A top Pizza Hut franchisee said the chain’s introduction of an AI-powered delivery system has turned a once-quick pizza order into a slow-arriving, cold mess, rapidly growing business that outperformed nearly every other operator in the system.
In a lawsuit filed May 6 in Texas Business Court, franchisee Chuck Pizza Northeast accuses Pizza Hut of forcing its stores to implement its delivery management platform, Dragontail. Pizza Hut says it uses artificial intelligence to “optimize” food delivery, even though the lawsuit says it clearly conflicts with Chuck’s business model.
Chaac is approx. 111 Pizza Hut restaurants in New York, New Jersey, Maryland, Washington, D.C., and Pennsylvania claim the system caused “cascading outages and customer dissatisfaction” after DoorDash drivers were given real-time visibility into kitchen workflow and order timing.
Franchisees say the impact has cost them more than $100 million in business and enterprise value.
Before Dragontail, Chaac said more than 90% of delivered pizzas arrived within 30 minutes, and the company consistently posted double-digit sales growth and guest satisfaction scores above system averages. After Pizza Hut rolled out Dragontail in 2024, franchisees said their delivery performance deteriorated sharply.
DoorDash drivers were given virtual visibility into the kitchen system, allowing them to see when their pizzas would come out of the oven, and then began waiting on multiple orders at once, according to the complaint.
The complaint alleges that instead of completing orders and leaving immediately, drivers waited “up to 15 minutes” for additional deliveries, increasing the amount of time it took for pizzas to be removed from oven racks and leave the building for delivery. The delays delayed deliveries, disappointed customers and caused a significant drop in sales, the lawsuit says.
The lawsuit also alleges that Dash companies were able to see the tip amount and whether orders were paid in cash, making some drivers less likely to accept certain deliveries.
“With the intent to improve efficiency and service to its customers, Dragontail did just the opposite,” the complaint says. “This resulted in significant delays and decreased consumer satisfaction.”
Chaac alleges that Pizza Hut failed to properly train operators on the system, rejected requests for support and ignored deteriorating delivery metrics after sales began to plummet in key markets. In New York City, franchisees said year-over-year sales growth went from +10.19% to -9.78% since the rollout.
The lawsuit alleges that Pizza Hut failed to use “reasonable business judgment” and violated its franchise agreement by requiring continued use of the software while failing to make system changes to accommodate Chaac’s reliance on DoorDash drivers.
Chaac is seeking more than $100 million in damages, as well as attorney’s fees and other relief.
In a statement emailed to Business Insider, a Pizza Hut spokesperson said the company is reviewing the lawsuit’s allegations and will respond “through appropriate legal channels,” but declined to comment further.
Representatives for DoorDash and Chaac’s attorney did not immediately respond to requests for comment from Business Insider.
The lawsuit comes as Pizza Hut faces widespread pressure across its U.S. operations. The chain’s parent company, Yum! Last year, Brands Inc. announced it was considering strategic options for the struggling brand, including a possible sale, after Pizza Hut recorded multiple consecutive quarters of declining same-store sales.
In the February financial results announcement, Yum! The brands announced plans to close 250 Pizza Hut stores in the United States in the first half of this year.
Executives said the brand is struggling to compete in an increasingly crowded market, with rivals such as Domino’s Pizza and Little Caesars leaning heavily into lower-price deals and delivery partnerships.