Yum! Restaurants Australia to put cap on the price its local outlets can charge for a pizza in hopes of increasing sales

Nevin Barich

July 5, 2014 (The Advertiser (Australia)) – A CIVIL war is brewing in-side 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 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 lead to an increase in sales.

But not everyone’s happy: 80 Pizza Hut franchise owners have banded together to mount a legal challenge claiming it will cost them $10 million and put many out of business.

Last week, Yum! tendered a document to the Federal Court showing fierce rival Domino’s now charges $4.95 for certain pizzas every day of the week, rather than just Mondays and Tuesdays.

Pizza Hut recently followed suit with its website and ad campaign touting $4.95 pizzas for sale on every day of the week.

Specifics of the “reduced pricing strategy” were kept confidential but the court heard it entailed restricting the maximum price charged for pizzas and reducing the number of pizzas on the menu.

On June 24, the 80 franchisees unsuccessfully applied for a court-ordered injunction against the sales strategy.

Australasian Pizza Association president and solicitor Jim Kartsounis told the court a “price war” would damage the Pizza Hut franchise’s brand and financial position.

A report by accountant Terrence Potter said the rock-bottom pricing strategy could “ultimately result in the failure of the business”.But Yum! market director Kurtis Smith told the court the pricing strategy had been successful in turning around Pizza Hut’s struggling performance in the US and New Zealand.

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