The Federal Supreme Court has ruled in favour of cheaper pizza, a move that Pizza Hut franchise owners say will leaving them struggling financially.
Australia’s pizza wars are currently being fought on two fronts. First there’s the more obvious battle between industry cheese kings Dominos and Pizza Hut, each battling over who can offer the cheapest slice. Then, there’s the internal war – the one being waged by Pizza Hut’s parent company Yum! and a whole stack of its franchise owners.
In a bid to keep up with its mortal enemy and fierce competitor, Yum! recently launched a revamped “sales strategy” that puts a cap on the price its local outlets can charge for a pizza and scaled back the number of items on the Pizza Hut menu.
Following the strategy overhaul, 80 Pizza Hut franchise owners banded together to mount a legal challenge against Yum! claiming the price reduction will cost them $10 million and force many of them out of business.
Reports News Limited, Yum! market director Kurtis Smith told the court the strategy was in response to “concern about a downward trend in financial performance and the steady loss of customers in the Pizza Hut business in Australia over the last 10 years”.
He said that similar pricing strategy had been successful for Pizza Hut in the US and New Zealand and that something had to be done to “arrest the decline”. The Federal court agreed with Yum!’s arguments and denied the franchisees their injunction.
Judge Jayne Jagot ruled that Yum! was acting in “good faith with the intention of advancing the interests” of the whole organisation, meaning their cheaper pizza sales strategy will stand. According to News Limited legal action is likely to continue.
