Mexican-inspired fast-food restaurant chain Guzman y Gomez is weeks away from achieving a business milestone — becoming a publicly listed company.
Since opening its first restaurant in Sydney 18 years ago, Guzman y Gomez (GYG), which boasts 210 restaurants across four countries, has become the fastest-growing fast-food chain in Australia.
But it's not just GYG's quick Mexican fare that has been in hot demand. Behind the scenes, the fast-food chain has been planning to go public on the Australian Securities Exchange (ASX) for years, as part of its goal to become as big as McDonald's.
As GYG's American co-founders Steven Marks and Robert Hazan put it: "Not bad for a couple of kids from New York."
Where did Guzman y Gomez come from?
It may have a Mexican-inspired name, but GYG is the brainchild of childhood friends Steven Marks and Robert Hazan who grew up eating Mexican cuisine in the United States.
Their careers brought them to Australia — Mr Marks was a former hedge fund manager, and Mr Hazan had worked in retail and fashion wholesale — and the duo realised there was a gap in the market for fresh Mexican food.
After founding Guzman y Gomez in 2005, Mr Marks and Mr Hazan opened GYG's first restaurant in the Sydney suburb of Newtown in October 2006.
Today, GYG has 185 restaurants around Australia, 16 outlets in Singapore, five restaurants in Japan, and four stores in Mr Marks and Mr Hazan's native United States.
Despite its expansion, what hasn't wavered is GYG's mission to reinvent fast food. The company says it's committed to serving made-to-order Mexican cuisine using fresh ingredients and not adding preservatives, colours, artificial flavours and "unacceptable additives".
It's this self-described "obsession" with fast and fresh food that Mr Marks attributes to GYG becoming the fastest-growing fast-food chain in Australia that serves burritos, tacos and nachos for breakfast, lunch and dinner, seven days a week.
"And the most exciting part is that we are just getting started," Mr Marks told prospective investors.
Why is Guzman y Gomez going public?
As co-founder Mr Marks alluded to, it's because GYG wants to keep growing its business — and it's planning on a significant expansion.
GYG wants to open about 30 stores in Australia this year alone, and its lofty future ambitions mean it needs a lot of money to make its dreams a reality.
"It's talking about growing to about 1,000 stores over the next 10 to 20 years, so [GYG has] ambitious expansion plans and they need a deep pool of capital to be able to realise that," Betashares' chief economist David Bassanese said.
"An [initial public offering] does give them access to a greater pool of funds … so I think an IPO allows [GYG] to raise a lot of money at a pretty good price."
By "going public", GYG will go from being a privately held business to a company that trades on the ASX and allows people to buy and sell shares in it.
"The business itself is growing incredibly fast. In fact, it's one of the fastest-growing fast-food businesses in the world," Jun Bei Liu, portfolio manager at Tribeca Investment Partners, said.
"The company itself at the moment is well capitalised, but because of the speed of how many stores they're rolling out, how many potential franchisees they can sign up, they just want to have enough capital to keep up with that growth."
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How much money is Guzman y Gomez looking for?
To fund its expansion plans, GYG is offering 11.1 million shares at a price of $22 each to raise $242.5 million.
"About $40 million of that will go back to existing shareholders and management as a sort of reward for their efforts, so they'll get a nice payday," Mr Bassanese said.
"But $200 million is going to be retained by the company and used to fund the expansion plans, so that's the goal of using that money."
All up, it means the company is valued at $2.2 billion — more than four times the value of department store Myer.
Mr Bassanese said the offer appeared expensive compared to those already listed on the ASX.
"You're looking at a price to earnings ratio around about 37 to 38 times earnings, which does seem very high by the standards of many companies already listed on the market, but it does have high growth expectations," he said.
"In terms of the Australian market, it's not a small company, it's not a tiny company, but it's certainly not a large company either."
However, Ms Liu sees the business's growth potential as a reason for investors to jump in and she doesn't believe it is overvalued.
"If you compare [GYG] to a high-growth [business] in another market, like in the US market, it's actually not too bad," she said.
"I do think their forecast is quite conservative for the 2025 year, and they should be able to achieve it quite comfortably."
She also believes local investors will consider the fast-food franchise an attractive offer.
"For investors, it's actually really interesting because we don't have too many high-growth food businesses here in Australia," Ms Liu said.
"We have a few of them, the likes of Domino's and others, but they have all gone overseas because their home market, Australia, is already mature.
"It is actually quite refreshing to see something that's growing so fast within our homeland."
Where to next for Guzman y Gomez?
By June 20, GYG is expected to list on the ASX with the ticker (or three-letter code) "GYG" on a "conditional and deferred settlement basis".
Then the following week, GYG expects its shares to be issued on June 24 before its first "normal" day of trade on the ASX on June 25.
But GYG has made it clear it will continue following its plans for growth, starting with opening its next series of restaurants in Australia this year.
However, the company is still focused on growing its international footprint — including in its co-founders' native US.
"It does want to grow in Australia, but the real jewel here is the United States," Mr Bassanese said.
"If they can succeed in the United States, the potential share value of this company will be enormous.
"It's a very competitive market, it's a very large market, but I think their goals are in that area."
But Ms Liu said GYG's eventual expansion in the US was a "much longer-term ambition" for the company.
"The company has stated that they're going to be very cautious with their US approach," she said.
"They're going to open a few stores and gradually grow into their market. They're not going to invest a significant amount of money … it's a measured approach."
As for how much more GYG can grow in Australia, Ms Liu believes the company can easily sustain hundreds of restaurants locally.
"They can easily move to at least 500-600 [restaurants], or even compared to some similar businesses here in Australia, growth could go to 800 stores, but they're not going to push it that far," she said.
"[But] there's a huge amount of growth trajectory within this business here in Australia."
