Papa John's sales don't deliver following founder controversy

Papa John’s reported its most recent earnings Tuesday

Papa John's is spending a lot of dough on its image. We didn't know they'd be this ugly.

"We are working to ensure that our future is not defined by the words of one person", CEO Steve Ritchie said on the call.

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

Schnatter issued his own assessment of the quarter.

The latest controversy that resulted in Schnatter's departure as chairman came after revelations that Schnatter had used a racial slur against African Americans in a conference call.

But Schnatter, who said he regrets resigning from his post as chairman, isn't walking away without a fight.

Same-store sales in North America fell 6.1% in the second quarter, Papa John's said Tuesday. The results were worse than Wall Street analysts' forecast of a 4.7 percent drop in comparable sales at North American restaurants. And it's going to spend $30 million to $50 million on a variety of plans. Schnatter remains Papa John's largest shareholder.

Back to the company itself.

Schnatter stepped down as Papa John's CEO last January.


"We are not dependent, nor should we be, on one person", he said.

At another point, Ritchie called Schnatter's comments "very inexcusable and irresponsible".

Papa John's has hired new agencies - Endeavor Global Marketing on creative and Weber Shandwick's Powell Tate on PR, to help it try to mitigate the situation.

Papa John's says a key sales figure dropped 10.5 percent in July, and that it can't predict how long and badly it will be affected by the fallout with its founder.

A Papa John's restaurant is seen on July 11, 2018 in Miami, Florida. 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. A $12.99 bundle didn't help sales much in the second quarter.

Papa John's is still searching for the right candidate to be its next CMO. Ritchie says there have been a number of external and internal candidates for the role.

'Sometimes the greatest opportunities happen in the most inopportune times, ' Ritchie said.

Papa John's has banned Schnatter from all media appearances and enacted a "poison pill" measure to prevent Schnatter from acquiring a controlling stake in the company. "Franchisees and partners have expressed overwhelming support for ... our decision to remove John as brand spokesperson".

The pizza chain also slashed its sales outlook for the year, and its shares fell more than 9 percent.

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