Should Papa John’s Rebrand? Stock Rises as Future Unclear

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John Schnatter / Papa John's

Papa John’s founder John Schnatter has left the building—even if his face and name are above the door at Papa John’s International Inc. On Thursday the chairman of the world’s third-biggest pizza delivery chain resigned after disclosure of a racial slur he made on a conference call with its agency (which duly dropped him as a client).

Shares of Papa John’s International soared on Thursday as news spread that Schnatter had resigned as chairman of the board. Papa John’s stock (NASDAQ: PZZA) was up about 12.1% at 12:15 p.m. EDT. The board and management team’s decision on whether or not to rebrand hangs in the balance. Casual observers on Twitter, of course, had their opinions:

Whatever direction his former company now takes, Schnatter’s personal story as a cocky entrepreneur who rose to the top of the quick serve restaurant industry and created a global brand—he was also featured prominently in its advertising—is a crisis management lesson in its own right of what not to do.

Peyton Manning Papa John's

In an e-mail to Forbes, which broke the story, Schnatter on Wednesday admitted he used the “N-word” and their reporting was correct. According to Forbes, someone on the call asked Schnatter how he might deal with online racist groups as a continued impact of his 2017 NFL remarks:

“He responded by downplaying the significance of his NFL statement. ‘Colonel Sanders called blacks n—–s,’ Schnatter allegedly said, before complaining that Sanders never faced public backlash.” (An allegation about Saunders that is unfounded and no defense even if it were true.)

Irony of ironies, Forbes reported that the conference call involved a “role-playing exercise for Schnatter in an effort to prevent future public relations snafus.”

Papa John's logo with founder John Schnatter

Papa John's new logoTo say that Schnatter was a PR disaster is only part of the issue, as his eponymous company still bears his name although is face has been fading from the logo since last year.

But for Papa John’s, the disclosure was one public relations snafu too many, while the bottom line was starting to take a hit.

According to CNBC, after the Forbes story broke, Major League Baseball contacted Papa John’s HQ to say it was cutting ties, marking the end of co-branded marketing efforts such as the #PapaSlam social promo.

Papa John’s management team, board and PR handlers have been popping headache pills since November, when on a quarterly earnings call with financial analysts Schnatter criticized the NFL for fumbling the “take a knee” U.S. national anthem protests that were led, initially, by black players. He blamed the controversy for denting sales of Papa John’s, which at the time was the Official Pizza Sponsor of the league.

Last December, Schnatter had tendered his resignation as CEO (which took effect in January) and was replaced by Steve Ritchie, but kept his chairman title. The press release that described his new role at the company as one of benevolent founding father: “In his duties as Chairman and founder, Schnatter will continue to champion the core principles that led to recognition as the industry leader in product quality and customer satisfaction. He will also pursue his personal passion for entrepreneurship, leadership development and education.”

Papa John's Pizza Family

Forbes heard there was internal tension while Schnatter sought to repair his image and CMO Brandon Rhoten started becoming the public face of the brand. (A fed-up Rhoten exited in May for the CMO role at Potbelly Sandwich Works.)

Papa John's NFL statement

The chain’s official NFL sponsorship also ended in February as Pizza Hut stepped into the role as the official pizza partner of the NFL. The end of that lucrative position made it clear that Papa John’s had became one of the most polarizing brands in America.

While Papa John’s decides if it will indeed rebrand to remove itself from its toxic founder and his legacy, the fallout continues for Schnatter.

Purdue University is reportedly weighing whether to remove his name from the John H. Schnatter Center for Economic Research at its business school that Schnatter funded in May with an $8 million gift. Purdue says it “will continue to assess the situation” while it has other fires to put out, too.

 

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