Guzman y Gomez isn’t the reason Taco Bell is getting axed, insists CEO

The operator behind Taco Bell is giving up on running the Mexican-inspired fast food chain in Australia after it failed to gain traction in the face of tough competition from Guzman y Gomez and a series of missteps during the initial growth phase.

Collins Foods, which operates KFC in Australia and some other countries, operates 27 Taco Bell restaurants in Australia and is in talks to “transition” the business to US brand owner Taco Bell International or another operator.

Taco Bell in Tamworth. Parent company Collins Foods wants out of the business.

“This is a business that does not contribute profits, and it does not contribute cash flow,” Collins Foods chief Xavier Simonet told investors during a call on Tuesday.

“Therefore the decision we made will be a positive impact to cash flow once we have fully exited the business.”

If it doesn’t find a buyer in the next 12 months, Collins Foods’ only option is to shut the stores down “step by step or in one go”, Simonet said.

The move comes after Taco Bell’s third attempt to crack the Australian market: the first Taco Bell store opened in the early 1980s but exited after clashing with a Sydney restaurant named Taco Bell’s Casa. The chain tried again in 1997 with a store in Sydney’s George Street, but left by 2005.

Collins Foods became a franchisee of the business in 2017 after local players Guzman y Gomez, Zambrero and Mad Mex gained popularity around the country, demonstrating a growing appetite for Mexican food.

“I’m not saying [Guzman y Gomez] is the reason why we’re closing,” Simonet told this masthead.

“What’s the space of Taco Bell or other Mexican-type brands in a market where GYG has a high level of penetration? I think my only comment would be Australia is a really interesting, competitive landscape for this kind of food, considering the expansion plan of GYG.”

A Taco Bell in Sydney’s Chatswood.Credit: Louie Douvis

The company had been backing Taco Bell as recently as November 2022, with then-chief executive Drew O’Malley saying he was “confident in the future prospects of Taco Bell”.

Collins Foods’ share price was down 8 per cent in late afternoon trading.

Simonet joined Collins Foods last November and initiated a strategic review of the company, after which he said he received several questions from investors and analysts about the performance of the Taco Bell business.

“I looked at past performance, I engaged with different stakeholders, went to the stores ... talked to a number of analysts, looked at the numbers, and I don’t see that at this point in time that this is the best allocation of capital that we can make,” he said.

“It’s not delivering the return on investment that we need to generate for our shareholders, and the business is unprofitable, so at the end of the day, this is why the board, based on my recommendation, has made the decision to exit ...”

Tough competition aside, Simonet conceded to investors that Taco Bell had also suffered from decisions made in Collins Foods’ relaunch of the business in 2017 around restaurant location selection as well as the menu.

Collins Foods chief executive Xavier Simonet.

“There are learnings around some disadvantages with respect to how we launched in the market,” Simonet said.

“From a footprint perspective, we spread our restaurants around. That probably wasn’t the right decision because we didn’t have critical mass.”

Taco Bell makes up less than 4 per cent of the money Collins Foods makes, contributing $54.4 million to Collins Foods’ total revenue of $1.5 billion in the 2024 financial year. KFC Australia is the real engine of the company, contributing $1.1 billion.

Taco Bell’s performance contrasts with that of Guzman y Gomez, which listed on the Australian stock exchange to a valuation of over $3 billion, raked in $365 million in revenue in 2024, and has ambitions to grow in the US and Asia.

Guzman y Gomez chief executive Steve Marks declined to comment directly on Taco Bell’s exit, but said “GYG knows clean, fresh fast food is what our guests deserve and want”.

Food consultant and Titanium Food director Suzee Brain wondered whether Australia had enough room for multiple Mexican chains in Australia.

“We don’t really eat Mexican as much as we eat other cuisines,” she said, adding that burgers, chicken and pizza were Australia’s top choices.

Taco Bell was never a meaningful contender to Guzman y Gomez, she indicated. “There’s a play-out between [Zambrero and Mad Mex]. They’re the differentiator.”

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