Pizza chain Pizza Hut has closed 15 locations in the northwest of the state of Indiana, US in a financial dispute with EYM Group, one of its largest franchisees.

The dispute centres on millions of dollars in unpaid bills and puts 129 more locations in Illinois, Georgia, South Carolina and Wisconsin at risk of closure.

The closures began abruptly on Friday 14 June in Indiana, leaving employees and patrons in shock. The development was first reported by the Times of Northwest Indiana after finding employees’ posts on social media expressing their surprise and dismay at the sudden closures. Many have been advised to seek unemployment benefits.

EYM Group has been sued by Pizza Hut over financial discrepancies. After a payment deadline was missed in early June 2024, the Indiana locations were swiftly shuttered, and similar actions are anticipated for the remaining establishments, as reported in Nation’s Restaurant News.

EYM Group has attributed its financial struggles to Pizza Hut’s failure to modernise its menu and digital ordering system, which they claim has allowed competitors such as Domino’s and Little Caesar’s to gain an edge.

Pizza Hut’s US sales declined by 6% year-on-year in 2024.

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A spokesperson for Pizza Hut stated: “The company is working to transition these locations and expects many of them will reopen soon.”

Pizza Hut has established staggered deadlines for EYM Group to settle its debts in each state, with the threat of further closures if the franchisee fails to comply. Following Indiana’s deadline on 12 June, South Carolina is next on 27 June, followed by Illinois on 7 July, Georgia on 11 July and Wisconsin on 5 September, reported the Daily Mail.

The Texas-based EYM Group, founded in 2008, has had a rocky relationship with Pizza Hut since 2023. In August of that year, Pizza Hut offered a forbearance agreement to facilitate partial debt repayment. However, on 15 March 2023, EYM Group filed a lawsuit against Pizza Hut, accusing the company of breach of contract and failing to keep pace with competitors.

EYM Group’s lawsuit detailed a series of grievances, including outdated technology that led to online ordering issues during the Super Bowl and unsuccessful menu updates. The franchisee also criticises Pizza Hut for reduced research and development spending, which they claim has hindered innovation and contributed to a decline in customer base and market share.

EYM Group has also been impacted by inflation, which has significantly increased the cost of ingredients, squeezing profit margins. In response, Pizza Hut filed its lawsuit on 7 June 2024 in Texas, outlining the steps it would take to reclaim the restaurants if the outstanding debts were not settled. Court documents reveal that EYM Group initially defaulted on a $3m payment in late 2022 and a subsequent $2.6m in 2023.

Pizza Hut, a subsidiary of Yum Brands, operates through a network of franchisees across the US.