GUZMAN y Gomez is up for sale.

The Mexican chain founded by former New York hedge fund manager Steve Marks and backed by former McDonald's executives needs cash to take its fight with McDonald's to the fast-food giant's home turf.

GyG is seeking investors to pour in between $25 million and $35 million for a 60 per cent stake, with Mr Marks and co-founder Robert Hazan to collectively retain 40 per cent.

"We opened our first store 12 years ago. Now we're getting to this next level where we're looking to raise money to fund our US expansion and Australian growth," said Mr Marks, who stressed the minority stake did not mean losing control.

"It doesn't really go that way. I remain the largest shareholder. I'm an entrepreneur. People come to GyG because of the energy and passion of the brand - that will never change. Investors are here to help us grow. They're coming on board because they see the future and the journey GyG's been on - not to change it.

Guzman y Gomez is getting into breakfast.
Guzman y Gomez is getting into breakfast.

"We sent out a letter to franchisees saying we would never let anyone into this family unless they're going to embrace our values."

The sale process, which is being handled by investment bank Morgan Stanley and overseen by accounting firm KPMG, is expected to precede a possible stock market float three or four years down the line.

From its first store in Sydney's Newtown, GyG now pulls in revenue of about $170 million a year and has 97 Australian locations, with plans to open another 25 this year. It already has 10 overseas - in Japan and Singapore.

US fast-food veteran Kevin Reddy, the former chief operating officer of Mexican chain Chipotle and chief executive of pasta chain Noodles & Company, was recruited last year to spearhead a major push into America.

The Mexican chain is opening 25 new drive-throughs this year.
The Mexican chain is opening 25 new drive-throughs this year.

Mr Marks said GyG's first US location would open in Chicago this September or October. "Living in Australia for the last 15 years, there are a couple of things that work against you," he said. "You don't have a lot of people, labour costs are high, food costs are high, rent is high. You need a lot of revenue coming in.

"The operating platform we've built here, because we have to be very efficient, I think is one of the fastest operating platforms globally. Because Australia has all these obstacles, if you can make it in Australia and build a brand people love, those brands have a chance on a global scale."

Meanwhile, the company is currently rolling out a breakfast menu including coffee, breakfast burritos, scrambled egg bowls and guac on sourdough. "This is part of our long-term strategy of having breakfast, lunch, dinner, 24 hours through a drive-through," he said. "We want to own that market."

GyG will open new drive-throughs this year in Queensland at Upper Coomera, Bowen Hills, Capalaba, Cannon Hill, Maroochydore, Springwood, Arana Hills, North Lakes, Vitoria Point, Helensvale and Southport; in NSW at Smithfield, Hoxton Park, Crossroads, Marsden Park, Lake Haven, Port Macquarie and McGraths Hill; in Victoria at Kennington, Cranbourne, Morabbin, Tarneit and Dandenong; in WA at Balcarran; and in the Adelaide CBD.

GyG and Chemist Warehouse have also been trialling drone deliveries in Royalla on the outskirts of Canberra with Google parent company Alphabet's Project Wing, which recently announced it was expanding the trial to more suburbs.

"They approached us to be their first commercial delivery partner to run this trial. It's been going since September," he said. "It goes up by drone, goes 120km an hour. I can't say too much about it but the trial's been very successful."

Mr Marks insisted the it was not a gimmick and would form a key part of the company's strategy for delivery, which is now offered in 40 stores. He said the huge rise in online delivery platforms had forced GyG to adjust its drive-through plans.

"Delivery is amazing," he said. "We're the number one with Deliveroo, number two with UberEats, delivery's here to stay. What's funny is it's kind of changed our real estate strategy a little. We've got 11 drive-throughs, another 25 in development right now, that won't change.

"But what's changed is delivery. Our first couple of stores - Newtown, Bondi Junction, Kings Cross - stores built in high-density residential areas with limited seating, those stores have gone up literally about 20-30 per cent [in sales] because of delivery. Overall delivery is adding 10 per cent in sales."

frank.chung@news.com.au


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