An AI system promises faster pizza delivery but ends up costing a restaurant chain $100 million

Artificial intelligence and its integration into businesses is becoming increasingly common, although it does not always go as planned. The case at hand revolves around a $100 million lawsuit filed against Pizza Hut by Chaac Pizza Northeast, the company that operates 111 locations of the chain in the United States. The complaint alleges that Dragontail, the AI-based delivery management system used by Pizza Hut, has caused business losses and a decline in corporate value amounting to the aforementioned sum.

The lawsuit is being heard in the Texas Commercial Court, a recently established body that specializes in commercial disputes involving more than $5 million. Chaac claims that the implementation of Dragontail technology in more than a hundred restaurants led to a significant decline in service: delivery times, which previously averaged 30 minutes or less for 90% of orders, rose to over 45 minutes for approximately half of all deliveries.

A technology that has not fit into Pizza Hut’s operations in the United States

Business Insider reports that, prior to the implementation of the AI-based system, Chaac Pizza Northeast was experiencing double-digit sales growth—over 10%—in states such as New York. Following the adoption of Dragontail, that growth turned into a decline of -9.78%. Chaac maintains that Pizza Hut breached the franchise agreement by failing to provide adequate training, ignoring requests for technical assistance, and failing to intervene in the face of the collapse in both sales and customer satisfaction rates.

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The situation is complicating the chain’s outlook in the United States, although its parent company, Yum Brands, has already shown signs of scaling back. In February, the company announced the closure of 250 Pizza Hut locations across the country during the first half of the year, and persistent rumors are circulating about a possible sale of the entire brand.

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