John Schnatter isn’t just leaving his role as chairman of the board at Papa John’s; he’s also exiting the company’s public image. The Associated Press reported July 13 that the pizza chain is pulling its founder’s image from marketing following reports he used a racial slur in a May conference call. The AP said Schnatter, Papa John’s founder and former CEO, who resigned as executive chairman Wednesday night, already had his face taken off some marketing materials by late Friday morning. The company said details and exact timing for the overall changes are not yet confirmed. It also said there are no current plans to change its name.
Schnatter remains on the board at Papa John’s and is its largest shareholder. It just appears his time touting the brand he brought to market in 1984 in TV ads and logos has come to an abrupt end—for now at least.
Reports from Forbes surfaced earlier in the week that during a May conference call arranged between Papa John’s executives and marketing agency Laundry Service, one that was meant as an exercise to prevent future public-relations issues, Schnatter used the “N-word” when asked how he would distance himself from racist groups online. He allegedly responded: “Colonel Sanders called blacks [racial slur],” and then complained about Sanders not facing the same kind of public outcry he did after an NFL controversy earlier in the year.
Schnatter admitted fault, saying in a statement: “News reports attributing the use of inappropriate and hurtful language to me during a media training session regarding race are true. Regardless of the context, I apologize. Simply stated, racism has no place in our society.” Late Wednesday, Papa John’s released a statement announcing it accepted Schnatter’s resignation as chairman of the board and that Olivia Kirtley would act as the company’s lead independent director. A new chairman of the board will be appointed in the coming weeks.
The call was almost certainty in response to Schnatter’s controversial investor call November 1 when he railed against the NFL’s handling of player protests to the national anthem. He exited as CEO January 1 and COO Steve Ritchie stepped in.
“The NFL has hurt us. And more importantly, by not resolving the current debacle to the player and owners' satisfaction, NFL leadership has hurt Papa John's shareholders," he said at the time.
In reality, the statement hurt Papa John’s stock more than the NFL’s issues probably did. It slipped shares 11 percent, and they’ve fallen close to 30 percent in total since. The two parties also parted ways in regards to Papa John’s official sponsorship of the NFL, although no direct correlation to the incident was drawn. Pizza Hut is now the current official sponsor. Sales have also sagged, although, again, whether that’s related to the controversy or to other factors, is difficult to say for sure.
The brand’s same-store sales dipped 3.9 percent in North America in Q4 and then 5.3 percent in Q1 fiscal 2018, year-over-year.
What is clear, however, is that Papa John’s needed to produce a bold marketing gesture in order to make its opposition to Schnatter’s comments crystal. The University of Louisville, for example, said it would remove the Papa John’s name from its football stadium. It also plans to rename the John H. Schnatter Center for Free Enterprise at its business college. Schnatter resigned from the university’s board of trustees as well.
Cathy Dunkin, a public-relations expert and longtime practicing professional and leader in business communications at Washington University in St. Louis’ Olin Business School, said Papa John’s needs to “emphasize the new leadership team and strong company values that don’t include such insensitive attitudes,” in a release. She said Papa John’s could benefit from a shift similar to the one Subway made when spokesman Jared Fogle pled guilt to distributing child pornography and traveling for paid sex with girls in 2015.
“This could mean that all-company training would be a great idea as part of an overall strategic plan with messaging and stakeholder engagement,” Dunkin said.
And what about a name change? That’s the obvious and most drastic change, but hard to imagine when you consider the scope. At the end of the first quarter that ended April 1, there were 670 domestic company-owned stores and 2,745 franchised North American units. There were an additional 1,788 restaurants internationally, bringing the total store count to 5,212.
Dunkin said Papa John’s should monitor sales results, social media, and even consider polling consumers before deciding what steps to take next. “The name may be salvageable with some sort of ‘new generation taking over’ messages, but we don’t really know,” Dunkin said.
“Obviously it’s expensive to build an entirely new brand—when they might be able to show that new people, new thinking and new practices are in charge. It’s too early to say that a drastic name change or rebranding is necessary; again, something like that requires intensive research and information. Short-term, they might be able to survive and thrive after some kind of public campaign starting with an apology stating clearly those aren’t the beliefs of the company, along with actions to support the assertions of new thinking.”
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