A major Pizza Hut franchisee is suing the company over its rollout of an AI-powered delivery management system called Dragontail, claiming the technology caused major operational problems and more than $100 million in damages, according to Business Insider. The lawsuit was filed by Chaac Pizza Northeast, which operates about 111 Pizza Hut locations across the Northeast and Mid-Atlantic.

The suit claims that Dragontail gave DoorDash drivers real-time visibility into kitchen operations, allowing them to see when orders would be ready. Chaac alleges drivers began delaying pickups to batch multiple deliveries together, which caused pizzas to sit longer before leaving stores and led to slower delivery times, colder food and declining customer satisfaction.

Stores previously delivered more than 90% of orders within 30 minutes, the franchisee claims, adding that they also regularly outperformed system averages in sales growth and guest satisfaction. Chaac claims sales went down significantly in markets such as New York after Dragontail was implemented.

The lawsuit also alleges that drivers were able to see tip amounts and cash payment orders, which could have influenced which deliveries they accepted. Chaac also argues that Pizza Hut didn’t provide adequate training and support.

Chaac is seeking over $100 million in damages and claims that Pizza Hut breached its franchise agreement by forcing operators to use the software even though it had issues. Pizza Hut says it is reviewing the claims.

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Pizza Hut Franchisee Suing Company Over Problems Caused by AI System

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Victoria Campisi