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Papa John’s fires back at John Schnatter

The chain’s board says that Schnatter began undermining management after the company said it wanted to change its advertising.
Photograph: Shutterstock

Upset with market research suggesting he be replaced as Papa John’s spokesman, founder John Schnatter commissioned his own research and produced separate commercials featuring himself in a bid to remain the company’s spokesman.

That is according to a letter Wednesday to “the Papa John’s community” from an independent committee of the company’s board of directors set up to oversee the company's response to an unprecedented controversy surrounding its disgraced former chairman.

The letter describes its former chairman as a man determined to hang on to his status as the company’s primary spokesman. It says that decisions late last year to replace Schnatter with Steve Ritchie as CEO, and then to appoint a new chairman last month, were both unanimous.

“However, when the company decided to implement a new marketing plan that did not feature John Schnatter, he began to criticize the management team and undermine the new CEO’s leadership,” the letter said.

The letter includes the most revealing comments from the company yet in an ongoing controversy that has engulfed the Louisville, Ky.-based chain since Schnatter resigned as chairman after acknowledging using a racial slur during a conference call.

The board committee accuses Schnatter of repeatedly ignoring board directives and usurping the authority of his handpicked successor, Ritchie.

“John Schnatter is promoting his self-interest at the expense of all others in an attempt to regain control,” the committee said. “John Schnatter is harming the company, not helping it, as evidenced by the negative impact his comments and actions have had on our business and that of our franchisees.”

A representative for Schnatter said there was no comment on the letter.

The committee said that it instructed Schnatter late last year not to talk about the NFL player protests during the national anthem on the company’s third quarter earnings call in November.

“In direct defiance of these instructions, John Schnatter made unscripted comments about the NFL controversy,” the committee wrote in the letter.

Those unscripted comments, in which Schnatter appeared to blame those protests for declining NFL ratings and, in turn, his company’s weakening same-store sales, helped ignite the controversy surrounding the chain.

It was during a conference call with a marketing firm aimed at helping Schnatter avoid such problems when he apparently uttered a racial slur.

The committee in its letter said that Schnatter “misinformed the board about the circumstances surrounding the termination of the company’s relationship with Laundry Service,” the marketing agency that held the conference call training session.

Schnatter has undertaken an aggressive campaign against the company since he was removed from the chain’s marketing, including a lawsuit and a website, Save Papa John’s, where he has legal filings from his lawsuit and letters critical of company management. That includes a letter earlier this week in which he says he recommended in June that Ritchie be fired

Schnatter blames management, rather than his comments, for Papa John’s deteriorating sales performance. Same-store sales have plunged this year, including a 6.1% decline in the second quarter and a 10.1% decline in July as the controversy mushroomed.

Amid this, Schnatter reportedly had been talking with The Wendy’s Co. about a potential merger. The committee’s letter Wednesday described an apparent meeting between Schnatter and “another restaurant company’s executives without Steve Ritchie.” The board wanted Schnatter to have the meeting with the CEO present.

The letter also says that Schnatter held meetings with management and staff without Ritchie’s knowledge or without informing the board.

The board committee said that it tried to meet directly with Schnatter, but he didn’t respond to its requests until last week, and his attorney said Schnatter would only meet if the company cancelled its annual operators conference. Schnatter would then reschedule the conference.

That conference is scheduled to be held this week and include 1,500 employees and franchisees.

“John Schnatter’s demand that it be cancelled just one week in advance was unreasonable and does not support his purported concern for the future success of Papa John’s franchisees, employees and team members,” the committee said.

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