Papa John’s blames founder scandal for sharp decline in sales

08 August, 2018, 12:51 | Author: Eric Barnett

CEO Steve Ritchie said the company will "make every effort" to keep North American franchisees from closing stores, including offering relief from royalty payments and other aide.

Showing just how hard it will be to divorce its image from its founder's, Papa John's said it may not be until next year that the process of collecting all materials with Schnatter's image from its stores would be complete.

Papa John's International, Inc.'s same-store sales continued their slide in the second quarter.

Even before the controversy came to light, Papa John's said Tuesday that sales fell 6.1 percent at established North American locations. The former CEO was caught in a negative media storm, along with his company, when his use of a racial slur during a conference call was leaked and publicized.

We knew Papa John's results would be ugly. Executives attributed the decline to "recent events" and reiterated that they are reviewing the company's culture.

The pizza chain has struggled in recent quarters amid tough competition from rivals Pizza Hut and tech-savvy Domino's.


Reiterating previous comments, Ritchie said in the earnings release: "We have also begun an external audit of Papa John's culture and will address any improvements that are recommended at its conclusion".

"I am not going away and will continue to fight to do what's best for the company and its employees, franchisees, shareholder and customers", Schnatter said.

'The company is trying to deflect attention from the source of the problem - management's ongoing failures with regard to financial performance - and blame me for its problems, ' he said. And of course, the images of that one person it depended on for so long are hastily being wiped from marketing materials such as pizza boxes and logos. Papa John's CEO Steve Ritchie's comments included zingers like this: "We are not dependent, nor should we be, on one person". Schnatter initially drew scrutiny last November when, while still serving as Papa John's CEO, he blamed a sales decline on the company's relationship with the NFL and its handling of player national anthem protests. Pizza Hut replaced Papa John's as the NFL's official pizza sponsor last February.

In an interview with The Associated Press last week, Schnatter said the chain's troubles reflect its move away from marketing its 'roots, ' including his disappearance from TV and radio ads starting late past year.

Papa John's is still searching for the right candidate to be its next CMO.

Shares of Papa John's fell 10.5 percent to $36.75 in after-hours trading following its report and the statement from Schnatter.

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