Fans of the Mexican casual food chain Guzman y Gomez were surprised to learn last week that the Australia-based competitor to Chipotle Mexican Grill had abruptly closed all of its U.S. locations.
And the chain’s customers weren’t the only ones surprised by the news. Now, some of its former employees are suing the company over the unexpected closures. Here’s what you need to know.
What’s happened?
On May 21, Guzman y Gomez, a chain of Mexican fast-casual restaurants based in Australia, abruptly announced that it was closing all of its U.S. locations.
According to the company’s Australian website, Guzman y Gomez was founded in Sydney in 2006 with the aim of bringing more authentic Mexican cuisine to Australia.
Since then, the company has expanded into other countries in the Asia-Pacific region, including Singapore and Japan. It now has over 260 restaurants globally.
Until recently, those restaurants included some in America. But as of May 22, the chain’s U.S. locations have now shuttered.
A visit to the company’s U.S. website states that “Effective from May 22nd, GYG USA restaurants will cease trading.”
“After six years of burritos and big dreams in Chicagoland, we’ve made the difficult decision to close our US restaurants,” the website reads. “To every guest who came through our doors – you chose us, and we never took that for granted. To our team – thank you. Your passion and your purpose built something special.”
Fast Company has reached out to Guzman y Gomez for comment.
Which Guzman y Gomez locations have closed?
While the company’s website no longer lists the chain’s former U.S. locations, the Chicago Tribune reports that the first Guzman y Gomez store in the U.S. opened in Naperville, Illinois, in 2020.
The chain then opened another seven stores in the state, where all its U.S. locations were based.
Guzman y Gomez’s eight U.S. locations were in the following cities:
- Buffalo Grove, Illinois
- Chicago, Illinois
- Crystal Lake, Illinois
- Deerfield, Illinois
- Des Plaines, Illinois
- Evanston, Illinois
- Naperville, Illinois
- Schaumburg, Illinois
Additionally, the Chicago Tribune reported that Guzman y Gomez had planned to open three more locations in Illinois in 2026, but those plans have been abandoned following the company’s exit from the U.S. market.
Why did Guzman y Gomez close its US stores?
It is notoriously hard for international food chains to operate in the U.S. market. Not only is the American marketplace crowded with U.S.-based rivals, but in recent years, even U.S.-based chains have struggled with declining foot traffic and rising costs as inflationary pressure bites consumers and businesses alike.
Mexican restaurants and fast food chains are also abundant in America, unlike in other parts of the world where Guzman y Gomez operates.
This means that Guzman y Gomez already had an uphill battle in a country where, for instance, Chipotle Mexican Grill already dominates, with more than 4,000 locations.
On May 21, Guzman y Gomez’s co-CEO, Steven Marks, explained the abrupt U.S. pullout on a call with investors, telling them that the chain’s poor U.S. sales didn’t justify keeping the stores open any longer.
“This means ceasing to trade at our restaurants from today and proceeding with an orderly wind up of our operations in the U.S.,” the Tribune quoted Marks as saying “Notwithstanding the progress made by the team, the financial performance of the U.S. has simply not been acceptable.”
He added: “Starting with suburban drive-thrus has made it difficult to build brands in the U.S. Chicago has also been difficult. What is important is that we make changes when we need to.”
How have Guzman y Gomez’s employees responded?
The abrupt closures of Guzman y Gomez’s U.S. stores weren’t only a shock to its customers. Its U.S. store employees were also reportedly blindsided by the move. As noted by the Guardian, some of those employees have now launched a class action lawsuit over the closures that resulted in their job losses.
Workers were allegedly only informed about the closures on May 21 via an internal company message board. That’s the same day Marks made comments about the closures to analysts.
The class action lawsuit alleges that federal and state laws required Guzman y Gomez to give 60 days’ notice before mass layoffs—something the company allegedly did not do. The plaintiffs are now seeking 60 days’ pay and benefits.
A spokesperson for Guzman y Gomez told the Guardian that the company “is aware of legal action filed in the United States and we are confident we have met all of our legal obligations to our US employees,” adding it was “not in a position to provide further comment on this matter.”
How has Guzman y Gomez’s stock price reacted?
Guzman y Gomez does not trade on U.S. markets, but it is a publicly listed company in Australia, where it trades on the Australian Securities Exchange under the ticker GYG.AX.
Immediately after the company announced its U.S. withdrawal on May 21, its shares surged around 11%. This stock price boost likely reflects investor approval of the company’s decision to exit the notoriously challenging U.S. market.
However, despite this stock price jump, Guzman y Gomez’s shares have struggled for much of the past several years. Year to date, the company’s stock price has fallen more than 10%.
And looking back even further, things are worse for the company’s share price. Over the past 12 months, Guzman y Gomez shares have been down more than 35%.