In a startling development, Pizza Hut has abruptly shuttered 15 locations across the Midwest, with over 120 more at risk of closing due to a bitter legal dispute with one of its franchisees.
The franchisee in question, EYM Group, operates 142 Pizza Hut outlets in Illinois, Indiana, Georgia, South Carolina, and Wisconsin. The conflict erupted when Pizza Hut accused EYM Group of defaulting on millions of dollars in payments that were due by a June deadline.
Reports from The Times of Northwest Indiana indicate that Pizza Hut abruptly closed 15 restaurants in Northwest Indiana last Friday. This move has caused significant disruption for employees and customers alike, with social media posts from affected workers highlighting the sudden nature of the closures.
EYM Group has fired back, accusing Pizza Hut of failing to modernize its menu and digital ordering system, leaving the franchise at a competitive disadvantage in the casual dining market. Competitors like Little Caesars and Domino’s have made significant strides in these areas, putting additional pressure on Pizza Hut to keep up.
In response to the closures, EYM Group filed a lawsuit against Pizza Hut in March 2023, alleging breach of contract. Pizza Hut, however, countersued earlier this month, accusing EYM Group of financial discrepancies and failure to make required payments, thus violating their franchise agreement.
The legal wrangling between Pizza Hut and EYM Group has been ongoing, with Pizza Hut entering into a forbearance agreement with the franchisee last year after several defaults. This agreement appears to have unraveled, leading to the current state of affairs.
Pizza Hut’s parent company, Yum Brands, reported last month that same-store sales at Pizza Hut declined by 7% in its most recent quarter. In the U.S., same-store sales dropped 6%, a stark contrast to the 7% growth experienced during the same period last year. This decline has added pressure on Pizza Hut to address internal issues and maintain its market position.
While shares of Yum Brands have risen nearly 6% since January 1, the ongoing dispute and resulting closures cast a shadow over this growth. Yum Brands also owns Kentucky Fried Chicken and Taco Bell, which have been performing relatively well compared to Pizza Hut.
The legal battle between Pizza Hut and EYM Group underscores broader challenges within the casual dining sector. As consumer preferences shift and competition intensifies, companies must adapt quickly to stay relevant. Pizza Hut’s struggle to modernize and streamline its operations has evidently taken a toll, with the current legal dispute serving as a painful reminder of the stakes involved.
The Post has reached out to both Pizza Hut and EYM Group for comment, but neither party has responded as of yet. The outcome of this legal battle will likely have significant implications for both companies and could reshape the landscape of the casual dining industry.
As Pizza Hut navigates this turbulent period, the company must address both its internal challenges and the external pressures from competitors. The future of over 120 Pizza Hut locations hangs in the balance, and the resolution of this dispute will be crucial in determining the brand’s path forward.
