Papa John's to shell out up to $50M to remake its image

08 Août, 2018, 12:53 | Auteur: Auguste Feret

The pizza giant, Papa John's, hit an extremely rough patch after the PR nightmare caused by its founder John Schnatter. FBN's Cheryl Casone with more.

Papa John's worldwide said its domestic sales were down 10.5 percent last month in the wake of John Schnatter's admitted use of racial language and feud with the company he founded, and executives warned their turnaround plan will take time to bear fruit.

Ritchie said that Papa John's made the decision to distance itself from Schnatter after he said in November that the National Football League protests hurt sales. The sales decline became even steeper after Schnatter's use of the n-word and other racial slurs on a May conference call in May with Laundry Service, the chain's creative agency at the time, came out in a July 11 Forbes article.

John Schnatter is well aware of the difficulties Papa John's faces. Stevie Ritchie, the president and current CEO acknowledges this diminished performance. Executives attributed the decline to "recent events" and reiterated that they are reviewing the company's culture.

The company said it expects to "incur significant costs as a result of the recent negative publicity" of between $30 million and $50 million as it revamps its marketing efforts and brand images at "nearly all" of its store locations. The cost estimate also accounts for a third-party audit of its corporate culture amid backlash related to Schnatter's remark.

Schnatter criticized Papa John's in a statement released immediately after the company reported weaker-than-expected second-quarter earnings.

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Schnatter, in a separate statement, said the company's results "further exemplify" his concerns over the leadership of Ritchie (who took over as CEO from Schnatter at the start of the year) and the board of directors.

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

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 previous year. It is trying to distance itself from Schnatter, its biggest shareholder and a board member.

The beleaguered pizza chain posted dismal second-quarter results and issued a bleaker forecast for the year.

Papa John's has overhauled its sales strategy to address sagging revenue, with an emphasis on menu discounts, investments in digital technology and customer outreach.

Schnatter stepped down as Papa John's CEO last January. Lately, Papa John's has been promoting $6.99 medium meat pizzas, including a new BBQ meat variety, after hawking two one-topping large pizzas for $7.77 each.

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