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Schnatter: Morale, pizza quality are down at Papa John's

| by S.A. Whitehead
Schnatter: Morale, pizza quality are down at Papa John's

Photo: iStock

Papa John's founder and former CEO John Schnatter came out with guns blazing Monday when he wrote a letter published in the New York Post about what he alleged was poor leadership, poor performance and even a potentially poorer-quality pizza from that sold two years ago when he was at the helm of the Louisville-based company.

Since that time, of course, Schnatter has stepped out of his former roles as CEO and chairman after he was reported to have used a racial slur during a conference call with a media training company. What prompted his letter to the Post this week was apparently a mid-October incident involving the use of the same slur by New York Governor Andrew Cuomo discussing racial pejoritives and negative stereotypes about Italian- and African-Americans during a WAMC radio interview transcribed by CNN. He said:

"They used an expression, that Southern Italians were called ... quote on quote and pardon my language, but I'm just quoting the Times, 'n***** wops,' 'n-word wops,' as a derogatory comment." 

Since the comment, many have spoken in defense of Cuomo, claiming that in the context of the radio interview the use of the highly derogatory term was not intended as a slur. Schnatter told the Post in his letter that the circumstances of his remark were quite similar, but he said in his case the situation was turned against him, which a study recently covered by this site suggest is a plausible argument. 

But Schnatter — who still owns nearly 17% of Papa John's stock — said in his letter that the loss of his leadership has ultimately harmed the company. He wrote:

"As the founder and single largest shareholder of Papa John's Pizza (Schnatter still owns about 17% of the stock of the company), I know a thing or two about management accountability. It was two years ago that I led my last quarterly earnings call for Wall Street analysts as the chairman and CEO.

Our sales at the time were slowing considerably, largely owing to the NFL's mishandling of the protest controversy. A quarter of our marketing budget was invested in the NFL each year; as NFL viewership declined, so did customers' exposure to our marketing.

More controversy ensued months later, when an internal diversity-training meeting was secretly taped and leaked to Forbes with a false narrative about a comment I made. In the meeting, I expressed frustration over the NFL controversy and paraphrased someone who had purportedly used the n-word on a frequent basis.

In fact, I was expressing my disdain for racism throughout the meeting. ...

Ironically, Gov. Andrew Cuomo used a racial comment during a live radio interview last week, and African American state leaders rushed to defend him, showing their understanding of the intent and context of his words while also considering his character.

Cuomo's situation is in stark contrast to the irrational overreaction and internal exploitation of my comments. The double standard is jarring. I would have hoped to have been given the benefit of the doubt, just as Cuomo was. Instead, unnamed sources reversed the meaning and intent of my words to damage me.

This has left the franchisees and the company to struggle without my leadership and brand expertise ever since.

I have a huge stake in Papa John's, not just financially, but also with 35 years of my blood, sweat and tears. In August 2018, I tried warning my fellow directors and put out a news release that the performance of the company was bound to get worse. My prediction has been proved right for four quarters since then and still today. ...

More important, what I've observed in the months since then is that the Papa John's management may be emphasizing cost-cutting over product quality. Even the pizzas don't appear to be made the way that I made them just a few years ago. ...

I hear from store managers, franchisees and employees, and I believe that their morale is at an all-time low. Some are taking out additional loans and putting off future plans as they tighten their belts based on the current performance of the company. Franchisees tell me that banks are even hesitant to lend them money to buy and build more stores. This troubles me deeply.

Based on my experience, recent declines in store economics make it extremely difficult to increase earnings per share for shareholders, now or in the immediate future.

Leadership means taking responsibility for the command of your ship and not using scapegoats. This management team needs to step up and change course — immediately — to revive our iconic American brand. I should know, since my team and I built more than 5,000 stores from scratch and brought us through other down cycles."

At this point, Schnatter closes his letter bringing attention to the company's upcoming Q3 financial report on Nov. 5 and his hope that better times and performance were afoot at Papa John's.

Somewhat ironically, his allusion in the letter's final paragraphs to leaders who use "scapegoats" is the same thing many accused Schnatter of doing in his final days of leadership at Papa John's when he laid blame for the company's faltering sales on its sponsorship with the NFL. 

Papa John's has not responded to a request for comment about Schnatter's letter. 

Topics: Financial News, Franchising & Growth, Leadership, Marketing / Branding / Promotion

S.A. Whitehead

Award-winning veteran print and broadcast journalist, Shelly Whitehead, has spent most of the last 30 years reporting for TV and newspapers, including the former Kentucky and Cincinnati Post and a number of network news affiliates nationally. She brings her cumulative experience as a multimedia storyteller and video producer to the web-based pages of and after a lifelong “love affair” with reporting the stories behind the businesses that make our world go ‘round. Ms. Whitehead is driven to find and share news of the many professional passions people take to work with them every day in the pizza and quick-service restaurant industry. She is particularly interested in the growing role of sustainable agriculture and nutrition in food service worldwide and is always ready to move on great story ideas and news tips.

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