A new lawsuit is just the latest example of why AI probably shouldn’t be used for everything. A Pizza Hut franchisee claims the chain’s AI-powered delivery system, meant to optimize orders and speed up deliveries, instead backfired and cost it more than $100 million.
Earlier this month, in the Texas Business Court, Chaac Pizza Northeast sued Pizza Hut after its restaurants were forced to use an AI delivery management platform known as Dragontail.
Pizza Hut’s parent company, Yum! Brands, acquired Dragontail Systems in 2021.
Chaac Pizza Northeast operates more than 100 Pizza Hut locations in New York, New Jersey, Maryland, Washington, D.C., and Pennsylvania. The company alleges that before it adopted Dragontail, more than 90% of its pizza deliveries arrived within 30 minutes of an order being placed and that it consistently received high satisfaction scores from customers.
But Chaac claims the system’s rollout caused “cascading operational breakdowns and customer dissatisfaction.”
The main issue appears to be that Dragontail gave DoorDash delivery drivers access to real-time status, workflow, and order timing. Chaac alleges that some drivers used that information to wait up to 15 minutes in the restaurant for additional orders, leaving pizzas sitting out after they came out of the oven and resulting in longer delivery times.
Those delays and disappointed customers allegedly caused sales to nosedive.
Chaac Pizza Northeast claims its year-over-year sales growth in New York City fell from 10.19% to -9.78% after the system was implemented.
The company is now seeking more than $100 million in damages.
Pizza Hut did not immediately respond to a request for comment from Gizmodo.
The lawsuit comes as Pizza Hut has been struggling nationally. Yum! Brands announced in February that it plans to close 250 Pizza Hut locations. The company also said it was considering selling the chain last year.
Pizza Hut isn’t the first fast-food chain to adopt AI tech with mixed results.
Burger King made headlines earlier this year when it rolled out a new AI-powered management platform in its restaurants that keeps an eye on everything from when menu items are running low to complaints about dirty bathrooms, and even how employees interact with customers. The system even gave locations and shifts “friendliness scores.”
McDonald’s, Wendy’s, White Castle, and Taco Bell have also tested or used AI in drive-thru ordering in recent years. Taco Bell quickly decided to retreat from the strategy after it found the public really liked messing with the AI by doing things like asking for “18,000 cups of water, please.”
