By Stuart Condie

SYDNEY--Australian fast-food retailer Guzman y Gomez has scrapped its U.S. expansion plans after its Mexican-themed dishes failed to entice local diners.

Founded in 2006 by two Sydney-based New Yorkers, the ASX-listed company had long targeted growth in the U.S., citing expansion into the world's largest consumer economy as one of the drivers of its 2024 IPO.

The company reiterated annual guidance for its U.S. business as recently as February, but on Friday said its eight U.S. restaurants, all of which are in the Chicago area, would immediately cease trading.

Founder and co-CEO Steven Marks said he had been confident that sales would eventually improve, only changing his mind after consistently watching them operate in person.

"Having spent the last three months in the U.S., I realized this was going to take significantly more time and capital than we had expected," Marks said.

"The board and I have concluded that the business is unlikely to deliver the performance that would justify continued investment of shareholder capital."

GYG's U.S. exit underlines the difficulty that operators of quick-service restaurants can face when moving into overseas markets, especially those where their specialty cuisine is already popular and easily available.

Taco Bell operators opened some restaurants in Mexico in the 1990s and 2000s but pulled out after they struggled. The brand has also failed to gain traction in Australia, where GYG operates more than 200 restaurants and has said it wants more than 1,000.

Collins Foods, the Australian fast-food operator that runs KFC restaurants in Australia and Europe, this year ended its efforts to grow Taco Bell locally. It transferred ownership of some sites to Taco Bell-owner Yum Brands and closed others.

When it went public two years ago, GYG said it would take a measured approach to U.S. growth, but flagged what it called a large growth opportunity and the potential for increased expansion.

It doubled its U.S. store count over two years, but on Friday Marks said financial performance had not been acceptable.

GYG expects its bottom line to take a hit of between US$30 million and US$40 million from the exit. It said the hit would not affect the dividend payout at the end of its current fiscal year.

Many analysts had been skeptical of GYG's U.S. aspirations. RBC Capital Markets analyst Michael Toner has an outperform rating on GYG but didn't expect its U.S. operation to break even until the 2037 fiscal year.

"The U.S. business had very low prospects of being successful and the losses of the business were weighing down the earnings of the group, so the sooner exit than anticipated is positive," Toner wrote in a note.

Shareholders agreed, sending the stock surging in early trade. About 20 minutes after the open, GYG shares were up 20% at 21.67 Australian dollars, equivalent to US$15.50.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

May 21, 2026 20:33 ET (00:33 GMT)

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