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Papa John’s CEO blames founder for drop in sales

libadmin August 8, 2018
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A Papa John’s restaurant in Louisville. (Luke Sharrett /Bloomberg News)
August 8 at 3:40 PM

Papa John’s chief executive Steve Ritchie blamed the company’s poor sales performance on founder John Schnatter in a call with analysts Tuesday. Same-store sales were down 6.1 percent for the quarter and 10.5 percent for the month of July. The company’s stock price dropped about 5 percent following the call.

Schnatter resigned last month from his post as chair of the company’s board after Forbes reported he used a racial slur during a conference call.

Ritchie attributed the lagging sales to “consumer and brand sentiment challenges that have carried over since our November 2017 earnings call,” referring to the call during which Schnatter blamed NFL player protests for poor sales. Schnatter stepped down as chief executive in January following those remarks.

Ritchie repeatedly distanced Papa John’s from its eponymous founder during the call and emphasized the company’s efforts to smooth over relationships with franchisees. Ritchie said franchisees supported the company’s decision to remove Schnatter from his role as brand spokesman.

“We are not dependent, nor should we be, on one person,” Ritchie said.

After Schnatter resigned, the board moved to block him from acquiring a controlling stake in the company, a move known as a “poison pill,” rarely employed against a company’s founder. About two weeks after that, Schnatter filed a lawsuit to demand documents that might show discussion among board members about him leading up to his ouster.

A week after Forbes reported Schnatter’s use of the n-word during a conference call, the magazine published a story that described a sexist corporate culture at Papa John’s, where offensive comments to female employees were common. Forbes reported that this culture was at least partly enabled by Ritchie.

Ritchie said during the call that the company promoted Victoria Russell to be its first chief of diversity, equity and inclusion. In addition to auditing and improving the internal workings of Papa John’s, Ritchie said, the company has prioritized repairing its public image.

“We have to be more than a product and an experience to be relevant to the consumers we have lost,” he said. “Promotions alone are not going to reinvigorate trust in our brand given the bigger sentiment issues.”

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