Dallas Wants to Give Millions in Tax Breaks to a Failing Pizza Delivery Startup

Dallas plans to offer Zume, a Silicon Valley tech startup, more than $5 million in tax incentives to open a manufacturing hub. The company, once valued at more than $2 billion, has come on hard times after failing to deliver on its early promise of robotic pizza delivery.

The city will throw in five years of incentives valued at more than $2 million. The county is offering nearly $300,000 per year over 10 years. It hopes to recoup much of that expense through an expansion of the tax base as the company begins hiring at the million-square-foot warehouse off Interstate 20 in southern Dallas.

It's not clear how quickly that will happen. As part of a recent restructuring, Zume is abandoning pizza delivery and now plans to produce environmentally friendly food containers. The Dallas facility appears central to that strategy. It "will design, process and manufacture biodegradable, renewable material associated with food packaging," according to the city.

The agreements — which would slice the tax bill on the company's equipment in half — are dependent on the company meeting employment and investment targets. To obtain all of the tax benefits, Zume would need to hire 300 employees, pay them a living wage and invest $250 million in the facility.

But Dallas isn't alone in competing for the facility, which The Dallas Morning News called "one of the largest industrial building deals in North Texas this year."

Hunt County is offering similar incentives to the company if it locates its facility in Greenville.

Economists have long debated the value of these deals, which pit governments against each other in a race to offer the heftiest tax breaks. Nathan Jensen, a professor at the University of Texas at Austin, published a paper in 2018 that showed that a state tax abatement program had little impact in companies' decision-making: He found that 85% would have come to the state regardless.

Zume did not respond to a request for comment. It told The Dallas Morning News in December that it had no operations in Texas and could not disclose future plans.

The company was riding high in 2018 following the infusion of $375 million into the business by SoftBank, a Japanese conglomerate. It outfitted delivery trucks with robotic pizza-making arms and created an app with the promise of hot pies delivered in minutes.

But the strategy failed, and last week Zume shuttered its pizza business and fired half its employees.

Ads the company was running for manager-level positions around the Dallas area have disappeared.

It's only the latest in a series of bad investments by SoftBank. Its nearly $8 billion investment in Uber is currently underwater, and it lost $5 billion in the wake of WeWork's implosion last year.

Zume is now focused on a new goal: to "engineer a more sustainable food system." In October it launched a new innovation in partnership with Plano-based Pizza Hut: a compostable, circular pizza box.