A major Pizza Hut franchisee just closed 15 locations without warning, and nearly 130 might go dark for good in an ongoing battle with the struggling brand owner.
EYM Group owns and operates 144 Pizza Hut locations in Indiana, Illinois, Georgia, South Carolina, and Wisconsin but owes millions in franchise fees to Yum Brands. All the Indiana locations were boarded up on Friday of last week, and the Daily Mail reported today that the remaining 129 restaurants "across Illinois, Georgia, South Carolina and Wisconsin are on the brink of shutting as part of the dispute."
How EYM and Yum Brands got here is one of those stories they'll tell for years to business masters students as a lesson on What Not to Do.
Based in Texas, EYM ended up owing millions to Yum for a number of reasons, including inflation jacking up food costs faster than EYM could boost prices on increasingly cost-conscious diners. But Pizza Hut's problems run back much further than Bidenflation.
Yum was showing patience with EYM, giving them extra time to pay their overdue franchise fees. But EYM sued corporate last March for breach of contract — basically, for failing to deliver a competitive product for franchisees to sell. According to the suit, Pizza Hut has "not kept up with the heavy competition from its competitors, Dominos, Little Caesars."
Another complaint was that "In recent years, the best Pizza Hut managed to do is change the cheese in its stuffed crust from mozzarella to cheddar or trot out an occasional, ill-fated appetizer liked the Philly steak melt."
Yum countersued EYM earlier this month. And for its part, Pizza Hut said, "The company is working to transition these locations and expects many of them will reopen soon," and claims they'll do the same if and when the other 139 EYM restaurants close.
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There are 6,700 Pizza Hut locations across the U.S., so it isn't like closing 144 restaurants — and those perhaps only temporarily — means the chain is going away any time soon. But Pizza Hut isn't what it once was, and I couldn't tell you what it is now or wants to be.
Pizza Hut went from being a fast-casual dine-in chain to competing with low-cost delivery joints like Little Ceasar's. Then they started opening weird dual-use take-out/delivery locations with other Yum brands like Taco Bell and KFC.
The company's short-lived experiment with Beyond Meat's fake pepperoni and this year's introduction of cheeseburgers to the menu only added to the confusion.
During the stupid pandemic lockdowns, "Pizza Hut’s largest U.S. franchisee, NPC International, filed for Chapter 11 bankruptcy protection after struggling under the burden of $1 billion in debt."
Pizza Hut has been in trouble for a long time, largely because Yum forgot what the brand was supposed to be.
As the only real pizza place where I went to high school in Mexico, Mo., I spent a lot of time — and dollars — at Pizza Hut in the mid-'80s. And it was good. My favorite was the personal pan pizza that came out in a cast-iron pan that had just come out of an oven set to one degree below "Molten." I always ordered it with extra pepperoni so I could pick off the crispy extras to eat for "dessert" while I scrounged for quarters for the tabletop Galaga machine.
But the days of fresh crust, quality toppings, and a nice dine-in experience have been over for years, and what happens to Pizza Hut next is anyone's guess — including Pizza Hut's.
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