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The fast food industry model of rapidly rolling out new stores can result in corporate indigestion – a risk that investors in newly listed Guzman y Gomez appear to have largely ignored.

Recently, GYG’s market capitalisation of $3.1 billion has leapt ahead of Domino’s, which is sitting at $2.96 billion. Domino’s hauled in net profit of $120 million while GYG makes about $6 million.

Domino’s is toning down some of its international colonisation plans but is committed to growth in some select countries such as Germany.

It is tough out there in the fast food industry. First there’s the cost-of-living crisis, which is pricing some customers out of the market.

GYG has an enormous long-term expansion plan in Australia and offshore, and it seems investors are eating it up. Shares in the GYG float were issued at $22 and are currently trading at $32.62. One broker, Morgans, has laid out its bull case for the shares to reach a heroic $62.

This would make GYG something of a diamond in the rough of the fast food market.

The daddy of them all, the US McDonald’s, recently posted disappointing first-quarter results. Its chief executive, Chris Kempczinski, put the result down to boycotts of US companies in various countries in response to the Gaza war.

But the soft US sales were driven by low-income customers cutting back on fast food, he said.

Meanwhile, Collins Foods, which owns KFC stores in Australia and Europe, had a strong result in the 2024 financial year but said the first seven weeks of the new financial year in which Australian sales were up a somewhat anaemic 1.5 per cent reflected a continuation of a weaker consumer environment in Australia, while the conflict in the Middle East was also affecting sales in Europe.

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Chief executive Kevin Perkins sought to brace Collins Foods investors for a tough period ahead, saying significant cost-of-living and inflationary pressures are expected to remain for much of the year ahead and while commodity prices are stabilising, labour and energy costs remain elevated around the world.

While the fashionable Mexican wave of fast food is moving around the world, pizza may not be this year’s black.

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