Pizza Hut abruptly shutters 15 restaurants – with 129 more at risk – after huge bust-up with major franchisee

Nearly 150 Pizza Hut restaurants will close due to an ongoing financial dispute with one of its major franchisees.

Friday evening saw abrupt closures of 15 locations in Indiana, stunning staff and customers.

DailyMail.com can reveal that another 129 businesses in Illinois, Georgia, South Carolina and Wisconsin are set to close as part of the dispute.

EYM Group – which operates the 144 Pizza Huts in the five states – is being sued by the chain in connection with millions of dollars in unpaid bills.

When a deadline passed last week for Indiana restaurants, they quickly closed. The same will happen to the others in the coming weeks and months.

Meanwhile, EYM blamed Pizza Hut for its financial problems. It says sales have been hit hard because the pizza chain has not modernized its menus or app to keep up with rivals such as Domino’s and Little Caesar’s.

Overall, Pizza Hut’s U.S. restaurants have seen sales decline 6 percent this year compared to last year.

Staff at Pizza Huts in Indiana posted on social media that they had received no warning prior to the closure. They said they were told to apply for unemployment benefits.

A Pizza Hut spokesperson said: ‘The company is working to transition these locations and expects many of them to reopen soon.’

Pizza Hut has established EYM staggered payment terms in each state. The chain will close the restaurants at both restaurants if the debts are not paid.

The deadline for Indiana was last Wednesday, June 12. Two days later, the fifteen restaurants were closed.

They were in Cedar Lake, Chesterton, Crown Point, Griffith, Hammond, Hobart, LaPorte, Lowell, Merrillville, Michigan City, Munster, Portage, Schererville, Valparaiso and Winfield.

“These are Pizza Hut bosses showing they are not bluffing,” an insider told DailyMail.com.

Next up is South Carolina with a June 27 deadline. Then it’s Illinois on July 7, Georgia on July 11 and Wisconsin on September 5.

EYM, a Texas franchisee, was founded in 2008. The problems between the company and Pizza Hut – which has 6,700 locations in the US – date back to last year.

In August, Pizza Hut offered an extension so the franchisee could pay off some of the money owed.

But on March 15, EYM sued Pizza Hut for breach of contract, alleging the fast-food chain breached the terms of the agreement in August.

It also claimed that the company had ‘failed to keep up with stiff competition from its competitors’, [such as} Dominos, Little Caesars.’

EYM pointed to outdated technology that caused online ordering to crash druing the Super Bowl and new menus that ‘flopped’. 

The claim outlined a raft of problems at Pizza Hut, including a cut to its research and development budget that meant it ‘failed to innovate’.

‘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.’ 

These ‘failed strategies’ caused Pizza Hut to lose customers and not attract new ones. 

Pizza Hut has also been suded by franchisee ERM, which says the chain’s menus had gone stale

On top of this, ERM then suffered when the cost of ingredients were badly hit by inflation which erorded profit margins. 

Pizza Hut filed a lawuit on June 7 in Texas that also alleged breach of contract, and laid out how it would take control of the restaurants if debts were not paid.

The court documents show EYM failed to pay Pizza Hut millions of dollars. It initially defaulted on $3 million in late 2022 and then then $2.6 million in 2023.

Pizza Hut, owned by Yum Brands Inc., operates through several franchisees nationwide.