Pizza Hut facing $100 million lawsuit over delivery system
A nine-figure lawsuit has been filed against Pizza Hut by one of the company’s major franchisees over Artificial Intelligence-powered technology designed to optimise its food delivery service.
On 6 May, Chaac Pizza Northeast accused Pizza Hut of forcing its 111+ stores to adopt the delivery management platform Dragontail despite its ‘obvious incompatibilities’ with the franchise’s business model, as per Business Insider.
The suit, filed in the recently established Texas Business Court, alleged that the AI system caused ‘cascading operational breakdowns and customer dissatisfaction’ after giving DoorDash drivers real-time visibility into kitchen workflows and order timing.
According to the complaint, DoorDash employees would wait to batch deliver orders instead of immediately leaving.
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As a result, delivery times rose from 30 minutes to 45 minutes for approximately half of all deliveries, with some riders allegedly waiting ‘up to fifteen minutes’ for additional Chaac’s Pizza Hut deliveries, the filing read.
This caused guest satisfaction scores and sales growth figures to plummet dramatically, the US-filed complaint alleged.
"With the intention to improve efficiency and service to the customer, Dragontail did the exact opposite," the legislation read. "It caused significant delays and pummeled consumer satisfaction.”
Moreover, the business has used the suit to accuse Pizza Hut of: failing to adequately train Dragontail operators, refusing support requests, opting not to step in when sales began to fall, and breaching its franchise agreement by not exercising ‘reasonable business judgment’ due to how heavily Chaac relies on DoorDash.
Prior to the AI-system, one store in New York was experiencing double-digit sales growth of more than 10 percent, the filing said.
Following the adoption, the growth turned into a decline of -9.78 percent, the suit claimed.
As a result of the apparent tech blunder, Chaac is seeking more than $100 million in damages, plus attorneys' fees and other relief.
In a statement to Business Insider, a representative for Pizza Hut said that the chain was reviewing claims made in the filing.
They added that it would respond ‘through the appropriate legal channels’ in due course.
FOODbible has contacted Pizza Hut, DoorDash, and Chaac Pizza for comment.
The news comes amid Pizza Hut’s parent company, Yum! Brands announced that around 250 underperforming Pizza Hut locations would be shuttered across the United States by mid-2026.
Ranjith Roy, Chief Financial Officer for the company, which also oversees KFC and Taco Bell, said that the decision was a ‘necessary’ step within the brand’s ‘Hut Forward’ strategy.
“The 250 stores that we mentioned is a very small portion of the 20,000-unit estate that Pizza Hut has globally,” Roy said during an earnings call.
“And it is the right answer for the brand as we move through the strategic review.”
Meanwhile, Yum! Brands CEO Chris Turner suggested that the restaurant, which opened its first store in Kansas in 1958, may thrive under a different parent brand.
“The Pizza Hut team has been working hard to address business and category challenges; however, Pizza Hut’s performance indicates the need to take additional action to help the brand realize its full value, which may be better executed outside of Yum! Brands.”
Ella Scott