One of the hardest things for any management team to do is admit when something is not working.
On the 22 May 2026, Guzman y Gomez Ltd (ASX: GYG) did exactly that.
Co-CEO and founder Steven Marks had spent three months on the ground in Chicago.
His conclusion, delivered to shareholders, was that the US business required far more time and capital than originally expected.
He said:
Having spent the last 3 months in the US, I realized this was going to take significantly more time and capital than we had expected. The current performance of the US business could not justify continued investment of shareholder capital.
Guzman y Gomez shares surged as much as 20.58% on the day, closing 9.57% higher at $19.81.
Image source: Getty Images
Why the US exit is actually good news for Guzman y Gomez shares
At first glance, exiting the world's largest fast food market sounds like bad news.
In reality, it removes one of the biggest overhangs that have weighed on Guzman y Gomez shares since the company's ASX debut.
Guzman y Gomez entered the US market in 2020 with high hopes.
However, the business struggled to differentiate from rival Chipotle, and the challenges of operating in Chicago proved harder than management anticipated.
The US losses had been dragging on overall group numbers and absorbing management attention.
This attention could have been focused on the far more profitable Australian business.
The exit costs are contained.
Guzman y Gomez expects a one-off financial hit of between US$30 million and US$40 million, mostly non-cash.
Actual cash outflows are not expected to exceed US$15 million.
That is a manageable price to pay for a clean slate.
The Australian business is performing strongly
With the US distraction removed, investors can now focus on what really matters: the Australian growth story.
Guzman y Gomez lifted its Australia Segment underlying EBITDA guidance for FY2026 to approximately $85 million, representing growth of 29% on the prior year.
The company currently operates 237 restaurants in Australia, with a long-term target of 1,000.
That pipeline of 108 new sites already approved and in development represents a visible growth path.
Furthermore, the international master franchise model in Singapore and Japan is working well.
Singapore opened its 24th restaurant this week.
Both markets are guiding to further openings over the next 12 months.
These are capital-light, royalty-style exposures that cost Guzman y Gomez almost nothing to maintain and prove that the brand travels.
What Bell Potter thinks about Guzman y Gomez shares
The broker community responded decisively to the announcement.
Bell Potter upgraded Guzman y Gomez shares to a buy rating from hold with an improved price target of $24.50, from a prior target of $22.10.
The broker said:
We welcome the US exit as a previous overhang removed on the stock and see the switch to focusing on the core Australia opportunity as more beneficial to shareholders. We are confident in the medium-term Australia opportunity, backed by a pipeline of 108 restaurants, as well as the successful master franchising operation in Singapore and Japan.
However, with the US overhang now fully removed and the 29% Australian EBITDA growth confirmed, several analysts believe the Bell Potter target itself could prove conservative.
Citi, which had already been sceptical about the US prospects, called the exit decision the right one.
The broker noted there is "significant growth" in Australia where the long-term target of 1,000 restaurants has barely been scratched.
For context, Guzman y Gomez shares traded as high as $43 in December 2024, before the US concerns mounted.
A return even to half that level from today's price of $19.81 would represent significant upside.
Foolish takeaway
Guzman y Gomez shares are not without risk.
The US exit signals a painful lesson learned and takes one major growth option off the table.
Competition in Australia from other quick service restaurant chains remains significant.
However, the decision removes what had been the most persistent valuation overhang on Guzman y Gomez shares since listing.
What remains is a 29%-growing Australian restaurant business with a clear path to 1,000 locations, a capital-light international franchise model, and a founder back in Australia focused entirely on the core opportunity.
For long-term investors, the case for Guzman y Gomez shares looks considerably cleaner today than it did a week ago.
