Pizza Hut Closes Several Restaurants
Almost 150 Pizza Hut restaurants are set to close due to an ongoing financial dispute with one of its major franchises, EYM Group.
This turmoil has already led to the abrupt shuttering of 15 locations in Indiana, leaving staff and customers stunned. The Daily Mail reveals that another 129 locations across Illinois, Georgia, South Carolina, and Wisconsin are also at risk of closing.
EYM Group, which operates these 144 Pizza Huts across five states, is embroiled in a legal battle with Pizza Hut over millions of dollars in unpaid bills. As the deadline for Indiana passed last week, 15 restaurants were quickly closed, and similar closures are expected in the other states over the coming weeks and months.
EYM Group blames Pizza Hut for its financial woes, citing declining sales due to the chain’s failure to modernize its menus and app to compete with rivals like Domino’s and Little Caesars. Pizza Hut’s U.S. restaurants have seen a 6% drop in sales this year compared to last year.
Staff at the Indiana Pizza Huts reported receiving no warning about the closures and were advised to file for unemployment. A spokesperson for Pizza Hut stated that the company is working to transition these locations and expects many of them will reopen soon.
Pizza Hut has set staggered deadlines for EYM to settle its debts in each state. If the payments are not made, the restaurants will close. The deadlines are as follows: South Carolina on June 27, Illinois on July 7, Georgia on July 11, and Wisconsin on September 5.
EYM, a Texas-based franchisee founded in 2008, has been in conflict with Pizza Hut since last year. Despite being offered forbearance in August to help pay off some of the debt, EYM sued Pizza Hut on March 15, alleging breach of contract and claiming that Pizza Hut had not upheld its end of the agreement. EYM pointed to outdated technology that caused online ordering crashes during the Super Bowl and failed menu innovations as evidence of Pizza Hut’s mismanagement.
EYM’s lawsuit highlighted various issues at Pizza Hut, including cuts to the research and development budget, resulting in a lack of innovation. Examples cited include the switch from mozzarella to cheddar in stuffed crusts and unsuccessful new appetizers like the Philly steak melt. These failed strategies led to a loss of customers and an inability to attract new ones. Additionally, EYM suffered from the rising cost of ingredients due to inflation, further eroding profit margins.
Pizza Hut, owned by Yum Brands Inc., filed a lawsuit on June 7 in Texas, also alleging breach of contract and detailing plans to take control of the restaurants if debts were not settled. Court documents show that EYM defaulted on $3 million in late 2022 and another $2.6 million in 2023.