UPDATE: Sept. 27, 2021: Portillo's is targeting a proposed maximum aggregate offering price of $100 million as part of its initial public offering, according to an S-1 filing posted Monday. The company, which will trade under the symbol PLTO, plans to use the proceeds from its offering to repay debt. Portillo's reported average unit volumes of $7.9 million for the 12 months ending June 27, 2021 and restaurant-level adjusted EBIDTA margins of 28.6%. Comparatively, the chain reported AUVs of $7.7 million and margins of 26.8% in 2020. 

Dive Brief:

• Portillo's Hot Dogs announced Monday it has confidentially submitted a draft registration statement on Form S-1 with the U.S. Securities and Exchange Commission for an initial public offering. The number of shares to be offered and the price range for the IPO have yet to be determined. The IPO is expected to occur once the SEC completes its review process. 
• The restaurant company, which is held by private equity firm Berkshire Partners, is aiming for a valuation of $2.5 billion to $3 billion, the Wall Street Journal reported Friday. Shares are expected to begin trading by the end of 2021, per the publication.
• Portillo's is the the fourth U.S. restaurant chain to officially pursue a public debut this year, after Sweetgreen, Dutch Bros and Krispy Kreme. 

Dive Insight:

Restaurant chains that survived the economic upheaval of pandemic lockdowns are gambling on their future growth potential with plans to go public. But Portillo's IPO goals are a bit surprising given the chain's small size.

The hot dog restaurant only boasts 68 units across nine states and 2020 systemwide sales of $455 million, but is pushing for a valuation between $2.5 and $3 billion. For comparison, Krispy Kreme has over 360 U.S. locations and $1.1 billion in 2020 sales and received a valuation of roughly $2.7 billion. 

However, when Shake Shack went public in 2015, it also had a smaller location count, with just over 60 restaurants, but saw its revenue jump four-fold from $19.5 million in 2012 to $82 million the following year. It was then valued at more than $700 million, according to CNBC. The burger chain has since grown rapidly to more than 300 stores around the world.

It's possible that Portillo's IPO plans could fall short of its expectations, however, as Krispy Kreme experienced. The doughnut chain was originally targeting a valuation of up to $4 billion, but investor response was weak. It's unclear why the offering's reception was so lackluster, since investors appear to be relatively confident in the restaurant segment's future prospects. 

Portillo's did not disclose what it will use its IPO funds for, but expansion seems a safe bet. The company continued to open new restaurants last year despite the pressures of the COVID-19 crisis. 

It could put funds toward experimentation with new formats, as well. Earlier this month, the chain announced it will open a restaurant without a dining room in Joliet, Illinois. The "Portillo's Pick Up" model is 3,750 square feet, or roughly 50% of the size of a typical Portillo's unit, Restaurant Business reports, and features three drive-thru lanes. Two of the lanes will function as traditional drive-thrus, and the third will service pickup orders.