John Schnatter, founder of Papa John’s, is now the former mascot, chief executive and chairman of the pizza chain after a tumultuous year. He has lost his position at the top of the company he built following a sustained series of PR misfires.
Schnatter founded the company in 1984 where it is claimed his original pizzas were pulled together in a broom closest in the back of his dad’s tavern in Jeffersonville, Indiana. Three decades later, as of 2017, Papa John's had 2,606 stores in the US, 3,400 in US and Canada, and as many as 5,000 internationally.
Amid stern competition from Domino's and Pizza Hut on a global scale, he formed and led a formidable brand in a competitive space.
Following is the chain of events that has Schnatter fighting for control of his company.
Papa John’s was an official sponsor of the NFL (and had been since 2010). All was not well however. Schnatter was unhappy with a disunity in the NFL. Black athletes were 'taking a knee' and refusing to stand for the US national anthem in protest against police brutality and the NFL had been hit with a "significant decline" in TV ratings.
During an earnings call, he complained the issue "should have been nipped in the bud a year and a half ago," adding "the controversy is polarizing the customer, polarizing the country".
Weeks earlier President Trump said protesting athletes should be dumped by the league. It was not an uncommon stance to take at the time. Nonetheless, Papa John's backtracked on Schnatter's condemnation of the peaceful protests.
We believe in the right to protest inequality and support the players’ movement to create a new platform for change. We also believe together, as Americans, we should honor our anthem. There is a way to do both. (2/3)
— Papa John's Pizza (@PapaJohns) November 15, 2017
Schnatter stood down as chief executive in January 2018. The NFL backlash had hit. Year on year, comparable sales were down around 5.3% and the NFL scandal may have been a contributing factor.
At the time, in North America, Pizza Hut had the largest marketshare of the pizza delivery business at 12.4%. Domino’s followed (11.6%), then Little Caesars (8.1%) and then came Papa’s at 6.1%. It could not afford to lose more ground.
In the following months, Schnatter remained the largest shareholder in the company, and also stayed on as chairman. He was also the mascot, still present in the brand's marketing deployments.
At the end of February 2018, Papa John's called time on its NFL sponsorship. The next day this vital property went to rival Pizza Hut.
What had Papa John's lost? Pizza Hut US president Artie Starrs said: “NFL stadiums are packed every week, but tens of millions of fans are also watching the game at home.”
“We have an unmatched ability to bring those fans closer to the sport, thanks to the power of our 7,500 restaurants and 150,000 football-crazed team members. The capacity for what’s possible is endless.”
In May, it all seemingly came to a head during a media training conference with Laundry Service. Here Papa has admitted to using the N-word.
This incident remained under wraps for several months.
It is 11 July. News of May's escapades break through the press. Schnatter stood down as chairman and apologised for using a racial slur during the call with his agency of record - a meeting held to guide the brand in how to handle racially sensitive situations like the NFL gaffe.
Forbes reported that Schnatter said the following when talking about distancing himself from racism. “Colonel Sanders called blacks n*****s". He reportedly asked where KFC's backlash was.
Schnatter confirmed that he said it: "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.”
It is claimed he also would not work with musician Kanye West because "he uses the N-word in his lyrics".
Forbes interviewed 37 current and former employees to probe whether Schnatter had a tendency to use such language. There are disquieting allegations about the company's culture in the report. Papa John's has confirmed it is auditing its staff and culture and Papa John resigned as chairman.
But that was not the end of the saga.
Holding the creative agency of record account for less than a year, Laundry Service, which had held the ill-fated media call with Papa, resigned its account.
Schnatter has since accused the agency of trying to extort him for $6m in relation to the call.
The agency has called the accusation 'disparaging and outrageous'.
Publicis's Fallon was the next to drop the client. It had held the account for merely a month before cutting its losses.
Fallon said: "In mid-June, Fallon was retained by Papa John’s International to create work for the brand. The agency was unaware of the incident with its previous agency and learned about it with the rest of the world.
"During our short time with Papa John’s, Fallon produced limited product-focused advertising that has yet to air. The agency has decided not to pursue additional business with Papa John’s.”
Schnatter now backtracks his resignation. He claimed he was "kind of provoked" by his creative agency to say the N-word on the call.
He also condemned the actions of the board. “The board asked me to step down as chairman without apparently doing any investigation. I agreed, though today I believe it was a mistake to do so."
IPG Mediabrands' media agency Initiative had until now stuck by its client. It then U-turned when "additional information" emerged. Its chief executive Amy Armstrong said it had become aware of broader cultural issues at the brand that "run directly counter to our own values".
The week starting 16 July, Papa John (now just John) came out and issued a statement saying he made a mistake leaving the company. His lawyer said he is “not going quietly”.
Who is left?
With creative, media and PR away, IPG's Powell Tate appears to be the only retained agency still on the books. It is guiding the brand through this incident.
After taking some time to gather itself, the company brought aboard Endeavour Global Marketing to guide it through what it called a "pivotal moment" in its history. With its quarterly financials being released August 7, the company needed in place a strategy to assure investors on its path to redemption.
All Schnatter-featured marketing materials are to be ditched. There is little talent on the books to develop more work too. Furthermore, Schnatter still owns a 30% stake in the company and sits on the board so it is unclear where the business will be down the line.
Deb Gabor, chief executive of brand strategy consultancy Sol Marketing, analysed whether there is a quick path of redemption. She said the call was not a "publicly-facing statement" where he was "acting in a role as an official spokesperson for the company".
She said: "I do suspect that Schnatter's digging in his heels about separating from the company is not helping. Additionally, the company itself isn't helping matters at all, by refusing to take responsibility for Schnatter's behavior (CEO Ritchie's public statement that 'Papa John's is not a person...')"
Gabor noted that the brand has been struggling since Schnatter's condemnations of Obama and the NFL. She noted: "I can say that many brands are capable of weathering the storm of crisis, even some of the most widely disliked brands such as United Airlines. It's just that some do it better than others (Southwest Airline and Starbucks) because they have stronger, deeper emotional connections with their customers.
"Most general consumers have pretty short memories when it comes to brand disasters, so sometimes the outcry against certain brands lasts only as long as the current news cycle. There really is no telling what the long term impact is."
On what the brand should do, she said: "A brand is like a magnet that's designed to draw to it customers, employees, and other stakeholders who share values and beliefs similar to those held by the organization behind the brand. When a company chooses a spokesperson (whether its a founder, a leader, a paid celebrity spokesperson, or even a made up "face" of the brand, (as Subway did with Jared Fogle), the company puts itself at risk when that spokesperson behaves in a way that doesn't align with the organization's values."
She concluded: "The company should also use this crisis as an opportunity to authentically convey the positive values and beliefs that the organization does stand for and use this as an opportunity to share with its stakeholders a plan for how it plans to reinforce those values to the world through its actions."