Papa John’s has explained how it plans to clean up its brand in its first earnings call since its chief executive was embroiled in a race row and reluctantly stood down.
'Papa' John Schnatter's departure in July was the culmination of a year of brand misfires. It started with his clash with protesting NFL athletes in 2017 and ended with his of the N-word in a media training call. This sparked an exodus of the group’s aghast marketing and creative agencies and it is still short of replacements for Laundry Service, Fallon and Initiative.
A month on, chief executive replacement Steve Ritchie has informed stakeholders that same-store sales are down 10.5% year on year. He said the slump is linked to the comments of Schnatter who was very much its public face. The company is expecting a sales decline between 7% and 10% for the year as a whole.
Comparable sales in North America were down 6.1% on Q2 2017. A "disappointed" Ritchie urged shareholders to rally behind its new “cultural commitments" and "brand positioning".
He also claimed the brand researched Schnatter's impact. The study ran after the 2017 NFL scandal where Schnatter voiced his concerns that protests were hurting NFL sponsor Papa John’s bottom line. The research, Ritchie claimed, “made it clear that we needed to move away from a founder-centric marketing plan".
“Obviously, the recent events have further evidenced that we need to move on," he added.
Schnatter’s “very inexcusable and irresponsible comments” were linked to a 4% drop in sales compared to the brand's benchmarks. Schnatter stepped down as chief executive in December 2017 after the NFL clash but remained spokesperson and chairman until recently.
International sales grew 12%, suggesting an insulation from the events in the US, but comparable sales still dropped by 0.8%. Analysts pointed to difficulties in the Middle East and the UK in particular.
In an effort to change its culture, Papa John’s said it has hired Nimbus as its multicultural agency of record. It also promoted Victoria Russell to become its first chief of diversity, equity and inclusion.
On this, Ritchie said: “These stakeholders have expressed strong support for the actions we are taking, both as it relates to our corporate culture and our brand as it relates to improving how we operate and connect with consumers.
"Specifically, franchisees and partners have expressed overwhelming support for our new advertising and marketing campaign and our decision to remove John Schnatter as brand spokesperson.”
Despite the group’s shortage of agencies of record, it will “aggressively roll out a new advertising and marketing campaign in the fourth quarter”.
Ritchie also highlighted the importance of building new branding and marketing campaigns that “differentiate” Papa John's but did not clarify whether he was keen to further differentiate the brand from rivals, or itself.
Papa John’s will work with new marketing partner Endeavor Global Marketing to help chart its course back to growth. The creative and comms will likely focus on the current ‘Better Pizza and Better Ingredients’ strapline and work will start appearing late in 2018.
Ritchie said: “We are confident that Endeavor is the right partner for us as they will provide not only creativity and content, but a unique position as a cultural marketing agency that can take our core brand DNA and marry it with their influence, access and activation expertise to craft our way forward.”
The brand has stayed on US TV running promotional offers despite its lack of agency partners.
“It is a transitional period for us as we bring on the new agencies and create the new brand work, but we do intend to stay on air with some of the promotional activities that we had planned," Ritchie said.
He concluded by stating that the future of the brand will not be “defined by the words and actions of one person". He noted that the group has 120,000 corporate and franchise employees.
There is likely still some fallout to come from the scandal with Schnatter initiating a legal suit against the brand.