Pizza Hut restaurants abruptly close across Northwest Indiana after franchisee is accused of defaulting on payments (2024)

Pizza Hut restaurants abruptly closed across Northwest Indiana Thursday after the franchisee was accused of defaulting on payments and claimed Pizza Hut failed to adapt to modern tastes and did little more recently than changing the type of cheese in its Stuffed Crust Pizza.

Pizza Hut locations in Hammond, Munster, Griffith and Schererville were all closed during regular operating hours. A sign on the door of the Schererville pizzeria said "location closed" while a sign at the Griffith location read, "We apologize for any inconvenience. We are temporarily closed."

Pizza Hut's website also listed locations in Merrillville, Crown Point, Hobart, Lowell, Cedar Lake, Winfield, Valparaiso, Chesterton, Portage and Michigan City as closed. South suburban locations, such as in South Holland and Crete, remained open in Illinois.

Plano, Texas-based Pizza Hut, one of the largest pizza chains in the country, said the closures should hopefully be temporary but cautioned that not all the locations may reopen. The pizza chain, known for its personal pan pizzas and Book It! promotion, is embroiled in a contractual dispute with the franchisee that owns its local restaurants in Northwest Indiana.

"While some local franchisee-operated restaurants have temporarily closed, Pizza Hut remains committed to providing outstanding service and products to our valued customers," a Pizza Hut spokesperson said. "The company is working to transition these locations and expects many of them will reopen soon."

Several local Pizza Hut employees posted on social media that all the Northwest Indiana locations were closed without warning, all the employees were let go and told to file for unemployment and the closures affected all Indiana locations owned byEYM Group.

EYM Group is a Texas-based franchisee of different national restaurant brands that owns restaurants in Indiana, Illinois, Wisconsin, Texas, Florida, Georgia and South Carolina. It owns Pizza Hut, KFC, Panera Bread and Denny's restaurants across the country.

Pizza Hut filed a lawsuit on June 7 in Texas alleging a breach of contract by EYM, according to court records. EYM Group previously sued Pizza Hut on March 15 in Texas alleging a breach of contract.

EYM Group did not immediately reply to a request for comment.

The franchisee defaulted on its payments to Pizza Hut, initially failing to pay $3 million owed in late 2022 and $2.6 million owed in 2023, according to court records. EYM has been looking to sell its Pizza Hut restaurants, saying the business has soured and inflation, labor costs, a lack of innovation and other factors have hurt its bottom line.

EYM Group was buying more and more Pizza Hut restaurants around the country in 2017, when Domino's surpassed Pizza Hut in sales. Then in 2020, Pizza Hut's largest franchisee in the United States, NPC International, filed for bankruptcy after it went $1 billion into debt.

"Pizza Hut has a great responsibility to its franchisees. It has not kept up with the heavy competition from its competitors, e.g., Dominos, Little Caesars. Pizza Hut has failed to keep up with modern times,"EYM Group said in its lawsuit."Pizza Hut failed to adapt to modern business practices. Pizza Hut didn’t observe carefully enough how people had begun to live. Pizza Hut failed to keep up with new technology. Pizza Hut failed to heavily invest in digital and delivery. Pizza Hut has no distinct identity like others. Pizza Hut has no image or identity that sticks with patrons. Pizza Hut lost its brand identity. Pizza Hut took millennials for granted, which are a demographic with money that should have been the target of ad campaigns. Pizza is a millennial approved food. Pizza Hut neglected loyal customers as well as its franchisees."

EYM Group alleged that Pizza Hut's menu has gone stale, leaving franchisees on the hook.

"Pizza Hut’s modern gourmet menus flopped and did not target existing customers. Pizza Hut failed to innovate; in fact it rarely offers new items," the company said in its lawsuit. "Pizza Hut’s revamped menu failed and scared off loyal customers. Pizza Hut cut its research and development budget and it has showed. In recent years, the best Pizza Hut has managed to do is change the cheese in its Stuffed Crust from mozzarella to cheddar, or trot out an occasional, ill-fated appetizer like the Stuffed Cheez-It or the Philly steak melt! Then despite Pizza Hut becoming the official pizza of the NFL, the Pizza Hut online ordering system failed during the Super Bowl, costing franchisees monetary losses on a day they should be profiting."

EYM Group and Pizza Hut reached a forbearance agreement last August. The franchisee is alleging in its lawsuit that Pizza Hut is violating the terms of that agreement and trying to force it to sell for pennies on the dollar.

Pizza Hut asked EYM Group to sell its 15 Indiana locations for $1.5 million or $100,000 a store. EYM Group noted it its lawsuit it costs $600,000 to build a new Pizza Hut from the ground up.

EYM Group originally paid $8.56 million to buy its Indiana restaurants, which employ more than 200 workers, according to its lawsuit.

The company accused Pizza Hut of sabotaging its efforts to sell its restaurants.

"Pizza Hut is saying, if you don’t sign our draconian paperwork today, then we will make sure the bank calls your loans on Tuesday," EYM Group said in a lawsuit. "Pizza Hut has a well-earned reputation for using strong-arm tactics to pressure its franchisees. Pizza Hut knows exactly what it is doing."