From its inception through 1997, and a revival in 2003, the festival toured North America. In 2004, the festival organizers decided to expand the dates to two days per city, however poor ticket sales forced the 2004 tour to be cancelled. In 2005, Farrell and the William Morris Agency partnered up with Austin, Texas based company Capital Sports Entertainment and retooled into its current format as a weekend destination festival in Grant Park in Chicago, Illinois.
The inaugural 1991 lineup was daringly eclectic, drawing in headliners from rap such as Ice-T as well as industrial music such as Nine Inch Nails. Crossing popular music's rigidly-drawn genre lines gave the festival an air of independence from corporate rock. Another key concept behind Lollapalooza was the inclusion of non-musical features. Performers like the Jim Rose Circus Side Show, an alternative freak show, and the Shaolin monks stretched the boundaries of traditional rock culture. There was a tent for display of art pieces, virtual reality games, and information tables for political and environmental non-profit groups. Lollapalooza's charter was not just a super-star rock jam—it was a cultural festival, albeit for the newly-formed 1990s counterculture.
After 1991, the festival included a second stage (and, in 1996, a third stage) for up-and-coming bands or local acts. It began a churning effect for alternative music—as underground bands broke through to the mainstream, they drew listeners to Lollapalooza, who would then see the next generation of underground bands on the second stage. Many of the bands that played second stage at Lollapalooza later had more widespread commercial success.
In the early 1990s (prior to the advent of the ability to order tickets online via a website on the Internet), many attendees would have to camp outdoors in front of Ticketmaster outlets for hours (or even days) at a time in order to purchase tickets. Attendee complaints of the festival included high ticket prices as well as the high cost for food and water at the shows. When the festival played at the Pine Knob Music Theater in Clarkston, Michigan (near Detroit) in 1992, concertgoers ripped up chunks of sod and grass and threw them at each other and at the bands, resulting in tens of thousands of dollars in damage to the venue. Once the sun went down, attendees also lit several impromptu bonfires across the lawn using blankets, trash, sleeping bags, etc., in large heaps. Some attendees also climbed the scaffolding and lighting rigs surrounding the stage and overhanging the seats. This behavior resulted in the festival not being invited back to Pine Knob in 1993 (it was held at a dragway in Milan that year), but for reasons not explained, the festival was invited back to Pine Knob in 1994. When a sudden rainstorm occurred during the 1992 show at SPAC in Saratoga, New York, attendees created their own form of "slip and slide" on the wet lawn. After a half hour or so the lawn was nothing more than a huge mud pit and sliders were literally covered in mud for the remainder of the day. In Boston that same year, after night fell on the event fans tore down large sections of a tall perimeter fence at the back of the lawn area and used the planks to start large bonfires on the lawn. In 1993, most items were banned at the gate and beer sales were closed three hours before the end of the event to prevent events such as these from occurring. This type of behavior would also be repeated a few years later at Woodstock '94 and again at Woodstock '99.
1994 was the high-water-mark of the grunge era and a year of tragedy for Lollapalooza. Nirvana, the band that had kicked off grunge's breakthrough into mainstream music, was scheduled to headline the festival, but the band officially pulled out of the festival on April 7, 1994. Nirvana frontman Kurt Cobain's body was discovered in Seattle, Washington the next day. Cobain's widow, Courtney Love, made surprise guest appearances at several shows, including the Philadelphia show at FDR Park (usually taking time given to her by The Smashing Pumpkins vocalist/guitarist Billy Corgan), speaking to the crowds about the loss.
In 1996, Farrell, who had been the soul of the festival, decided to focus his energy to produce his new festival project, ENIT, and did not participate in producing Lollapalooza. Ideas and musical genres that had been edgy and risque at the beginning of the 1990s were now mainstream or passe. Many fans saw the addition of Metallica in 1996 as going against the practice of featuring "non-mainstream" artists. Efforts were made to keep the festival relevant; including more eclectic acts such as country superstar Waylon Jennings and emphasizing more heavily electronica groups like The Prodigy. By 1997, however, the Lollapalooza concept had run out of steam, and in 1998 failed efforts to find a suitable headliner resulted in the festival's cancellation.
Farrell partnered with Capital Sports & Entertainment (now C3 Presents), which co-owns and produces the Austin City Limits Music Festival, to produce Lollapalooza. CSE, Farrell and the William Morris Agency —along with Charles Attal Presents—resurrected Lollapalooza as a two-day destination festival in 2005 in Grant Park, Chicago, Illinois, with an even greater variety of performers (70 acts on five stages) than that of the touring festival. Without the constraints of traditional venues, and as an independent promotor, Farrell again had the opportunity to create freely and to build the festival from the ground up. The festival was generally successful, attracting over 65,000 attendees, despite a 104 degree Sunday heat wave (3 people were hospitalized for heat related illness). It returned to Chicago from August 4-6, 2006. On October 25, 2006, the Chicago Park District and Capital Sports & Entertainment agreed to a five-year, $5 million deal, keeping Lollapalooza at Grant Park in Chicago until 2011.