Pizza Hut's AI fail has little to do with AI

Don't outsource your bottleneck

$100 million in lost pizza sales due to AI! That’s a lot of pepperoni. 👀

This from a franchisee’s lawsuit alleging Pizza Hut mandated use of its “Dragontail” AI delivery system.

Pizza Hut surely would have preferred to settle this quietly. They didn’t, and we get a useful case study.

Here’s the story:

• Pizza Hut’s AI gave DoorDash drivers visibility into orders, bake times and tip amounts.

• Drivers gamed the system by refusing low-tip orders and grouping deliveries.

• On-time deliveries dropped from 90% to 50%.

Compare this to Domino’s. They are on DoorDash, but negotiated to use it only for orders. Domino’s pizzas are delivered by Domino’s employees.

It’s easy to point the finger at AI, but the system is working as designed. Pizza Hut’s mistake was outsourcing its bottleneck to a third party whose incentives didn’t match its own.

Give up control of your bottleneck, and your customers end up with cold pizza.