Pizza wars heat up as Pizza Hut franchisees take head office to court

A group of 288 Pizza Hut franchisees that initiated a class action against the chain’s franshisor Yum! Restaurants last year will have their day in court on Tuesday.

A directions hearing for the class action suit against Yum will take place in the New South Wales Federal Court on Tuesday, more than 12 months after the dispute over the pizza chain’s pricing strategy first came to the fore.

In June 2014, 80 Pizza Hut franchisees attempted to stop Yum’s pricing strategy, which saw the Pizza Hut chain go head-to-head in a discount price war with rival Domino’s, offering pizzas for as little as $4.95.

But the group of franchisees failed to secure an injunction to stop the pricing being introduced and in August, Diab Pty Ltd, a company owned by Sydney Pizza Hut franchisee Danny Diab, initiated legal proceedings against Yum in the Federal Court.

An initial directions hearing had been scheduled for October 3, 2014, and applicant group members were given until October 28 to opt out of the action.

According to court documents, Diab Pty Ltd filed a statement of claim, as well as material relating to the originating application and applicant’s genuine steps statement, in an unconscionable conduct application on June 12 this year. A defence was filed by Yum on July 10.

Justice Bennett held a case management hearing on July 21 and a directions hearing will be held at 4pm on Tuesday.

The ABC reports 288 out of 298 Pizza Hut stores are party to the class action, which will argue the chain’s aggressive pricing forced many franchisees out of business.

At least one Pizza Hut franchisees has also submitted a formal complaint to the Australian Competition and Consumer Commission, alleging the franchisor’s actions resulted in their business becoming insolvent and their franchise agreement terminated.

According to the ABC, 32 Pizza Hut franchisees have lost their business since the pricing strategy was introduced.

In a statement issued to SmartCompany, Pizza Hut Australia general manager Graeme Houston said Pizza Hut is “looking forward to finally resolving this matter in court and moving on so we can focus on our core role of helping our franchisees build their businesses”.

“We are unable to comment further while the case is before the courts,” he said.