Gary Stern Contributor
5151 Food & Drink
Photographer: Luke Sharrett/Bloomberg
Papa John’s used to be known as your friendly pizza parlor. But now its reputation is tarnished, its founder has been banished, and its stock price is plummeting. Can it bounce back?
When the news emerged in July 2018 that Papa John’s former CEO, board chairman and founder John Schnatter had used a racial slur during a media training session, it was the latest salvo in a series of missteps by the pizza king. He had previously tangled with the NFL, blaming it for “poor leadership” when several of its players kneeled during the playing of the national anthem.
Papa John’s board had already replaced Schnatter with new CEO Steve Ritchie in December of 2017, who now has to clean up the mess left by his predecessor.
In the last year, Papa John’s stock has dipped to $45 a share from a high of $78, a nearly 30% drop. Papa John’s is the third largest pizza chain in the U.S., after Pizza Hut and Domino’s Pizza.
After the racial incident surfaced, Papa John’s board tried to disentangle itself from the contentious founder. It removed him from any future advertising campaigns and prohibited him from using company office space. But after years of Schnatter’s serving as the face of the company’s ad campaigns, most consumers still identify him with Papa John’s.
And now, echoing what Starbucks did when it faced a racial incident at a Philadelphia store, Papa John’s is introducing diversity training to all of its 120,000 employees. But will that be enough to salvage Papa John’s tarnished reputation with customers?
While Gary Stibel, the founder of the Westport, Connecticut-based New England Consulting Group, acknowledged that the scandals have hurt sales, he also notes that many consumers have short memories. He thinks the initial comments that Schnatter made might have faded were it not “for the ongoing tug of war between Schattner and Papa John’s board and management.”
But Richard Anderson, a former ABC news foreign correspondent who now runs Little Rock, Aransas-based Anderson Media Training, emphasized that founder “has to go. I’d buy him out. He’s Kryptonite.”
And the underlying problem for Papa John’s was “tying their brand to one individual. Look at what happened to Weinstein’s film company,” said Anderson.
Though Stibel deems the diversity training that Papa John’s is transmitting to its staff “necessary and desirable,” he describes its impact on the board’s reputation as “modest at best” in relations to the continued controversy between Schnatter and his namesake Papa John’s.
But former newscaster Anderson dismisses diversity training as more of a public relations effort than implementing any real change of a company’s culture.” t’s a waste of time. It’s locking the barn door after the horse is gone,” he said. In fact, Stibel thinks the board is exacerbating a difficult situation rather than defusing it. His advice: “Stop the insanity and refocus attention on Papa John’s superior product and experience. They have to stop aggravating the wound before it becomes infected and potentially lethal.”
Were Stibel hired as a Papa John’s crisis consultant, he’d advise it to “shift attention to some new news which builds on the brand’s equity, such as, better tasting pizza from higher quality ingredients.”
He recommends the following:
1. Declare an immediate apology with corrective action
2. Launch a superior new product at an outrageously good price–without a spokesperson.
Gary Stern
I cover the restaurant industry.
I cover restaurants of all different types and from a variety of vantage points. I’ve interviewed the CEOs of Panera Bread, Chipotle and Cheesecake Factory, focusing on ascertaining why those chains have flourished during tough times for restaurants. I’m always looking for a fresh angle: What can restaurants learn from TripAdvisor and Yelp reviews. Why is everything speeded up at most restaurants? How is home delivery changing the landscape of restaurants? I’m interested in covering restaurants from every angle: changing food, the effect of e-commerce, customer service, hiring and retaining.
© 2018 Forbes Media LLC. All Rights Reserved.