Major franchise owner sues Pizza Hut, says company's AI delivery system lost him $100 million

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Wolfgang Ramsay
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Anybody who (a) has unlimited faith in artificial intelligence and (b) who likes Pizza Hut should consider this report from Business Insider:

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Why does a pizza restaurant need an "AI system"??

A top Pizza Hut franchisee says the chain's rollout of an AI-powered delivery system turned once-speedy pizza orders into a cold, late-arriving mess β€” and cratered a business that had been outperforming nearly every other operator in the system.

In a lawsuit filed on May 6 in Texas Business Court, franchisee Chaac Pizza Northeast accused Pizza Hut of forcing stores to adopt Dragontail, a delivery-management platform that Pizza Hut described as using artificial intelligence to "optimize" food delivery, despite what the suit calls obvious incompatibilities with Chaac's business model.

Chaac Pizza Norheast is no small-time mom-and-pop franchisee. It "operates about 111 Pizza Hut restaurants across New York, New Jersey, Maryland, Washington, DC, and Pennsylvania." One of the consequences of that, of course, is that if something goes wrong franchise-wide, the results can be disastrous.

The AI allegedly caused "cascading operational breakdowns and customer dissatisfaction" because it "gave DoorDash drivers real-time visibility into kitchen workflows and order timing."

Prior to the AI rollout, Chaac said, "more than 90% of its pizza deliveries arrived within 30 minutes." And yet "delivery performance sharply deteriorated" after Dragontail went into effect. And the reason why makes perfect sense once you think about it:

The complaint says DoorDash drivers began waiting to batch multiple orders together after gaining virtual visibility into kitchen systems, allowing them to see when pizzas would come out of the oven.

Instead of immediately leaving with a completed order, the suit claims drivers waited "up to fifteen (15) minutes" for additional deliveries, increasing the time between when a pizza is removed from the oven rack and when it leaves the building to be delivered. That delay slowed deliveries, disappointed customers, and caused a sharp drop in sales, the suit says.

Instead of zipping off deliveries to each house ASAP, drivers were sitting around in their cars so they could take five at once.

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I suppose that makes sense from the DoorDasher's perspective. Not so much from the franchise end of things!

There was another flaw to the system as well: The suit "also alleges Dashers could see tip amounts and whether orders were cash payments, making some drivers less likely to accept certain deliveries."

The filing further claims that the Pizza Hut corporation failed to respond to worsening business data:

Chaac alleges Pizza Hut failed to adequately train operators on the system, refused requests for support, and ignored worsening delivery metrics after sales began plunging in key markets. In New York City, the franchisee says year-over-year sales growth swung from positive 10.19% to negative 9.78% after the rollout.

The franchise outfit claims Pizza Hut "breached its franchise agreement by mandating continued use of the software" without reasonably modifying the system to fix the flaws. It seeks $100 million in damages as a result.

This isn't as bad as Skynet launching the nukes. But it's still not a good look for AI!

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