Guzman y Gomez catching up with McDonald’s, says CEO, as it looks to hit 1000 stores in Australia

The boss of Guzman y Gomez says younger people are opting for clean, fresh food, and an IPO could happen as soon as this year.

The co-chief executive and founder of Mexican-themed restaurant chain Guzman y Gomez says only McDonald’s is doing better in Australia in terms of customer patronage, with the fast-food business aiming to aggressively ramp up its local store numbers fivefold to 1000 locations.

New York-born Steven Marks is also focused on growing its store numbers across Japan and Singapore as well as almost tripling its burgeoning store network clustered around Chicago in the US to as many as 15 as the private company, valued at as much as $1.5bn, eyes an initial public offering as early as this year.

Speaking to The Australian after Guzman y Gomez unveiled its first-half results, which showed a tripling of its interim losses to $3.96m but built on a 31 per cent surge in sales to $471m, Mr Marks said the Mexican-themed chain was close to recession-proof as proved by its continued strong growth despite cost of living pressures across the community.

He said the business, which has 209 outlets, had proved its economics and earnings potential at a time when many stretched consumers were eating out less at fast-food chains and restaurants due to cost of living pressures.

“We have been operating for about 18 years and the mission for this business is to reinvent fast food enough to change the way the masses eat. And we are really proud about our comparative store sales growth over the last four or five years, and when you look at these macro times, being in fast food, especially what we are doing in fast food which is serving healthy, clean food for the masses, if you look at our average unit value (AUV) for the first 6 months (of fiscal 2024) it was about $87,000 a week per restaurant and last week it was about $92,000.

“These are world class economics. We have some of the leading world class economics anywhere … we have around 185 restaurants in Australia and have a clear vision to get to 1000 just in Australia alone.”

Guzman y Gomez is targeting to have 1000 stores in Australia, a fivefold increase on its current network, as it catches up to McDonald’s which as 1100 stores locally. Picture: Kevin Farmer

Far from saturated, Mr Marks said the Australian market did have an appetite for his company’s type of fast food, which was affordable, fresh and exciting food, which is especially appealing to younger consumers.

“The dynamics of this market is changing. The younger generation wants clean food. If you look at our AUV and our restaurant economics there is probably only one other business in Australia doing better than that and that’s McDonald’s — and we are catching up.”

The world’s largest restaurant chain, McDonald’s, has 1100 stores in Australia.

Guzman y Gomez certainly has insight into the ‘secret sauce’ which has made McDonald’s a success. The chairman of the private equity and superannuation-backed Mexican chain is Guy Russo, who ran McDonald’s Australia and China, and one of its directors is the former chief financial officer and chief operating officer of McDonald’s Australia, Stephen Jermyn.

Its main shareholders include the founder Mr Marks, TDM Growth Partners, philanthropic-focused investor Hearts & Minds, Aware Super, Athletic Ventures and Point King Capital.

The bulk of its stores are in Australia, numbering 183, while it has opened four stores in the US, 17 stores in Singapore and five in Japan. It is targeting to open 30 to 40 stores per year over the long term with a target of 1000 stores in Australia eventually.

In 2023 Guzman y Gomez appointed TDM partner Hilton Brett as a co-CEO with many viewing the move as a precursor to the chain eventually seeking an IPO. Mr Brett said on Wednesday an IPO could be triggered either this year or in 2025.

“We have always had aspirations that at some point in time we will IPO this business, but that will always be dependent on market conditions at the time, at this point our thinking is either late this year or next year — just really depends on conditions at the time.

“If you look at markets today you have seen very few IPOs take place over the course of the last 12 months.”

Mr Brett said growth and a differentiation in the market was also a key pillar of any business which seeks an IPO, but it would also eventually emerge profitable.

For the first half, although Guzman y Gomez reported a statutory net loss, its underlying earnings rose to $21.2m, up 64 per cent. Its same store sales for its Australian network rose 11 per cent, sales in Japan rose 39 per cent, were up 15 per cent in the US and up 9 per cent in Singapore.

A heightened focus on costs in combination with menu price increases of 8.2 per cent delivered corporate margin expansion of 400 basis points to 18.5 per cent, with these hikes in menu prices not denting its strong sales trajectory.

But Mr Brett said despite the bottom line net loss for the half — driven by some one-offs, including the settlement of a legal case in the US and lifting heavily its investment in stores and new store expansions — Guzman y Gomez had the credentials for “mass disruption” of the fast-food sector.

“The quality of our food, our incredible guest experience, white space in Australia and globally as well as our restaurant economics, are some of the best in the world. In Australia we have at least 800 restaurants to roll out which gives us an unbelievable growth runway for many years to come.

“We’re just getting started in the USA and have substantial opportunity for growth in Singapore and Japan, with the rest of the world waiting for us.”

Originally published as Guzman y Gomez catching up with McDonald’s, says CEO, as it looks to hit 1000 stores in Australia