Pizza Hut Australia in war with franchise holders

In today’s paper was an article about 80 Australian Pizza Hut franchise holders taking court action against Yum Brands for the new marketing campaign.
It is PH marketing campaign of a large pizzas for $4.95 any day of the week, matching Domino’s same program.
Looks like more franchise store will bite the dust
The price cannot be successful with the high wages cost in Australia, high rents and all the other associated costs. Once all of this is taken out and then the franchise fee (average in Australia is 12.5% of gross sales) they would be selling under cost.
Less cheap chains is better for us Indies
The reason the chains are ding mass price cuts is because their product is crap for undersized, cheaply made rubbish. People only buy when it is this cheap, not so much at their normal pricing
If they put the effort into making a good product at a reasonable price they would be better off.

Here is the article

[I]THERE’S a civil war brewing inside fast-food giant Pizza Hut and it’s going to be great for pizza lovers.

The once-powerful pizza-maker is struggling to maintain its slice of the Australian pizza market forcing Pizza Hut’s parent company, Yum! Restaurants Australia, to launch a “sales strategy” that puts a cap on the price its local outlets can charge for a pizza.
Yum! hopes the move will cause sales to increase. But 80 Pizza Hut franchise owners have banded together to mount a legal challenge claiming it will cost them $10 million and put many of them out of business.
Specifics of the “reduced pricing strategy” were kept confidential, but the Federal Court heard it entails restricting the maximum price that can be charged for pizzas and reducing the number of pizzas on the menu.
Last week, Yum! tendered a document to the court showing fierce rival Domino’s is now charging $4.95 for certain pizza every day, rather than just Mondays and Tuesdays. Pizza Hut has followed suit with its ad campaign touting $4.95 pizzas on every day of the week.
On June 24, its 80 franchisees unsuccessfully applied for an injunction against the strategy.
President of the Australasian Pizza Association Jim Kartsounis told the court a “price war” would damage the franchise’s brand and financial position.
The franchisees also pointed to a report by accountant Terrence Potter that said the rock-bottom pricing strategy “could be expected to result in both the inability of the owner-manager(s) (of the franchises) to earn a living from the business and ultimately result in the failure of the business”.
Yum! market director Kurtis Smith told the court the pricing 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”.
The court heard that by December 2013 he had told Yum! senior executives that something had to be done to “arrest the decline”.
Mr Smith said the pricing strategy had been successful in turning around Pizza Hut’s performance in the US and New Zealand. He told the court Yum! had invested in leaflet drops and advertising to support the price drop.
The company believed to do nothing would mean continuing poor financial performances, the court heard.
Judge Jayne Jagot ruled there was no evidence Yum! was acting in its own interests at the expense of franchisees and rejected the injunction.
The judge told the court Yum! had acted in “good faith with the intention of advancing the interests” of the whole organisation.
Mr Kartsounis declined to comment because the legal action was likely to continue[/I]

Sounds all to familiar :frowning:

It’s like when Burger King tried to match McDonald’s $1 menu. Also reminds me of Subway doing the $5 footlong campaign. So many franchisees lost big on those gambles. Domino’s is bottom of the barrel in my opinion. They have their market segment and they can keep it. Pizza Hut is now stooping to their level and hurting not only their franchisees but their brand.

Not many big pizza chains out there do things the right way, but I’ll always have respect for Papa John’s and Round Table. They stick to their guns and Papa John’s has always taken care of his franchisees.

Not quite sure how PJ’s is an exception here. They joined in the $10 pizza wars with Domino’s and Pizza Hut a few years ago. Its hard to get away from that $x price for a pizza. They did it for so long…eventually you have to raise the prices! Just like Subway and the $5 footlong.

PJ had theirs at 11 while the others were at 10 for a large