A significant number of Pizza Hut restaurants face closure due to an ongoing financial dispute with one of its major franchisees.
As reported by Daily Mail, a total of 150 restaurants are set to close, with an additional 129 across Illinois, Georgia, South Carolina, and Wisconsin on the brink of shutting down as part of the dispute.
The closure wave began unexpectedly in Northwest Indiana, where several Pizza Hut outlets ceased operations. Signs on the doors read “location closed” or “We apologize for any inconvenience. We are temporarily closed,” NWI.com first reported.
Pizza Hut’s website also listed locations in Merrillville, Crown Point, Hobart, Lowell, Cedar Lake, Winfield, Valparaiso, Chesterton, Portage and Michigan City as closed.
Pizza Hut’s headquarters in Plano, Texas said the closures should hopefully be temporary but cautioned that not all locations may reopen.
The root of the issue lies in the contractual disagreements and financial strain between Pizza Hut and Texas-based EYM Group, which operates multiple restaurant brands nationwide.
According to court records, the franchisee defaulted on its payments to Pizza Hut, failing to pay 3 million owed in late 2022 and 2.6 million owed in 2023. EYM Group has been seeking to sell its Pizza Hut restaurants, citing inflation, labor costs, a lack of innovation, and other factors as contributing to its financial struggles.
In a lawsuit filed by EYM Group against Pizza Hut, the franchisee alleged that Pizza Hut has failed to keep up with modern business practices and failed to invest heavily in digital and delivery.
According to the lawsuit from EYM Group, per NWI.com:
“Pizza Hut has a great responsibility to its franchisees. It has not kept up with the heavy competition from its competitors, e.g., Dominos, Little Caesars. Pizza Hut has failed to keep up with modern times.
“Pizza Hut failed to adapt to modern business practices. Pizza Hut didn’t observe carefully enough how people had begun to live. Pizza Hut failed to keep up with new technology. Pizza Hut failed to heavily invest in digital and delivery. Pizza Hut has no distinct identity like others. Pizza Hut has no image or identity that sticks with patrons. Pizza Hut lost its brand identity. Pizza Hut took millennials for granted, which are a demographic with money that should have been the target of ad campaigns. Pizza is a millennial approved food. Pizza Hut neglected loyal customers as well as its franchisees.
“Pizza Hut’s modern gourmet menus flopped and did not target existing customers. Pizza Hut failed to innovate; in fact it rarely offers new items.
“Pizza Hut’s revamped menu failed and scared off loyal customers. Pizza Hut cut its research and development budget and it has showed. In recent years, the best Pizza Hut has managed to do is change the cheese in its Stuffed Crust from mozzarella to cheddar, or trot out an occasional, ill-fated appetizer like the Stuffed Cheez-It or the Philly steak melt! Then despite Pizza Hut becoming the official pizza of the NFL, the Pizza Hut online ordering system failed during the Super Bowl, costing franchisees monetary losses on a day they should be profiting.”
Pizza Hut filed a lawsuit on June 7 alleging a breach of contract by EYM. This followed a similar lawsuit filed by EYM against Pizza Hut on March 15.
EYM Group and Pizza Hut reached a forbearance agreement last August. However, EYM alleges that Pizza Hut is violating the terms of this agreement and trying to force it to sell its 15 locations in Indiana for $100,000 per store.
EYM Group originally paid $8.56 million for its Indiana restaurants ($600,000 to build), which employ more than 200 workers. It accuses Pizza Hut of sabotaging its efforts to sell these establishments.
“Pizza Hut is saying, if you don’t sign our draconian paperwork today, then we will make sure the bank calls your loans on Tuesday,” EYM Group said in a lawsuit. “Pizza Hut has a well-earned reputation for using strong-arm tactics to pressure its franchisees. Pizza Hut knows exactly what it is doing.”
More from Daily Mail:
Staff at Pizza Huts in Indiana posted on social media that they were given no warning ahead of the closures. They said they had been told to file for unemployment.
A Pizza Hut spokesperson said: ‘The company is working to transition these locations and expects many of them will reopen soon.’
Pizza Hut has set EYM staggered deadlines for payment in each state. The chain will close down the restaurants in each if the debts are not paid.
The deadline for Indiana was last Wednesday, June 12. The 15 restaurants were shuttered two days later.
‘This is Pizza Hut bosses showing they are not bluffing,’ an insider told DailyMail.com.
Next up is South Carolina with a deadline of June 27. Then it is Illinois on July 7, Georgia on July 11 and Wisconsin on September 5.