A franchisee of Pizza Hut has filed a lawsuit alleging that the company's mandatory rollout of an artificial intelligence-based delivery system caused losses of $100 million. Chaac Pizza Northeast, which operates over 100 Pizza Hut restaurants across five US states, claims the Dragontail system led to 'cascading operational breakdowns'.
According to the lawsuit, before the AI system was introduced, more than 90% of deliveries arrived within 30 minutes. However, the implementation of Dragontail resulted in slower delivery times, colder food, and reduced customer satisfaction. The franchisee accused Pizza Hut of forcing stores to continue using the system despite 'materially degrading delivery metrics'.
The lawsuit, filed earlier this month, states that DoorDash drivers could see when pizzas were ready and would wait up to 15 minutes to collect multiple orders, further slowing down deliveries. Chaac reported double-digit sales growth before Dragontail, but afterwards sales declined. In New York City, year-over-year sales growth fell from positive 10.19% to negative 9.78%.
A Pizza Hut spokesperson said the company is reviewing the lawsuit and will respond through appropriate legal channels. The case comes as Yum! Brands, Pizza Hut's parent company, announced plans to close 250 underperforming US restaurants by early 2026. Yum! CEO Chris Turner also revealed a formal review of strategic options for Pizza Hut.
