, youre going to see colors, youre going to see an energy, youre going to see movement. The focus has to be on the customers, the people in your community who you serve. That will be a theme throughout my book. One of my favorite sayings is, The customer is the foundation of our business.

In the 50 years I owned the company, we experienced significant growth, adding locations across Illinois, Indiana, California, and Arizona. We employed over 4,000 people and, in addition to our employees, we create work for carpenters, plumbers, bakers, drivers and equipment companies. A much broader sector of the community has benefited from the growth of Portillos.

Customers returned the love. In the years since we first opened, there have been three major economic downturns in America. But through each of them, Portillos sales grew! Other businesses were closing, but our customers so enjoyed the experience we gave them that our restaurant sales increased through those dark periods.

While people have lost millions trying to compete with me, I made millionsand much more.

I sold Portillos to Berkshire Partners, a private equity firm in Boston, in 2014. The amount of money I was paid for 38 Portillos and Barnellis units made it the largest sale in restaurant history in the United States for its size.

Twenty-four private equity groups wanted to purchase Portillos. There were days I had two meetings a day to listen to presentations. One would start at eight in the morning, the other at four in the afternoon. This sounds strange. I knew we were good. I knew we were successful. But once the word got out that we were for sale, it just went crazy.

But Portillos is complex. It took years for me to get where Im at. I purposely, by design, created something very, very complex. Specifically, my time in the Marines gave me mental toughness, discipline, taught me the value of training, teamwork, and organization, and gave me confidence. All these qualities have proven essential in my journey through life. Some people may not believe this, but we spent very little money on marketing at Portillos. I invested that money into people.

I am humbled to be able to celebrate our achievements and my story. It truly has been an incredible journey. One might say I have lived the American dream, but it did not start that way.

* * *

The son of immigrants from Mexico and Greece, I came from a poor family and at one time thought I didnt have anything to offer the world. We lived in public housing until my father made enough money to move us to a better neighborhood on the west side of Chicago. Ultimately, he was able to purchase a home in Bridgeview, 13 miles southwest of Chicago.

As a child I was spanked and got the belt from my father when I did something wrong. I learned at an early agewhen my dad said, The world doesnt owe you a damn thing, youll have to earn itthat I was accountable for my actions and that I had to accept responsibility for poor decisions that I made. This is a lesson that carried over to business as well. Still, everything came hard for me in high school and I was unsure of myself. To this day I still think I had an attention-deficit disorder. My friends would study for a half hour and retain everything. I studied for two hours and learned half of what they did.