A fast-casual chain that once hoped to challenge Chipotle in America is now facing a messy legal fight after shutting down its entire U.S. business. For anyone tracking once-packed dining chains that ultimately filed for bankruptcy, this is another reminder that restaurant expansion can unravel fast.
Guzman y Gomez, the Australian-born Mexican fast-food chain, closed all eight of its U.S. restaurants last week, ending a six-year attempt to break into the American market. The company’s U.S. locations were concentrated in the Chicago area, where it had opened stores with hopes of building a much larger American footprint.
Now, former U.S. workers are suing.
A group of employees filed a class action lawsuit in Illinois federal court alleging Guzman y Gomez failed to provide advance notice before shutting down its U.S. restaurants. Reuters reported that the suit claims workers were not properly warned before the closures and are seeking pay and benefits under federal and state labor laws.
The complaint estimates about 500 employees could be affected by the class action, which alleges the company violated laws requiring 60 days of notice before a mass layoff. Guzman y Gomez has said it believes it fulfilled its legal obligations.
The lawsuit turns a failed expansion story into something bigger.
Guzman y Gomez had a clear pitch: fast, fresh Mexican-style food with burritos, bowls, tacos, nachos, and breakfast items. That formula worked well in Australia, where the brand became a major growth story.
But the United States is a much tougher place to sell Mexican fast food.
American diners already have Chipotle, Taco Bell, Qdoba, Moe’s, Del Taco, local taquerias, food trucks, regional chains, and thousands of independent Mexican restaurants. In Chicago, Guzman y Gomez was not entering an empty market. It was entering one of the most competitive food cities in the country.
The company said its U.S. business did not have enough sales momentum to justify the time and money required to keep growing. The U.S. exit is expected to cost the company tens of millions of dollars.
For customers, the closures mean a short-lived restaurant experiment is over.
For workers, the story is now about whether the shutdown happened too suddenly.
And for the restaurant industry, it is another warning: a brand can be popular overseas and still struggle badly in America. In the U.S., name recognition, real estate, labor costs, food costs, marketing, and customer habits can make expansion brutally expensive.
Guzman y Gomez may still have a strong future in Australia and Asia. But in America, the chain’s story ended fast — and now it may end in court.
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