Pizza Hut Inc. plans to invest more than $10 million over the next 18 months to restore its presence in southern Louisiana after more than 40 franchised units closed earlier this week.
On Monday, Pizza Hut sued franchisee Lundy Enterprises LLC of New Orleans in the U.S. District Court in North Texas, claiming Lundy owed royalties and advertising fees, and that the franchisee “was unable to meet serious financial obligations to federal, state and local taxing authorities.”
Pizza Hut said it had worked in mediation with Lundy Enterprises since last summer to settle the dispute and sought to purchase Lundy’s Pizza Hut assets and terminate the franchise agreement. However, that deal fell apart in late December when it was determined Lundy’s debts exceeded assets.
The company’s lawsuit this week — which claims financial damage from Lundy’s continued use of the Pizza Hut trademark and systems — led to the closures of franchised restaurants in New Orleans and Baton Rouge, La.
Lundy Enterprises, which was founded by Larry Lundy and his wife, Marilyn, in 1992 to franchise the Pizza Hut brand, had reorganized under Chapter 11 bankruptcy protection in 2001. Many of the company’s restaurants were damaged extensively during Hurricane Katrina in 2005.
Pizza Hut, the Dallas-based division of Yum! Brands Inc., said in a statement that Lundy has contracted with the company for the next five years as it partners with the National Urban League and the Urban League of Greater New Orleans to build new units in the New Orleans and Baton Rouge markets.
Scott Bergren, president of Pizza Hut, said, “We will build brand new restaurants over the next 18 months, replacing all existing restaurants with state-of-the-art facilities to best serve our customers.”
Bergren added that the investment “is both good business and will stimulate economic development.”
Pizza Hut said it has started to identify locations, and when new restaurants are built, it will work with the National Urban League to seek a new franchisee for the markets.
In the meantime, Pizza Hut said it is spending $1 million and working the Urban League of Greater New Orleans to offer job counseling, training and career placement to displaced workers in both markets and is committed to rehiring workers as new units are opened.
Pizza Hut has nearly 10,000 restaurants worldwide.
Contact Ron Ruggless at [email protected].