Guzman Y Gomez persists with IPO ambitions amid hurdles

A stock market listing is still on the cards for Mexican fast food chain Guzman Y Gomez (GYG) despite a bungled US expansion, lawsuit and an exodus of senior management.

TDM Growth Partners, a venture capital firm which owns 40 per cent of GYG told The Australian Financial Review the business could be valued at more than $2 billion when it lists on the Australian Securities Exchange (ASX) as early as next year.

The figure is based on the values of similar fast food chains in the US, the company said.

“We are confident if we did seek investor feedback, it would be significantly higher currently than the last round of investment,” a TDM spokesperson said.

But it’s not all smooth sailing at the popular Aussie chain, as details have emerged about a lawsuit brought by its US management team.

Quoting documents filed in a California court, The Australian Financial Review reported that GYG was sued by its US leadership team over several allegations including ageism.

The lawsuit, in which the executives were seeking US$100 million (A$150 million) was described by GYG as a cash grab and “retribution” by underperforming employees.

It was reportedly settled with a US$1 million (A$1.5 million) payout to the six complainants and the buyback of $15.9 million in shares.

But the departure of the management team affected an aggressive expansion planned for the US, with the company looking to grow from four stores to up to 187 stores by 2027.

According to court documents the US team blamed the lack of growth in that country on a lack of investment in infrastructure, such as supply chains and software, as well as changes in strategy.

The US team was also concerned that the GYG logo may be considered racist in the US, after controversies with logos such as those used by breakfast foods Aunt Jemimah and NFL team the Washington Redskins.

The US court documents also revealed that the former US management team alleged the GYG board had forced company founder and CEO Steven Marks into a performance plan “involving cult-like life coaches and nonlegal advisers to try to transition him to a credible, reliable executive”.

GYG denied that there were concerns about Mr Marks’ performance but a TDM spokesperson has since told The Australian Financial Review that they “suggested to Steven in 2021 that like all other high-performing pursuits, improvement is based in expert coaching”.

In May this year, GYG announced Mr Marks would step down from the role following a health scare, but the decision was later backflipped on, with TDM partner Hilton Brett instead brought in as co-CEO.

The executive upheavals at the fast food chain continued, with chief financial officer (CFO) Rebecca Lowde leaving the company in June this year, followed by the heads of legal and human resources (HR).

TDM Growth Partners seconded its own staff to act as interim executives in these roles, but has since said that a new CFO has been found, with a permanent appointee to the HR roles to start in 2024.

They also announced that TDM general counsel Candice Heggelund, who was seconded to fill the GYG legal role, has joined GYG as general counsel on a permanent basis.

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GYG was founded by Mr Marks and Robert Hazan as a single store in Sydney’s Newtown in 2006.

It now has more than 200 stores across Australia, Singapore and Japan, as well as its four US stores and in the year to June 30, 2023, recorded global sales of $759 million for a gross profit of around $50 million.

In September 2022 a capital raising valued it at around $1.5 billion.

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