Well, just a late start. I'm Sara Senatore, Bank of America's restaurants analyst, and I'm very pleased to have with me Michael Osanloo. Help me with the pronunciation.
Osanloo.
Osanloo? Okay. Osanloo and Michelle Hook. Hook I've got.
Yeah.
So from Portillo's. Portillo's is a fast casual restaurant that specializes in Chicago specialties like Chicago style hot dogs and Italian beef sandwiches, as well as more traditional limited service menu items. Michael, prior to being President and CEO of Portillo's, he was formerly at P.F. Chang's and before that experience at Kraft Heinz and Caesars Entertainment, so a lot of experience in the consumer industry. Michelle, I think probably many of you know, certainly I did, from her role at Domino's, where she was the Vice President of Finance for Global FP&A before joining Portillo's as CFO in 2020. So again, lots of institutional history and memory up here. I know you are going to show a few minutes of slides just to introduce the concept to people who maybe are less familiar, so I will turn it over to you and then we'll kick off.
Thank you. Thank you, Sara. Thank you. Yeah, I think it's helpful to actually talk a little bit about what Portillo's is. It is, in some ways, a little bit of a unicorn. At a glance, here's what we would say. We think there's something cravable for everyone on our menu. If you haven't experienced us, our menu is relatively diverse, and it's not just there's something good, but there's something that you crave. We are an experiential offering. I'll show you a picture of the inside of our restaurants. It's not like a blank soulless box that you've come to expect in QSR and some fast casual. It's an engaging, vibrant environment. You see families there. You see people enjoying themselves. We were multi-channel before it became a thing. We have fantastic motion in the drive-through, in dine-in, in third-party delivery, self-delivery. We do catering events.
We do a direct ship business, and we've been doing this forever. We have obsessed fans. We'll give you a little stat on that, but I think that our fan base is as passionate about us as any fan base in the country. And by our fan base, I think there's a misnomer that, "Oh, Chicago people." Nope. People in Texas, in Florida, in Arizona, in other markets are evangelical about us. We think our value is ridiculously good. I'll show you the numbers. Show you the data. Our unit economics, they'll speak for themselves when I show it to you. We're growing faster and further than ever, and so we're excited. By the way, that picture, that's a new chicken salad, new spicy chicken chop salad that we're rolling out nationally at the end of this month. We're excited about it.
We think it fills a gap in our portfolio. It's a whole lot of flavors. It's a whole lot of spicy deliciousness, but it's part of what makes us an amazing company is the breadth of our menu. When I talk about something cravable for everyone, it's actually a really nice mix, right? Number one thing in our menu is 21% Italian beef, fries are 17%, hot dogs, burgers, a lot of the traditional stuff that Sara said. We certainly have our Chicago favorites, which is a beef sandwich, hot dogs, but we also do a great job with our burgers, shakes, and the sneaky thing on our menu are our salads. Most people wouldn't know. We sell, on average, $650,000 of salad per restaurant. Per restaurant. Our salads are not put in a clamshell sitting around. They're hand-tossed, fresh. They're custom-made. You want your chop salad without green onions?
We'll make it that way. In another life, we would call ourselves a salad concept, except we have really great margins. So we have something craveable for everyone. People love our food. I would say this is not a typical restaurant of ours. This happens to be our restaurant in Orlando, Florida. You can see it's got a lot of cha-cha-cha going on, right? We have people taking selfies in our restaurants. We have families coming in with their kids. This one happens to be a very successful restaurant because it's a mile away from the front door of Disney. And so after you've spent the afternoon at Disney gone crazy, you come here, you get a great meal at a great price, and you can have a beer and enjoy yourself. But our restaurants are meant to be experiential. I think of this as balance sheet marketing.
This isn't just an empty box. It's a beautiful experience. We're available any way you want it. An average Portillo's does $3.5 million in the drive-through. In the drive-through. The average Portillo's does $4.2 million inside the restaurant. We do $1.2 million per box in delivery. And then we have all these other off-premise channels. We do carry out. We do catering. We do direct shipping. But what's important is that when you're investing into Portillo's, you're essentially investing in two McDonald's in the drive-through, a Chipotle inside, and a Domino's. That's what you get when you do a Portillo's. Our fans love us. This is a Net Promoter Score study. It's done off of a Qualtrics platform. I'm a little jealous of In-N-Out. I don't like being stuck in, but I think we're in phenomenal company between In-N-Out and Chick-fil-A, which I think and Raising Cane's.
I mean, the truth is, these are all largely very, very good concepts with fantastic fandom. Any of you who follow Net Promoter Scores, NPS scores, those are all really good numbers, actually. It's a very, very strong benchmark. It's a strong peer group, but we are very much at the top of the list. We have ridiculous levels of fandom. And again, this isn't just a Chicago thing. We have restaurants in Texas, Arizona, Florida where the fandom is consistent. I'm very proud of our price points. We take this. We look at what we believe is a typical restaurant for us. This one happens to be in Elmhurst, Illinois. We look at competitors, which are near us. All these competitors are within a couple miles from us. And we take our most popular set before you take a picture, wait until I click one.
We take our most popular item, our most popular order, which happens to be beef, fries, and a soft drink, and we compare it to their most popular order. Unambiguously, we're the most affordable. I'm not even going to get into the fact that how much beef comes in our beef sandwich, the fact that our fries are huge and cooked in beef tallow and delicious. It's not like I'm saying we're less expensive because we're gut-filled. We are exceptionally high quality and less expensive. But wait, there's more. How many of you have gone to a restaurant and the POS machine does that arm twisting, make you feel guilty, have to give a tip?
If you don't want to give a tip, the person says, "Oh, you just got to hit a few buttons before you finalize, and then you got to go find the button to say no tip," etc., right? We've all done that. America is getting tip fatigue. It's pricing. Whatever cute way you want to discuss it, it's pricing. We don't engage in that at Portillo's. We're going to be transparent about pricing. We're not doing surge pricing. We're not doing tip pricing. The price is the price, right? And so when you include the suggested tips for these competitors, the only one that doesn't do a suggested tip is Chipotle. Every one of these others does a suggested tip. We are materially less expensive. I'm making this point because I think value proposition over time wins. Value proposition is why restaurant companies have good or bad traffic over time.
You can tweak numbers in a quarter, but over time, a great value proposition wins. It also suggests to me that we have untapped pricing power if and when we need to exercise it. Our unit economics, I think, speak for themselves. I'll highlight a few things. One is we were founded in 1963, which is an interesting factoid, but we really kind of grew up in 2021 when we became a public company and are now more differently managed versus an entrepreneur. Our average unit volumes are $9.1 million per restaurant. We have restaurant-level EBITDA margins of 24.3%. We generated $102 million of adjusted EBITDA. It's not on here, but you can imagine that that EBITDA, that operating income, those numbers translate into very attractive cash flows. The thing that's not on this is that we finance all of our restaurants with existing cash flow.
That's a really good place to be as a growth company. It means we don't have to go and borrow. We're not paying useless interest rates right now. We fund out of the bank. I joked, the Bank of Michelle Hook. Part of what underpins these great economics is the fact that we are a really good place to work. Fun fact for you, where do we pay minimum wage? Nowhere. We pay above minimum wage across the country. We do that because we expect superior performance from our team members. In our industry, we are a desired employer. We have 20 points lower turnover than the rest of the fast casual segment, and we're routinely lauded for being a great place to work for our team members. We believe in what I like to think of as an enlightened form of capitalism.
Our team members are the brand representative and the person who was the ambassador to the guest. You take great care of your frontline team members. Your guests are going to have a great experience. If your guests are having a great experience, your investors will have a great experience. It's a perfectly virtuous cycle, but it does take a leap of faith to take great care of your frontline teams. We're growing faster than ever before. People think of us as a Chicago concept. There's certainly a lot of truth in that. We were founded in Chicago. Our food is Chicago-inspired street food. We are growing across the nation. We now have restaurants in, what is that, 11 states, 10 states. We're expanding. We've publicly announced that we'll be growing in Atlanta, Georgia, in Denver, Colorado, in Las Vegas, Nevada. We're growing aggressively in the state of Texas.
This slide is actually wrong. We just opened our fifth restaurant in Denton, Texas, and we've announced we're going deeper into Dallas-Fort Worth, but also into Houston this year. We're growing across what I like to consider the Sunbelt. I call it colloquially the Sunbelt. The reality is it's the growing states in America. This is where population is growing. We would like to make our lives easier by growing in markets that have a tailwind of traffic and comp growth when we get established. That's places like Florida, Texas, Arizona, Nevada, Denver, Colorado, and Atlanta, Georgia. One question people ask is, "Well, how do these perform?" You're a Chicago concept, so we would assume that the Midwest is best for you. Actually, that's not quite factually true. We crush in Chicagoland. That's sort of undeniable. We have $11.4 million AUVs in Chicagoland.
But what's interesting is when you look at it is that our AUVs along the Sunbelt are better than our AUVs in the rest of the Midwest. And the rest of the Midwest, states like Indiana, Wisconsin, Minnesota, Iowa, Michigan, they all know Portillo's because people come to Chicago for business trips, for vacations, for weekends. They experience us. So our brand awareness is actually very high in the rest of the Midwest. But the economics and the dynamics of competing in the Midwest are just a little different than the economics and dynamics of competing in the growth states in the South. We don't have the same level of brand awareness, but my goodness, we're already doing significantly better. Our AUVs in the Midwest outside Chicago are about $5.8 million. Our AUVs across the Sunbelt are $6.8 million. Our long-term algorithm, look, we are a long-term growth stock.
We have 85 restaurants now on a journey to 900+. So we're less than 10% of the way to what full potential looks like for us. So we think the right way to think about us is a long-term algorithm. And the long-term algorithm is really simple. We've committed to 12%-15% unit growth, same restaurant sales growth that's low single digits. You can do the math on what that means in terms of top-line revenue. We think that adjusted EBITDA growth in the low teens, the nuance to think about there is we have really mature, really scale restaurants in a scale market in Chicago that generates a ton of EBITDA. The restaurants we built outside of Chicagoland are going to be great restaurants, but they're going to be at a lower margin to come out of the gate.
Then they build margin, comp, and traffic over time. So that's why you see adjusted EBITDA growth in the low teens as that leverages over time. You can imagine over time, our expectation is that you get closer to margin parity between Chicagoland and everywhere else. But that's our long-term growth algorithm. And I'm going to end with a picture. That's a combo sandwich. It's Italian beef and a sausage with a little bit of giardiniera in there. So if you had lunch, great. If you didn't, I'm sorry to torture you.
It looks amazing. I assume you brought some.
Yeah, no. Sorry.
All right. We'll have to make a trip to Chicago. Oh, actually, not so far now that we're in Florida.
That's right.
Yeah, okay. From New York, it's tougher. All right. So thank you for that. That was very helpful.
I guess I wanted to pick up one of the things you said was value. To your point, value proposition matters. Food that tastes really good. There's a lot of it. The price point is right. It always matters. I think now, as I think about the demand environment, it seems to matter even more. At least that's what some of the commentary has been from companies. Maybe you could then talk a little bit about that. Are you seeing trade down? Are you seeing trade up? What are you seeing that where in terms of your ability to kind of win, especially when value has become so salient?
Yeah, I think it's funny because value, sometimes people conflate value with just pricing. So I think value is, there's four things that really matter in our business: quality, quantity, the overall experience, and pricing. Those all matter.
You saw the numbers on pricing. Double-check for yourselves. I think our pricing looks really good compared to everybody else. I'm exceptionally proud of the quality of what we do. We're not playing games. We haven't degraded. If anything, we've actually improved the quality of items. We've actually improved some of the portions of items. The experience is hugely important to me. I want everyone who comes to Portillo's to have a great experience. I think if you're really focused on quality, quantity, experience, and price, you're going to win over time. It's hard for the big guys to drive traffic in a quarter by just dumping a bunch of things into their low-budget menus, right? We don't do that. We're more of an EDLP restaurant company. We charge you a really fair price, and we never go on sale.
When we feel like we need to drive traffic, though, Sarah, we have a number of tools in our arsenal. We can pulse aggressively. We have a catering business that's continuing to grow. That's a fantastic business for us. And over the course of the last 12, 18 months, we've built our own internal salesforce who does outbound calling on catering. This doesn't sound like a huge deal, but it's incremental sales. I love catering because I view it as a paid sampling exercise. And we pulse that business in the fourth quarter. It helped drive positive traffic, positive comp, plus-size performance. We know that when we market Portillo's, it works. And people ask me, "Well, why don't you market more aggressively? Why don't you constantly do it?" Well, because the number one thing that drives visitation is a good experience.
I'm already paying for management and team members to give guests a great experience. So the most high-return activity that you can engage in is be excellent operationally to drive traffic. There are times, though, when we want to pulse, and we did that in the fourth quarter. We had some great advertising in Chicagoland that we called the sounds of Portillo's, right? It's not a discount. It's not a call to action. It's just a reminder of what Portillo's looks like. It's food porn with sound, right? And it was compelling. You could see if you go onto our website, you can see examples of the ads. It worked really well. It works really well in Chicago because we have scale. The cost of the advertising is leveraged over 38 restaurants. And so it makes a ton of sense to do that.
We could probably do that in a couple of other markets. As necessary, we will. I mean, Michelle and I are very committed to driving traffic. But I think for us, value, execution are the two key things that are a healthy way of driving consistent traffic. It's what God bless Texas Roadhouse. That's what they do.
Right. Right. To your point, yeah, every day, value, price, visibility, consistency, and then, as you say, operations and having a good experience. I think about that as sort of a reason that people return, I guess, as I think about advertising. I think about it as bringing people in. To your point, as you said, the Chicagoland advertising was very effective. I think it was probably some combination of new and lapsed, or I guess from that, how do you think about maybe brand awareness more broadly? Because as you were highlighting there, there's brand awareness. There's brand obsession in Chicagoland, and there's brand awareness. So maybe talk a little bit about bringing people who are new to the concept or who maybe have forgotten about it a little bit.
Well, in Chicago, it's more about frequency. So when we know when we advertise, we pick up a little bit of frequency. If there's a pivot in Chicago that our marketing team is working on is consistently trying to get a little bit more youthful in our approach in marketing. The good news about one of the good things about Portillo's is we're a 60-year-old brand, right? We have a huge installed base. We've been around forever. We've never closed a restaurant. The bad news is when you're a 60-year-old brand, you tend to have a little bit older demographic of customer.
And so you've got to be smart about filling that funnel with new customers, particularly in a market like Chicago. So for Chicago, it's all about frequency. Outside Chicago, it's trial and awareness, right? And so all of our marketing activities outside Chicago are targeting, generating trial and awareness. And so we're very aggressive in field marketing, doing events. In the past, we've done food kiosks at Diamondbacks Stadium in Arizona. We did it at where the Cubs do spring training. We've done it at ASU in Tempe. We do hundreds of nonprofit charitable events where we donate food. And I like that. It's a powerful form of marketing because you're sampling. You're giving it away. You're not discounting anything, but you're giving people an opportunity to taste your food, and you're becoming part of the local culture, right? We prefer to be in Arizona.
I want to be the Arizona Portillo's. I don't want to be a Chicago carpetbagger. So there's a way of generating trial and awareness through field marketing that really does that for us.
Right. One of the things, and there's a lot, I think, to talk about there, especially when we think about the honeymoon and the big sort of openings and how you think about sequencing that. But before we get too far afield from just sort of the consumer and the operating environment, I did want to ask you talked about on the conference call, weather. You talked about the consumer pressure in February as well as in January. But you saw a nice acceleration from 3Q into 4Q. So I guess, has anything fundamentally changed in terms of the consumer from 3Q to 4Q and into 1Q?
I'd say, Sara, I wouldn't say anything fundamentally changed with consumer as we sit here today versus some of the headwinds we saw in 2023. I think we had talked about the competitive landscape. I think we have seen more recently, and this is coming in the back half of 2023, and into Q1 of this year, you see heavier discounting. And Michael mentioned by the QSR players, and you see that more pronounced in that space. And look, we've even seen some fast casual players recently get into some discounting as well. And I think that speaks to the environment, just the competitive environment that we're in today. But I don't think that the consumer is in any, I'd say, worse shape. I still don't think it's great.
I think, to your point, what we've seen in Q1 is largely some seasonality in the business, right, in terms of weather. We're still heavily concentrated, right, in the Chicagoland market and in the Midwest. And so, yeah, we're going to have some weather impacts. But when we look at Michael put out the long-term growth algorithm, but we're going to have some quarters that are going to have those dynamics. But over the long term, we feel comfortable that we can deliver what he showed. But I don't think it's any worse.
Okay. Yeah. Thank you. Yeah, that's helpful. And there's always I mean, this is a volatile business in the best of times. So it's always helpful to get your thoughts. So on the question, I guess, of you have Chicagoland, and then you have these growth markets. Obviously, you have the tailwinds, the demographic, the economic tailwinds that you've spoken about and should persist for some time. I know one of the things you get pushed on a lot is if you were to disaggregate Chicagoland from the Sunbelt, would you see dramatically different trends in terms of traffic or same-store sales? Just as you point out, this is a growth concept, and that's where your growth will be.
Yeah. I think when you look at them as two different businesses, which they really are, even as Michael mentioned, a 60-year-old brand in our core market, that when you think about how the future looks, right, for the core versus outside of the core, it's very different in the core in terms of when you look at population not growing but actually contracting.
The ability to grow sales is really going to come through a combination of smart ticket, right, whether that's pricing or being able to upsell your guests in your core market. Then you're going to have to take share, right, to get that traffic growth. So you're going to have to fight your way to traffic growth within the core. And I think outside the core, it's definitely a different dynamic with natural tailwinds with population growth. And there's still the ability, right, to take smart ticket growth, whether that's through price or some incrementality on mix and upselling and things like that. So I think, yes, they are absolutely two different dynamics. And we're still very young in terms of the restaurants outside the core that are actually in the comp base, right? And so I think that story is still to be told.
But we feel really good about the performance of the new restaurants, particularly as we look at the class of 2022, the 7 restaurants in that class. And then the 8 restaurants in the class of 2023 are really newer because they were all open in the back half of 2023. So that story's still to be told. But that's, at least as Michael and I sit here today, what we believe are the dynamics that will exist in the future.
Okay. So I guess put words in your mouth. So as that comp base shifts away, I think it's 80% Chicagoland still. As it shifts away, you see those tailwinds that you've seen in the other markets will become more evident in the overall comp number. And then maybe we can talk a little bit about the stores don't enter the comp base, right, until 24 months. And sort of talk a little bit about the life cycle or the cadence and what you're doing to maybe smooth that out a little bit or how you think about pre-opening opening.
Yeah. Our restaurants definitely have a honeymoon curve to them, which is why, to your point, they don't enter the comp base until after 24 months. And so they're going to start out and when you look at the numbers we put out there for a class of restaurants, again, it's a class, not one individual restaurant. By year three, we're targeting $7.3-$7.5 million AUVs and 22% margins. So if you walk that back into years one and two, in year one, you'd be looking at an $8.2 million AUV high teens margins. In year two, you dip to about $7.2-ish, call it. You dip about $1 million.
You'd still maintain that high teens margin even though your AUVs dip because you're starting to leverage labor a little bit more as you get more efficient in the restaurant. And then by year three, after you're in the comp base, we see the AUVs growing and then the margin continuing to grow. And it doesn't stop there. So beyond that, as we continue to get to scale, our expectation is we continue to see the top line and the margin continue to grow as we get scale in the markets we're in.
Right. And one of the things that we've worked hard on is we used to have this philosophy of a big bang opening. You want as big of an opening as possible. And the problem is it's not good for our business because we had openings that we were doing 450,000 a week, a week, okay?
It was actually not a good experience for the team, not a good experience for the guests. Guests would wait an hour in line to get food that wasn't well prepared. You would literally turn over the entire team in that first week. It was a horrible experience. We've very, very purposely metered that down. I don't want a huge big bang opening. There's already going to be excess demand for us. We're still going to have really big openings. But we try to take some of the pressure and the steam off that opening. We have two weeks of what we call just soft opening: friends and family, invited guests, people who've signed up for our birthday club, our version of a loyalty club, first responders in the community, local politicians.
We invite all of those people for the first two weeks, take some of the pressure off the restaurant so that when the restaurant opens, it's able to handle the volume. Guests can get through those first few weeks more quickly with better quality experiences, and it imprints on them so that they come back again. And so our goal is, as opposed to have this massive roller coaster penetration curve, you want a pretty good first year, a slight dip. It's unavoidable. And then to start building right back up again by year three. That's our goal. We've executed that really well in Orlando. That worked really well. And part of that was Orlando was going to be a big bang. There's nothing we could do because it's close to Disney, etc. But we did not turn on all of our channels right away.
We only had on-premise turned on for Orlando when it opened. After a year, we then started taking third-party delivery orders, delivery orders, and catering orders. And so Orlando is showing sort of a cycle that makes a lot of sense to me, is brand accretive and makes guests happy. That's where we're very purposely trying to flatten that curve a little bit.
Right. Okay. And so you have sort of a playbook from Orlando.
We have a playbook. First in market is always going to be hard. We opened in The Colony in North Dallas. We had people driving up from Houston, from Austin, San Antonio. It was just a ridiculously desired restaurant with a massive catchment its first year. So that one's going to have more of a bounce. But the second, third, fourth, fifth openings in Dallas look to be really good, sustainable openings.
Right. Okay. I want to talk about that and sort of the filling in around these in these markets. You talked about over 900 units. But I guess, to start with, maybe you could talk a little bit about the idea of scaling up, getting to, I think you said, six or seven, and a trade area is efficient. In particular, put that in the context of your growth algorithm because, as you said, the units start off at a unit level, a lower margin. That's explicitly embedded in your growth algorithm where you have EBITDA growth that's slightly lower than revenue. Does scale help offset that above the restaurant level margin line? Whereas you do have more of these markets that are scale, maybe you see that in the G&A. I mean, I guess talk a little bit about that.
Yeah. I mean, we're definitely trying to buffer the impact on when you look at the restaurant-level margin as a %, right? We're trying to buffer the impact of bringing all these new units on by getting to scale as quickly as possible because we know, Sara, there's benefits to scale. Michael talked about our local field marketing efforts. Those are going to benefit more restaurants, right, the more that you get to scale. You're going to be able to leverage your distribution within that market where you're bringing in full truckloads versus partial loads. You're leveraging your multi-unit manager, right, who has the ability to manage 6-8 restaurants versus if you just have a couple in a market today, you're not really leveraging that across the restaurant base that you can be. So yeah, absolutely, that's why scale matters.
Our goal is to get to scale as quickly as possible. Minimum scale for us is 6 restaurants, 6-8 within a market. You see that example in Dallas where we just opened our 5th restaurant in the span of, call it, 13-14 months. Our goal is to get to that 6 within the span of 18-24 months because that will help buffer against the margin degradation that you see from the new units coming on. I think when you talk about G&A over time, our expectation is we will continue to lever that line item. Right now, we're guiding to 75% of the revenue growth number. That's the G&A growth number.
I think when you look at the next 5 years, I think Michael and I both agree that for us getting to that 50% of that revenue growth number over the next 3-5 years is our goal. It's not going to be. It's going to happen overnight. But you think about it as a trend where maybe you go from 75% to 70% to 65%, etc., and you get to that 50% in the future. That's the goal.
Sara, can I just add one thing to what Michelle was saying? There's clearly cost synergies as you achieve local scale, right? It's G&A. It's labor. It's our distribution and supply chain costs, probably the best example. But there's a revenue synergy that is a little bit more nuanced but real. In Chicagoland, we have a Portillo's for a big part of Chicagoland.
There's a Portillo's within 5 miles of you wherever you are, okay? That changes the usage pattern. So our first restaurant in Texas, great restaurant, crushed it. But it's a special occasion because you might be in a place where in Dallas, it takes you an hour to get to The Colony. And now we have 5. Dallas is huge. It's a big driving city. But if you have a craving for Portillo's, there's probably one now within 20 minutes of you. I'd like to get it to the point where, wherever you are in DFW, there's a Portillo's within 12-15 minutes. Then people start using you different. Then you're not just a special occasion. Then you can become more like QSR Plus. I have a craving for a sandwich. You're 12 minutes away. I'm going to go to Portillo's as opposed to so-and-so or who's it's.
And so there's a revenue kicker that happens once you have a certain level of penetration and saturation. We see that clearly in Chicago. We're starting to see that in Arizona. That's why scale matters. It's not just the cost synergies, but it's a revenue kicker.
You see that. That shows up in frequency? So is that sort of.
The most simple way is look at the revenues, right? I mean, there's a reason the revenues in Chicago are what they are. It's because of frequency.
Right. Okay. Just the sheer volume.
You have the sheer transactions, right, that you're pumping through those restaurants. I think we just talked about restaurants not entering the comp base until after 24 months, right? That if we can get to scale within that period of time, right, then you're not worrying about, "Well, is this having an impact on this restaurant?" And you kind of come in with that game plan. And to Michael's point, the consumer has even more awareness, right, as you're in that market, which is a top-line benefit.
Yeah. Right. Right. So it shows up up and down the P&L. The time has flown. So I do want to get to the sort of unit growth, thinking about the dynamics there. So one thing is in terms of CapEx per unit, you've talked about trying to bring that down. I guess there are two things. One is maybe you can remind us again what that looks like. But importantly, are we going to see that in CapEx? Because restaurants spend on so much other than just the four walls of the restaurant. So maybe help us, as we look at the cash flow statement, will we see build costs coming from, I think they were north of $7 million to now kind of in that $5.5 million, the goal being $5.5 million.
Yeah. Our cost to build for the class of 2022 was $7 million. And class of 2023, and then what we're building right now in the class of 2024, our expectation is $6.2 million-$6.5 million build costs for those classes. But to your point, Sara, we have a new prototype of restaurant of the future, we're calling it. And we're going to start building those in the fourth quarter of this year.
Our expectation is that's going to bring the build cost down by about $1 million to $5.2 million-$5.5 million. So that will start showing up more in CapEx per restaurant in the future. But you are going to see some of that come online in 2024. And that was a question we got, which was, "Hey, your CapEx seems a little high to us in terms of the guide we put out." Well, part of that was us getting more ahead of timing, more ahead of the 2025 pipeline as we start building those restaurants in 2024. But yeah, the per-build costs in 2025 will all be in the new restaurant of the future prototype.
Let me just add something, though? What's important is I think some people have misconstrued that, "Oh, you're going to build smaller restaurants with smaller AUVs." No. Our commitment is that those restaurants, we're think of it as we're right-sizing it for the way people use our restaurants today. We've gone through. We've worked with outside people. We've done time motion studies. We've done parking lot studies. How many spots in our parking lot are occupied? How many seats in our dining room are full from 11:00 A.M. to 1:00 P.M., from 5:00 P.M. to 7:00 P.M.? So that you can right-size the restaurant, spruce up your off-premise capability because that's a bigger deal for the third party without giving up revenue. So our target is that these restaurants can all do $10+ million. We're building them to do $10+ million, but in a lower cost, slightly smaller footprint.
Got it. Okay. And when you talked about sort of the pull forward from 2025 into 2024, the reason that that might look different from, for example, pulling forward 2024 into 2023 is because of the cadence of how you're building.
Correct. Yeah. We brought in a new chief development officer. It's about a year and a half or so ago. 18 months ago. 18 months ago. And he's really worked hard to get the pipeline in the shape that it's in, right? So getting ahead of that and getting a smoother cadence versus what you saw all back-loaded in 2023. 2024 looks better in terms of our opening cadence that we put out there. 2025 will look even better. Our goal is we don't want to be building restaurants in November and December. And so yes, getting ahead earlier is part of that process.
Okay. And so as we think about, again, box costs coming down and the cadence more consistent, then we might see this reduced cost per box really materialize in 2025 because you won't have as much of a difference in kind of the pulling forward and the shifting.
Correct.
Okay. That's very helpful. Thank you. And then just in sort of the last minute, I guess we have, I did want to ask about you talked about Texas, the opportunity there. It's a big state. How do you think about the penetration there, how many stores you could have? And maybe also, is it the similar approach to as you think about getting to 950 more broadly? Is there something unique about Texas where maybe you can have a higher density than even you think kind of nationally?
I think Texas is the size of the prize is bigger just because it's geographically a really big state. There's a huge population base. When you look at the population growth times the population base, there's more people going to Texas than any other state, right? Texas by itself added more population by a long shot than all of the Midwestern states combined over the last decade. So that's the number one reason Texas. There's also a lot of growth and development. It's a lot easier when we're building in some of the places that we are, it's part of the suburban sprawl. So there's whole new developments. So you get great position on a corner with a light in a beautiful new center backed by an H-E-B in Texas, which is a great retailer, or some other great anchor tenant. It's just easier.
And so with population growth, with comp tailwind, with traffic tailwind, easier to get into. And full potential in Texas is a really big number of restaurants. So that's why Texas was a great next state for us to go to. And the margin profile for us in Texas will be fantastic.
Right. Right. Yeah. So it's great growth, good returns. Yeah. It makes sense that that's where you would be deploying your capital. I think your shareholders are happy about that.
And I like the joke. We're selling beef on bread that's worked well in Texas.
Surprisingly, yeah, they like beef.
They like beef in Texas.
Well, thank you so much for joining us. This has been very helpful to me. And I appreciate your time.
Thank you very much.
Thanks, Sara.