Let’s taco ’bout Guzman y Gomez: A timeline from burrito to IPO
Mexican-themed restaurant chain Guzman y Gomez surged to a $3 billion valuation on Thursday, after its listing on the ASX saw shares trade around 36% above asking price.
Mexican-themed restaurant chain Guzman y Gomez surged to a $3 billion valuation on Thursday, after its listing on the Australia Securities Exchange saw shares trade around 36% above asking price.
The long-anticipated stock market listing was the ASX’s biggest initial public offering in three years, taking place in a market hungering for another major success story.
Founded in 2006 by two Americans — former investment banker Stephen Marks and Robert Hazan — Guzman y Gomez now commands 210 restaurants in Australia and locations across Japan, Singapore, and the US.
Before its IPO, it sold institutional investors — including the likes of TDM Growth Partners, Barrenjoey, Point King Capital and Aware Super — on an expansionary vision, both in Australia and North America.
It plans to eventually operate 1,000 stores, and has frequently circled McDonald’s as a global point of comparison.
Some skeptics of its aggressive vision, its plan to dramatically expand its US cluster of four stores, and the economics of growing quick service restaurants, have argued Guzman y Gomez shares are fair value at $15, not the $22 offer price.
However, advocates for the company contend its true value should be judged on its future performance — and the potential for it to tap into global markets supposedly hungry for Australian-style, Tex-Mex cuisine.
At time of writing, shares in the Sydney-born business are trading around $28.48, slightly below Thursday’s closing price of $30.
So how did we get to this point? Here’s a timeline of Guzman y Gomez’ operations, as told by the SmartCompany archives.
February 2011
Speaking to SmartCompany in early 2011, Marks described the genesis of the publicly-listed burrito slingers.
It all began in 2006, when Marks encountered Australia’s take on Tex-Mex cuisine for the first time:
“It was horrible. Absolute shit,” he contends, rather bluntly… “In the States, there’s something called ‘fast casual’, which is burritos of restaurant quality served quickly. In Australia, you had traditional fast food and the restaurants, and the restaurants are very expensive. There’s nothing in-between.”
November 2013
To promote the launch of its second Melbourne CBD store, Guzman y Gomez handed out free burritos for four hours over the lunchtime rush.
The stunt drew the attention of marketing industry expert Mark Crowe, who ruminated on the timeless appeal of a free lunch:
“In the food and hospitality market, it’s a very competitive space so you certainly need to do something different, and dare I say overt, to capture people’s attention.”
April 2016
Ten years after its launch, Guzman y Gomez celebrated its network of 70 Australian stores, which were collectively turning over some $150 million at the time.
In another conversation with SmartCompany, Marks admitted the first few years were difficult. He claimed it took the Antipodean palate a while to adjust to Guzman y Gomez’ offerings.
He also referenced the big player in global fast food, which has served as a point of comparison for investors since:
“We’re just as fast as McDonald’s. But that slow, painful start is so integral to what Guzman y Gomez is today.
…
When did fast food become bad food? I don’t want to put McDonald’s out of business, I want them to change and I want to lead the way.”
September 2016
In the same year, Guzman y Gomez took a swing at competitors by claiming Australian fast food, as a whole, was a disaster for animal welfare.
The brand, which claimed to churn through 80,000 kilograms of chicken a month, highlighted its switch to free-range accredited poultry with another public campaign:
“We really want to inspire people to change,” [Marks] says.
“I’m not saying Guzman y Gomez is perfect, but we will be relentless.”
In a YouTube video promoting Guzman y Gomez’ free-range switch, Marks says he believes other fast food companies have “put profit and greed ahead of nutrition and quality”.
August 2018
After opening venues in global hotspots Singapore and Tokyo, Guzman y Gomez booked a $44 million investment from TDM Growth Partners to drive further growth — and nudge it towards Thursday’s IPO:
The company has experienced significant growth in recent year; it now boasts $200 million in annual turnover, up from $150 million in 2016, with revenue increasing 30% year-on-year.
The company began its search for investment around six months ago, calling on local funds to back the business so it could continue to roll out restaurants across Australia, as well as growing into US markets.
Speaking to SmartCompany, Marks says he first realised the company would need additional investment back in October 2017 when it was gearing up to celebrate the anniversary of opening its first store 12 years earlier.
“It’s been an incredible amount of hard work, and for it to pay off and for us to have a shot at being the best restaurant company in the world, I knew I would need a partner,” he says.
…
Asked if an ASX-listing is on the cards for Guzman y Gomez, Marks says he’s both a former hedge fund manager and a “crazy fucking guy”, and confirmed the company would look to undertake an initial public offering in the future.
“I was always my dream as a kid to list something, so we’re looking to IPO Guzman y Gomez at some point, mainly because I want the public to have a chance to own a piece of something they love,” he says.
April 2020
Echoing the free burrito stunts of 2013, the chain offered discounted takeaway burritos through the early days of COVID-19 lockdowns:
[Marks] also congratulated franchisees on jumping on board with the price cut, and their dedication to feeding people who “have to eat”, and praised the “great culture” he has managed to create.
“I think we’re doing a great job,” he said.
July 2022
After the company’s estimated value topped $1.2 billion in May 2022, Australia’s private equity players reportedly considered ways to realise that value.
One potential plan of action, reportedly touted by Blackstone’s private equity unit, would be a merger with fellow Australian Tex-Mex player Zambrero.
Cue Marks, on LinkedIn:
“GYG has no need, no desire, and no intention of undertaking a merger with any other business,” he wrote.
“Others putting ‘rumours’ into market to prop themselves up is an unfortunate and mildly comical distraction which should not gain any further traction as it’s simply not true.”
January 2024
With IPO plans well underway, SBO Financial’s Jason Andrew tore into Guzman y Gomez’ financials.
His analysis tapped into some of the investor excitement around the brand in the months leading up to its float:
The Guzman Y Gomez investor team will be selling a growth story at IPO, and are banking on hitting a home run in the USA.
Still, entrepreneurs have a saying: “If you can make it in Australia, you can make it anywhere”. It’s not an easy country to do business in, with high minimum wage, complex award rates, and a high tax corporate system.
