John Schnatter resigns as Papa John’s chairman

The founder leaves the company after word that he used a racial slur in a conference call.

John Schnatter stepped down as chairman of Papa John’s late Wednesday night following a tumultuous day that began with news that he used a racial slur during a conference call with a marketing company.

In a terse release sent out at 11 p.m. ET, the Louisville, Ky.-based pizza chain said that it had accepted Schnatter’s resignation as chairman of the board.

Olivia Kirtley will act as the company’s lead independent director, and Papa John’s “will appoint a new chairman of the board in the coming weeks.”

Early on Wednesday, Forbes reported that Schnatter used the N-word during a conference call with Laundry Service, the company’s marketing firm, which subsequently ended its relationship with the pizza chain.

Laundry Service was providing training to Schnatter on how to avoid public relations problems. In November, the company’s founder courted controversy by blaming his chain’s weakening same-store sales on poor NFL ratings, in turn blaming player protests for those poor ratings.

By Wednesday afternoon, Schnatter acknowledged making the comments in a public apology. “Regardless of context, I apologize,” he said. “Simply stated, racism has no place in our society.”

But by that point, the damage was done. The company’s stock, already down more than 40% since last August, fell 5% on Wednesday.

Later in the day, Major League Baseball suspended its Papa Slam promotion with the pizza chain, according to Yahoo Sports. The promotion enables baseball fans to get 40% off their order the day after a player hits a grand slam.

The loss of the major league sponsorship follows the end of Papa John’s longtime relationship with the NFL earlier this year, which was picked up by Pizza Hut.

For a chain that has used sports as a centerpiece of its marketing, the loss of those two deals was huge. And the additional controversy surrounding Schnatter threatens to further the chain’s sudden sales problems: Same-store sales declined 5.3% in the first quarter.

Schnatter had already stepped down as CEO in December, handing over the company to the chain’s president, Steve Ritchie.

Uncertain is what will happen with Schnatter’s role as the company’s most visible spokesman. Schnatter’s picture is on the chain’s logo and he has long appeared in the company’s advertisements.

He is also the company’s largest shareholder, with more than 30% of Papa John’s stock.

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