Papa John’s founder John Schnatter finds more controversy

The company’s founder allegedly used a racial slur during a conference call with its marketing agency.

Papa John’s founder John Schnatter reportedly used a racial slur during a conference call with the company’s marketing agency, prompting the agency to cut its ties with the pizza chain.

According to Forbes, Schnatter used the N-word in a conference call with the agency, Laundry Service, in what was described as a role-playing exercise to help him avoid public relations snafus.

Schnatter caused an uproar late last year when he blasted the NFL for not doing enough to prevent player protests during the national anthem—protests he blamed for the league’s declining ratings and his own chain’s struggling sales.

In a statement emailed to Restaurant Business on Wednesday, Papa John’s did not deny the report.

“Papa John’s condemns racism and any insensitive language, no matter the situation or setting,” the company said in its statement. “Our company was built on a foundation of mutual respect and acceptance. One of our core company values is People Are Priority Always (P.A.P.A.) and we are committed to maintaining a diverse, equitable and inclusive workplace for all of our corporate and franchise employees.

“Diversity is an essential ingredient in our pursuit of providing a better product and better service to our customers and to the communities where we operate and live. We take great pride in the diversity of the Papa John’s family, though diversity and inclusion is an area where we will continue to strive to do better.”

Bloomberg, in a report later this morning, reported that Laundry Service cut ties on May 31 with an unnamed client following “regrettable recent events that several employees” witnessed during interactions with an executive.

Laundry Service refused comments on the reports. 

The reports add to the challenges for Papa John’s, which has faced weakening sales and controversy since late last year. Schnatter stepped down as CEO in December, stepping into the role of chairman. Company President Steve Ritchie was named his replacement.

But Schnatter remains intimately tied to the company that bears his nickname, and he remains by far its biggest shareholder, with more than 30% of the company’s stock. 

He has long appeared in the chain’s advertisements, frequently appearing alongside sports figures such as Peyton Manning. And his face remains at the center of the chain’s logo. He is pictured on the company's website along with numerous employees. 

Same-store sales in the first three months of this year declined 5.3% in North America.

Same-store sales declined 3.9% in North America in the fourth quarter of last year. The chain had been enjoying nearly uninterrupted same-store sales growth before that.

Schnatter’s November comments preceded the chain’s split from its longtime sponsorship of NFL games, a sponsorship quickly picked up by rival Pizza Hut.

The company’s chief marketing officer left the company in May, and Ritchie in May said the company was “looking at ourselves in the mirror and knowing what our challenges are.”

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