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Pizza Hut’s AI rollout has seen the company lose a staggering $100 million.
While some companies are racing ahead in the artificial intelligence market, like Apple partnering with Google to enhance tech capabilities, or humanoid robots outperforming humans on warehouse shifts, others are discovering that rushing into AI operations can backfire.
Trump Mobile's T1 phone allegedly used AI-generated imagery on its American flag design, that's due to ship 'this week,' and it's not without some major flaws.
And now, Pizza Hut has found itself at the centre of a $100 million lawsuit over an AI delivery system that appears to have made everything worse.
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The lawsuit was filed earlier this month by Chaac Pizza Northeast, a franchisee operating more than 100 Pizza Hut restaurants across Maryland, Pennsylvania, New York, New Jersey, and Washington DC.
In 2024, Pizza Hut rolled out Dragontail, an AI-based delivery management system across its franchises. However, according to Chaac, the rollout did not go as advertised.
Before Dragontail, Chaac claims more than 90% of its deliveries arrived within 30 minutes.
After the system was introduced, the franchisee claims it experienced what the lawsuit describes as 'cascading operational breakdowns,' involving slower delivery times, colder food, and 'reduced customer satisfaction.'
"With the intention to improve efficiency and service to the customer, Dragontail did the exact opposite," the lawsuit states. "It caused significant delays and pummeled consumer satisfaction."
Specifically, Dragontail gave drivers visibility into when pizzas would come out of the oven, which sounds efficient in theory.
However, in practice, drivers were waiting up to 15 minutes at a time for multiple orders to be ready before collecting them which ultimately slowed down the entire delivery operation, Business Insider reported.
Chaac says it was generating double-digit sales growth before Dragontail was introduced. Then, in New York City alone, year-over-year sales growth swung from a positive 10.19% to a negative 9.78%.
Despite their 'degrading delivery metrics,' the lawsuit alleges that Pizza Hut continued to mandate use of the system. The fast-food chain also reportedly failed to implement what Chaac describes as 'reasonable business judgment' to accommodate its reliance on DoorDash.
In response, Chaac is seeking more than $100 million in damages, plus attorneys' fees and other relief. According to a Pizza Hut spokesperson, the company is reviewing the lawsuit and would respond 'through the appropriate legal channels.'
Meanwhile, in February, Yum! Brands (Pizza Hut's parent company) announced plans to close 250 Pizza Hut locations in the US in the first half of the year.
