This Australian fast food chain is going after McDonald’s, and it’s using former McDonald’s execs to do it

Guzman y Gomez founder, Steven Marks (centre). Photo: Supplied.

Think of biggest fast food chain in the world. McDonald’s, right?

Now imagine having the executives who led the proliferation of the business in Australia as investors in a new company that wants to revolutionise the fast food industry.

Meet Steven Marks, the founder of Guzman y Gomez. He’s well on his way to achieving just that, and he wants you to know all about it.

“Did you know half the population eats at McDonald’s every week? But they eat there out of ease and convenience,” Marks says.

“What’s in McDonald’s’ food is f***ing wrong, it’s disgusting and it’s not OK.

“I’ve got a big mouth, I’m from New York, and I want to be heard and I want it to be right.”

Marks is exactly as he said, a loud, animated New Yorker and he’s unashamedly calling out fast food restaurants everywhere to pick up their act, and to serve food that is what he calls “real”.

To give you a bit of background on how this crazy passionate American foodie wound up educating Australians in Mexican cuisine, Business Insider sat down with Marks and started at the beginning.

The guy behind Guzman y Gomez

Growing up in Long Island, New York Marks describes his upbringing as “pretty tough”.

“I have a twin brother and an older brother who is blind, and my mother raised us as a single mum. So we always had to hustle,” he said.

“I had my first company when I was eight… I had a snow plow business, sold that when I was 10. Then owned a t-shirt business.”

From an early age Marks knew he wanted to make something of himself, so he got a job on Wall Street running hedge funds in New York and London, working with one of the most successful hedge fund managers ever, Steve Cohen.

“I wanted to work on Wall Street to make money to take care for my family.”

But he quickly realised that money wasn’t the be-all and end-all.

“Once I did it, I was like ‘I f***king hate this. I hate the culture, I hate what it’s all about. I hate betting on people’s companies.'”

So he packed it all in and moved Down Under. This time he would get into the hotel business.

“When I worked on Wall Street I had hired an Aussie in London, then I hired another. And I’m like ‘he’s funny, she’s funny’. I realised I loved the Australian personality,” he said.

“They’re very self-deprecating, really smart and hard-working. So I came here to build a hotel.”

However, that didn’t work out either. But he did fall in love with the country.

“I then went into fashion, and I owned Sass and Bide, Zimmermann, all of this, and I owned them for North America, because my business partner’s background was fashion.

“Then we opened up a wine bar at Five Ways in Paddington. Then we opened up a record label, which we lost a fortune in.

“I came here with a decent amount of money, and I felt like I was on a race to bankruptcy.

“People in New York were like ‘what are you doing down there?'”

It was when he was trying to find a good Mexican restaurant with his ex-wife that his lightbulb moment came to him.

“All of a sudden I missed Mexican food, and so I went to every Mexican restaurant with her,” he remembers.

“It would be packed, and I was like ‘OK this one is going to be good’. And it sucked. I couldn’t believe how bad it was. But the Aussies loved it.

“So I was like if they eat the real stuff they’re going to love it even more.

“I mean I couldn’t leave it alone. Every time we’d eat it, she was like ‘I know, it’s sh**’, and I’d be like ‘No, you have no idea how bad this is. It’s horrible. I can’t believe they’re serving this’.”

That’s when he knew he’d found his calling: Mexican food, which with some hard work was going to be his big break.

“Everyone in Australia was like ‘No worries, no worries’. I remember saying to my business partner — who has been my business partner in everything — and is the co-founder of Guzman y Gomez,

“I remember saying to him, if we worry a little bit I think we’ll make it,” he said.

Photo: Justin Sullivan/ Getty Images.

Moving in on Maccas

The success that McDonald’s has had in Australia was another motivation for Marks.

“When I first was here McDonald’s was phenomenal,” he said.

“I couldn’t believe what the stores looked like, I couldn’t believe how busy they were.

“Then you have restaurants and I couldn’t believe how expensive they were. And in the middle you had chicken shops, and Aussie dumbed-down Thai food.

“I was like ‘Man, if I can operate in that space, like if I can do Mexican food the way I know it, where everything is made fresh, I think for the Aussies – who are very health conscious – we can nail this.”

In 2005, Marks started scouting Mexican travelers, Mexican immigrants and anyone with Mexican background he could find to help him build his authentic Mexican fast food restaurant.

“I think my wife thought I was having an affair because I would be like ‘be right back’ when I heard someone speaking Spanish and I was like ‘You’ve got to come and work for me’,” he laughs as he remembers.

He then hooked up with graphic designer and branding guy Tony Ibbotson to create the iconic yellow and black Guzman y Gomez signage.

Photo: Guzman y Gomez.

Guzman y Gomez, as it turns out, is actually named after friends of Marks, or as he said “my boys”. But Gomez — who appears to be the heavier of the men in the company’s imagery — isn’t actually that chubby in real life.

“We put so much time and love into this thing… but when we were about to launch we had to make him smile, because he looked like Saddam Hussein,” Marks says. “People were like ‘Is this Iraqi food?’ So we made him happier and a little chubbier.

“The guy whose dad it is, is like ‘He’s not that fat’ and I’m just like ‘Shut up’.”

Location, location

Then it came to actually building the first restaurant.

“I wanted to find a place in Australia that was ethnically diverse. And to me it was Newtown,” he said.

“I mean, I went to Newtown and felt like I was in East Village New York. There’s such ethnic diversity. There we’ve got the students, the gays, the creatives and everyone.

“I was like ‘this is going to be like super different to what they’re used to, I think they’ll be the most adventurous’.

“So we opened up and nobody had a clue what we are doing. I mean they walked in, and they thought all my Mexicans were Indians.

“They thought black beans were olives. They didn’t know what corn tortillas were.

“I worked the cash for the first five, six months, and I remember calling my business partner and saying we’re going to need another million dollars, this is not going well.

“So what I did was – I was really smart – I just kept opening stores, and losing more money.

“Inherently I knew that this thing was going to work. You can’t lose $20-30,000 a week for the rest of your life. So I was like f*** it, this is going to work.”

Despite the lack of traction, Marks persisted.

“I was like, ‘I’m not going to compromise my food, most Aussie don’t know what it is but they will one day and they’ll be able to taste how fresh everything is. I know we’re losing money but I’m going to back the charity we’ve set up. I’m going to send my guys to culinary school. I’m going to send my manager to business school, cause when this thing turns were all going to stay together.’

“To me that’s how you build a really tight-knit family.

“Because business was bad, I just kept improving my operations. I was like ‘OK I’ve got to build sticker systems, I’ve got to create different linear set ups, I’ve got to make this thing more efficient’. So I worked 80-100 hour weeks for years, figuring out and fine tuning to take this team along.”

And bit by bit, burrito by burrito, business picked up.

“At this point we had about five restaurants,” Marks says.

“I had Newtown which was like a residential college, and then Bondi Junction which was a little bit more commercial, then Kings Cross was more night time, then Australia Square which was more business-ey.

“And I remember they all broke even at the same time, and I called up my twin brother, who I’m very close with, and I was like ‘they all just broke even!’, and he was like ‘aren’t they suppose to make money?

“They had never done that before.”

He laughs. “I was such a loser, but I was so excited. I was seeing the restaurants starting to move. Then we started to get on people’s [investors’] radar… but I didn’t have much money left.

“While beggars can’t be choosers, I was like ‘I don’t like you, I don’t like you’.

“I knew if this thing was to be successful I want to sell to people I like, and I don’t care about the money, man. I just want good people with me.”

Enter the McDonald’s mafia.

Marks was introduced to Pete Ritchie, the former chief executive of McDonald’s Australia, Stephen Jermyn, the former deputy managing director and former CFO of McDonald’s, and Guy Russo, the former president of McDonald’s greater China.

In case these names aren’t familiar to you, they essentially built McDonald’s Australasia along with the late Charlie Bell who the first non-American to run McDonald’s globally at the age of 43. He died of cancer at 44.

“Out of four of them, I had three of them as investors,” Marks said.

“They came in September 2009, they’ve been around for seven years.

“Once I knew I had the right people, we just kept going. It was a critical turning point, and for me it’s a huge responsibility. I decided I was going to prove to these guys that it would be the best decision they ever made.”

Then it came time to grow, and that meant the decision of whether to franchise the business.

Marks says he wasn’t sure about franchising at first, admitting he has “a little bit of a control issue”.

“Being an entrepreneur, you have to have this healthy paranoia,” he said. “I don’t know if it’s because I’m a New Yorker, but I’m always feeling like someone is going to catch me. But they’re never going to catch me.”

He decided to do it and since then has opened 69 taquerias in Australia, three in Singapore, one in Tokyo, and has big plans to keep that expansion going, taking on the fast food industry as he does.

“Every time I’ve made a profit I’ve put it back into the company, I’ve never taken a profit at GYG [his abbreviation for the business]. I just keep reinvesting and reinvesting,” he said.

Then Marks had to make another defining leadership decision.

“All of a sudden it got to a level where I had to sit down with the board and say ‘This could get really special, and I think I could f*** it up, and I don’t want to’.

“My dream is to build the best food company in the world. So I need to bring in talent that will be able to do that.”

So, of course, he dipped into the McDonald’s talent pool once again and hired Mark Hawthorne, the former managing director of McDonald’s New Zealand and United Kingdom, as the CEO.

“So, we had this incredible team, and we were like ‘What are we going to do now?’

“When did fast food become bad food?

“We decided we’re what fast food should be.

Photo: Guzman y Gomez/ Facebook.

“Then all of a sudden all these years clicked. I started to really get into the research. I’ve always been into the nutrition, making everything at GYG very clean. Like there’s no additives, there’s no preservatives. We don’t use freezers, or microwaves.

“I also started to read what’s in McDonald’s’ food. I’m looking at labels and it’s sh** I can’t pronounce.

“Australians don’t want to eat it but they have no other choices because they are time poor.”

The secret sauce

But Marks thinks he has the secret combination that will make his game-changing business a success.

“I have McDonald’s royalty, I’ve got my food, I’ve got my culture, and to put that all together here in Australia, we can cause a stink.

“Going up against McDonald’s is not to put them out of business, it’s to make them change.

“So I had to have a sit down with my board [now, predominately former Maccas execs], and asked the ‘Do you love me? Do you have a GYG heart? Because you’re with me now. You’re with me for a reason and the game is changing.’

“Everybody’s trying to get out of fast food and we want to get in. It’s a huge market.

“We’re going to open up in locations where it’s been inconvenient for people. Where they only have certain things to choose from. I want everybody that is not educated to be educated, that’s what’s important.”

One thing he wants people to know is that the food at GYG may not be “healthy”, but it is real.

“I’m not a health food company. I’m selling nachos,” he says. “If you think nachos are healthy for you, you’re an idiot.

“But I’ll tell you something. Everything in my nachos is real. I have beautiful corn chips, beautiful cheese, fresh black beans, and beautiful grilled meat.

“If you are health conscious, have our brown rice burrito bowls.”

Going forward Marks is betting big on technology and deliveries to help him win.

As well as launching an app on May 3, GYG will be delivering in the next six months.

“Domino’s have done a great thing with tech. But our goal is to be better than them, to be a digital leader in the food space,” Marks says.

“Initially we will do it ourselves, but there’s so many third parties out there now that we might as well let people compete for our business too.

“I want to specialise in building and running great tacquerias.”

Going State-side

At the end of the day, Marks said he’d loved to take the brand back home to America.

“I’m in LA in a couple of weeks to hopefully set up some key partnerships over there.

“I’m hoping to open up a GYG in the next 12 months in the States. That would be very cool.

“To succeed in food in Australia is really hard. It’s really competitive, and wages are really high, the commodity prices, avocadoes go from $4.50 to $8, the dollar goes down, rents are high.

“In comparison, in the States where there’s 320 million people, they’re spoiled for choice, so I don’t think people execute as well.

“In Australia, you have to work so hard to be successful, whereas in the States you can be mediocre and still do well because of the population size.

“I just think as this little Aussies player; we’re going to come up there and f***ing smack them.”