Drive-through disaster – Guzman y Gomez facing legal action

Nick Hall

Australian fast-food chain Guzman y Gomez (GYG) is facing court action following accusations of misleading behaviour and deceptive conduct.

Speaking with Inside Franchise Business, a GYG spokesperson confirmed the company had been provided with a Supreme Court writ outlining the case of a former franchised restaurant in Bendigo.

“Guzman y Gomez has been provided with an unsealed Supreme Court Writ regarding the former franchised restaurant in Kennington, Victoria,” the spokesperson said.

“Guzman y Gomez are in the process of considering the claim and expect to file our defence at the appropriate time.”

The confirmation comes after the Herald Sun reported former Kennington franchisee, Andrew Hodgson is claiming a defective drive-through, poor visibility and an inflated valuation of the outlet’s revenue projection contributed to his $530,000 operating loss in the first six months.

According to the Herald Sun report, court documents outline Hodgson’s $1.3m outlay included a ‘not fit for purpose’ drive-through design that led to cars running into the building and customers unable to reach the speaker box.

The blemish comes just months after GYG opted to terminate its enterprise agreement amid reports of growing employee and franchisee dissatisfaction.

The Supreme Court writ claims Hodgson was initially pressured to invest in the outlet after the previous franchisee wanted to terminate his agreement, reportedly being told the Kennington site one of the network’s best.

GYG, which received a $44m equity injection to boost overseas expansion in August last year, responded to the claims stating that “Guzman y Gomez takes our responsibility as a franchisor seriously and we treat our franchisees as business partners and family.”

GYG has since taken assumed operation of the Kennington outlet.