Guzman y Gomez to list on ASX in June with $2.2 billion market cap

This lofty target represents almost the number of McDonald's in Australia currently, and the Sydney-headquartered group plans to start its journey to get there with 30 store roll-outs annually over the near-term, reaching 40 annually within five years.

At a share price of $22, and $18 for franchisees, the initial public offering (IPO) is expected to raise proceeds of $242.5 million.

Guzman y Gomez directors and their affiliates will own more than $1 billion worth of shares in the company plus options, and its co-CEOs Hilton Brett and co-founder Steven Marks will each be on a base salary of just over $1 million plus benefits and incentives.

At the IPO price Marks' share is set to be worth $194 million in addition to his options, as part of the 58 per cent of the company which will be held by the board, senior management and existing substantial shareholders post-completion, with an estimated opening date for ASX trading on 20 June.

"Over the last 18 years, the team at GYG have been obsessed with providing our guests with the freshest, cleanest and fastest made-to-order Mexican-inspired food," says Marks.

"I am incredibly proud to say that we now do this across more than 200 restaurants in Australia, Singapore, Japan and the US. And the most exciting part is that we are just getting started.

"As we commence the next chapter as an ASX-listed company, our vision to reinvent fast food and change the way the masses eat will remain central to what we do. We truly believe that fast food doesn’t have to be bad food and we look forward to sharing our food with more guests across Australia and overseas as we look to realise the opportunity we have to grow our network to more than 1,000 restaurants over the next 20-plus years."

This compares to an Australian store network currently of 183 and 26 internationally, which on home turf puts it slightly behind fellow Mexican food purveyor Zambrero's 233 and Oporto's 191, but ahead of the likes of Grill'd (169), Sushi Hub (164), Sushi Sushi (155) and Nando's (138).

Most of GYG's new restaurants - roughly 85 per cent - will be drive-thrus as this format has a substantially higher median average unit volume (AUV) than its strip restaurant stores at $6.1 million, as well as a slightly higher margin of 21.6 per cent.

"GYG has a strong operational and financial track record, with global network sales increasing from $101 million in FY15 to $759 million in FY23, a CAGR (compound annual growth rate) of 29 per cent," says co-CEO Hilton Brett, who was appointed to the role last year, and will have approximately $8 million worth of shares post-completion, plus around four times that figure in options.

"In addition to our delicious food, that growth has been underpinned by compelling restaurant economics which has allowed us to invest in our restaurant network, our teams and our systems."

Hilton expects sales growth to continue through the opening of new restaurants and increasing sales in existing restaurants.

Increasing sales within existing locations are planned through various mechanisms such as extending operating hours after 9pm, expanding the fast-growing breakfast business, introducing new menu items, accelerating the speed of service, and further investment in the digital experience with an average spend per transaction currently 17 per cent higher on the GYG mobile app and website versus in-restaurant.

"We also expect our profitability to improve as we continue to improve our execution in restaurants and we further leverage the benefits of our increasing scale," he says. 

"As a result, we expect pro forma EBITDA to grow from $29.3 million in FY23 to $59.9 million in FY25."

This increase is derived from revenue forecasts of $339.7 million in FY24 and $428.2 million in FY25. In statutory terms, the company ran at a loss of $2.3 million last year and that is set to deepen to $14.2 million in the current financial year, before an expected recovery to $6 million in FY25, as per the prospectus guidance.

As at the end of 2023, GYG had net cash excluding lease liabilities of $279.1 million, but its lease liabilities are significant at $208.1 million. In statutory terms, GYG's cash and cash equivalents stood at $13.6 million.

It is also worth noting that the largest portion of the group's Australian restaurant network comprises franchises, at 123, compared to 62 corporate restaurants. The business notes that funds raised from the offer will primarily be focused on the "significant expansion" of its corporate restaurant network.

Guzman y Gomez's chairman Guy Russo - who previously led McDonald's in Australia and then in China, and is currently also a director at Westfield shopping centres operator Scentre Group (ASX: SCG) - is upbeat about the chain's prospects.

"As a former CEO of Australia’s largest QSR (quick service restaurant), I immediately recognised the qualities that make GYG a truly great QSR brand – attention to detail, commitment to the guest experience, and an obsession with food quality and speed," says Russo, who upon the IPO completion will own an estimated $141.7 million worth of shares in the company.

"These core principles are central to GYG’s track record of exceptional performance and growth, as well as its future growth opportunity in Australia and overseas.

"On behalf of the Board, I am delighted to offer existing and prospective shareholders the opportunity to invest in and be part of GYG’s continued growth journey. We are happy we can offer our employees and franchisees the ability to become shareholders through this Offer, while continuing to appreciate the backing of our existing shareholders in this process. I encourage all prospective investors to read the Prospectus carefully."

The company lists TDM Growth Partners, whose founder Tom Cowan sits on the GYG board, as having a $727 million stake plus options, while Rokt founder and GYG director Bruce Buchanan has a stake of more than $9 million plus options.

Other existing shareholders including Aware Super, Cooper Investors, Hyperion Asset Management, Firetrail Investments and QVG Capital, have offered "considerable support" to the IPO, as have TDM Growth Partners and Barrenjoey Private Capital. 

The company will be accepting applications under the franchisee offer for a minimum $2,200 worth of shares and a maximum of $252,000. Under the employee offer, Guzman y Gomez staff will be able to buy up to $22,000 worth of shares, but cannot purchase less than $2,200 worth if they participate.

The offer is not open to the public otherwise.