Cold pizzas, delivery delays: How Pizza Hut's AI could have cost the company $100 million

Pizza Hut imposed the use of Dragontail, an AI-driven kitchen and delivery management system, on its restaurants to optimize every step, from preparation to delivery. However, one of the largest franchisees in the country, Chaac Pizza Northeast, which operates 111 locations including in New York and Washington, has filed a complaint. According to them, the forced implementation of this tool would have caused losses exceeding $100 million.

An AI that optimizes nothing at all

Before the adoption of Dragontail in 2024, the franchise was able to deliver more than 90% of its orders in less than 30 minutes. Since the AI has taken over orders, this rate would have dropped to only 50%. More problematic still, the "rack time" (the time a pizza spends waiting on a rack after coming out of the oven) would have jumped from less than 5 minutes to nearly 20 minutes. Result: customers receive their pizzas cold.

A situation that would also largely result from the way the AI handles interaction with DoorDash drivers, who are responsible for pizza delivery nationwide for the company. Previously, drivers managed their orders manually. With the new system, they have real-time access to the kitchen workflow. The complaint (Chaac Pizza Northeast) claims that drivers now wait up to fifteen minutes on-site to group multiple orders together, which systematically increases the delivery time for the first pizzas taken out of the oven.

A significant financial loss for the franchise

Beyond the cold pizzas, it is the financial health of the establishments that would be at risk. In New York, the franchise claims that its annual revenue growth has gone from +10% to -10% following the installation of the software. Chaac Pizza Northeast accuses Pizza Hut of violating their franchise agreement by forcing them to maintain a system that harms performance indicators and customer satisfaction. Despite repeated warnings about the decline in service quality, the brand would have refused to backtrack on the rollout of Dragontail.

Read: Google launches a new AI feature and it turns into a fiasco

This kind of problem apparently isn't the first time. The plaintiff mentions for example similar issues at Taco Bell, which also had problems with their AI implementation. If the court sides with the franchisee, it could mark a significant setback for AI systems imposed on franchisees in the fast food industry.

👉🏻 Follow real-time tech news: add 01net to your Google sources, and subscribe to our WhatsApp channel.

Source : Business Insider