Papa John's finds no allies in NFL attack

Papa John’s isn’t finding much team spirit in its denouncement of the NFL as a sales killer. 

The pizza chain has pointedly blamed the league for hurting business, saying the unresolved controversy over players’ behavior during the national anthem has cut viewership and hence takeout and delivery orders. Management also asserts that Papa John’s sponsorship of the NFL has turned disillusioned football fans against the brand.

Officials alerted investors last week that the impact will likely dampen sales through the remainder of the year.

“NFL leadership has hurt Papa John's shareholders,” Papa John’s founder and CEO John Schnatter told investment analysts. “This should have been nipped in the bud a year and a half ago.”

But competitors attest they haven’t felt any negative effects from the controversy—a refusal by some players to stand during the national anthem—or declining TV viewership of NFL games.

“We also love live sports, whether it's baseball, college football, [or the] NFL,” David Gibbs, president of Pizza Hut parent Yum Brands, told financial analysts covering his company. “We are not seeing any impact from any of that on our business and continue to obviously promote not just pizza but all of our brands on live sports.”

A local team playing on Monday night rather than Sunday afternoon might shift sales in that market, said Charlie Morrison, CEO of the Wingstop takeout and delivery chain. But otherwise, “we have not seen any sort of meaningful impact,” he said.

The difference in experiences led some financial analysts to ask why Papa John’s is taking such a wallop. One pointed out during the chain’s quarterly conference call that NFL viewership was down precipitously in 2016, yet Papa John’s posted a 4% to 5% rise in same-store sales toward the end of the year.

Papa John’s President Steve Ritchie noted that the damage was offset last fiscal year by the launch of a new pan pizza. The upswing in sales from the new product masked the damage, he said.

Schnatter said the reason behind the downturn in viewership is the big reason for the change in Papa John’s performance. “Last year, the ratings for the NFL went backwards because of the elections,” he said. “This year, the ratings have gone backwards because of the controversy,” a factor that’s “polarizing the customer.”

Ritchie noted that Papa John’s was more likely than competitors to be tarnished by the situation because it’s more closely associated with the NFL than those brands likely are.

The executives noted that Papa John’s is locked into its NFL sponsorship for this year and hence can’t reallocate the dollars to other marketing channels.

Schnatter indicated that executives are working with the NFL in hopes of having the kneeling controversy resolved. But he did not express much optimism.

“For good or bad, leadership starts at the top, and this is an example of poor leadership,” he said of the NFL’s executive team.

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