Cheesed Off Pizza Hut Franchisees Make Last Grab for Piece of the Pie

A former Pizza Hut franchisee is hoping to force the fast-food giant back to court to compensate franchisees for losing fistfuls of dough selling unprofitable pizzas.

Pizza Hut was Adam Gordon’s life. He started washing dishes and making dough for the family restaurant at 14, he was a shift manager at 17, an assistant manager at 18 and a store manager at 20.

“I know the Pizza Hut system,” he says. “I breathed it.”

But not any more. Last year, the 34-year-old Tasmanian man sold his two Pizza Hut franchises, walking away with just $10,000. Everything else was gone – except his resolve.

Mr Gordon is determined to finish the legal action first launched against the global giant two years ago.

Pizza Hut slashed the prices of its pizzas in 2014 to compete with rival Dominos, with its cheapest pizzas selling for just $4.95 (they are now $5).

After a group of franchisees failed to get an injunction to stop the price cuts going ahead, more than 280 franchisees from across the country began a class action against Pizza Hut’s then-owner Yum! Restaurants in 2015, claiming its aggressive pricing policies were forcing mum-and-dad operators to the wall.

Mr Gordon said once wages, rent, franchise costs, royalties, marketing and delivery costs were taken into account it cost him $5.50 to make a $4.95 pizza.

An estimated 90 per cent of franchisees claimed losses and business collapses as a direct consequence of orders they slash the price of pizzas by up to 50 per cent, to take market share from rivals.

The class action, initially led by Sydney franchisee Danny Diab, alleged unconscionable conduct under the franchising code.

While Mr Diab walked away from the class action, concerned for the impact it was having on his family (he declined to speak about the case to Fairfax, citing a confidentiality agreement signed as part of the settlement), the rest stayed – and lost.

Yum! defended the action and in March the Federal Court threw out the class action.

Now, Mr Gordon wants to lead an appeal against the decision, and has launched a crowd-funding appeal to try to raise the cash to go back to court.

“We have suffered financially and emotionally with many of us still trapped in this unequal arrangement,” he said.

“[We’re] buried under a mountain of debt and unable to even sell our business to cut our losses without the intervention of the franchisor.”

Mr Gordon is trying to raise $300,000 to fight the appeal, which has to be lodged by the end of September or not at all.

If he manages to raise the cash, Mr Gordon will employ Sydney-based lawyer Jim Kartsounis, who ran the Federal Court case, to run the appeal.

If he can’t raise the cash, he plans to donate it to charity.

“It is important that we do not give up the fight; if only because this case will set a precedent for this kind of class action in Australia,” he said.

“This case will help shape judgments in years to come, if small business owners band together against unjust and commercially irresponsible decisions made by their franchisor.”

Earlier this month, Australian private equity firm Allegro and three former McDonalds executives acquired the master franchisees licence from Yum! Restaurants.

In a statement, Allegro founding partner Chester Moynihan said the group’s immediate focus would be to strengthen the network of Pizza Hut stores across the country.

Yum! and Pizza Hut did not return calls and messages on Sunday.

Source: www.smh.com.au www.smh.com.au

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