Guzman Y Gomez Pivots to Ambitious Australian Expansion
Fast-food chain Guzman Y Gomez is adopting a disciplined strategy to achieve its goal of opening 1000 stores across Australia, a significant shift in focus following the unsuccessful expansion into the United States market. The Mexican-themed eatery currently operates over 270 locations globally, with the vast majority, 250, situated in Australia. The company also has a presence in Singapore (24 stores) and Japan (five stores), having recently closed its eight US outlets.
The long-term vision for Guzman Y Gomez is to reach 1000 Australian stores within the next two decades, aiming to rival the scale of established fast-food giants like McDonald’s. “We’re going to get there in a very disciplined approach,” stated George Mandilis, Guzman’s chief development officer, in a recent discussion following the inauguration of a new outlet in Western Australia.
Australian Growth Strategy Intensifies
In Western Australia alone, Guzman Y Gomez has launched four new stores this financial year, bringing the total to 17, with the latest addition opening in Wanneroo this month. Mr. Mandilis emphasized the company’s meticulous site selection process. “We always look for triple-A real estate. That perfect site, corner of (two main roads), beautiful access . . . easy car parking, dual-lane drive-thru,” he explained. He expressed confidence that by consistently executing this strategy and maintaining a robust development pipeline, the company can achieve 40 new store openings annually, a target they are currently on track to meet.
Mr. Mandilis reiterated the commitment to this rigorous real estate standard, stating it will not be compromised. These remarks follow Guzman’s withdrawal from the US market in May. Despite previous assurances from co-founders Hilton Brett and Steven Marks, the venture struggled to gain traction with American consumers, who are presented with a wide array of dining options.
Lessons Learned from US Venture
Reflecting on the US experience, Mr. Mandilis acknowledged the learning opportunities. “From a real estate perspective, there’s always lessons to learn,” he commented. “When it came to the US, would we have cut our real estate strategy differently? Maybe. Would I have loved to get more stores, yes.” He further elaborated, “Ultimately, we made the decision that we’d already utilised the capital we had told the market we would on that journey, and therefore we didn’t feel it was right to continue that journey.”
The US venture is expected to result in a one-time financial impact for Guzman Y Gomez, estimated to be between $US30 million and $US40 million. The company is also facing a class-action lawsuit in the US concerning allegations of insufficient notice provided to staff regarding store closures.
Focus on Drive-Thru and Strip Locations
In Australia, Guzman Y Gomez plans to accelerate the expansion of its drive-through and strip mall restaurant formats. “The reason we look at drive-through and strips is because you can trade those two formats 24/7,” Mr. Mandilis explained. “That is the reason why you don’t see much of our future pipeline being in shopping centre food courts. We don’t do more of them because it’s really hard to build a business off something that trades largely two hours at lunch a day.”
Looking ahead, Mr. Mandilis indicated that at least four additional stores are planned for Western Australia in the upcoming financial year. These locations include Curtin University, Nedlands, Baldivis, and Forrest Lakes. “A lot of growth to come in WA, it’s one of our main focus markets,” he added.
During the third quarter, Australian comparable sales saw a growth of 6.6 percent, exceeding market expectations of 5.1 percent.
