Papa John’s is looking for distance from founder John Schnatter—and is doing so in a highly public way.
The controversial principal stakeholder and former CEO made headlines when he blamed poor sales on NFL protests against police violence during the national anthem—and when it was leaked he had used the n-word.
He was forced to resign, and now the company he built into a national chain is trying to move on. However, Schnatter has been fighting his ouster.
Schnatter’s spokesman Terry Fahn said the ad was misleading.
“The video produced by the company represents another example of the company attempting to hide the true facts,” said Fahn, a strategic communications and crisis management executive for Sitrick. “It omits the avalanche of comments made by customers, employees and others who support John Schnatter and feel that the company is wrong.”
Fahn said Schnatter supports diversity, equity and inclusion within Papa John’s but remains concerned that the company is acting “improperly.”
Now the board of directors is attacking Schnatter in unvarnished language.
In an open letter, the board wrote:
John Schnatter is promoting his self-interest at the expense of all others in an attempt to regain control. 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. We have tried to meet directly with John Schnatter to discuss how we can move forward in the best interest of all stakeholders. However, John Schnatter had not responded to our requests until last week when his attorney conveyed his conditions for a meeting, stating John Schnatter would agree to meet only if we cancelled the annual Operators Conference (OpCon) and allowed John Schnatter alone to reschedule it to a date, time and location of his choosing. OpCon, which is being held this week, is a critical annual meeting that brings together approximately 1,500 team members and franchisees from all around the world. 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.
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The board is preparing for Schnatter to attempt a hostile bid to retake the company.
Throwing down a gauntlet to Schnatter, [the board] said “we will defend the company against his actions and continue to do what is right for Papa John’s and our stakeholders.”The board members said they have received “outspoken support from customers, employees, franchisees, partners and shareholders for the actions we are taking.”
The company last week hired two investment banking firms, which experts said may signal it expects Schnatter to make a hostile bid to buy the company outright.
Schnatter, who founded Papa John’s in 1984, owns 31 percent of its shares, a stake that is worth about $400 million.
Schnatter declined to respond to reporting about the open letter, in which the board laid out specific grievances with Schnatter, detailing his ignoring its advice and behaviors that led to several PR crises.
- The Board specifically directed John Schnatter not to talk about the NFL controversy related to the National Anthem on the 2017 third quarter earnings call. In direct defiance of these instructions, John Schnatter made unscripted comments about the NFL controversy.
- When independent market research showed that a change in spokesperson and advertising strategy was warranted, John Schnatter commissioned his own research and produced separate commercials that starred himself.
- It is simply not true that the Board asked John Schnatter to become Executive Chairman, as he has recently asserted. Rather, John Schnatter suggested to individual Board members that he should become Executive Chairman and even directed a member of management to make unauthorized contact with the Compensation Committee’s independent consultant in July 2018 to ask for peer compensation data.
- John Schnatter misinformed the Board about the circumstances surrounding the termination of the Company’s relationship with Laundry Service.
On Twitter, some have remarked on the tone of the letter as well as the content:
Papa Johns board is not messing around. Pretty much rips John Schnatter here. https://t.co/lzNc3TP2NT
— Jonathan Maze (@jonathanmaze) August 29, 2018
The letter from the independent directors comes after Schnatter accused the current Papa John’s CEO and his team of misconduct.
Papa John’s International Inc (PZZA.O) founder John Schnatter, who is trying to regain control of the pizza chain after resigning as chairman in July, accused Chief Executive Officer Steve Ritchie’s “inner circle” of sexual misconduct, an allegation the company denied on Tuesday.[…] “The company’s HR department has detailed evidence of sexual misconduct, harassment and intimidation by virtually everyone in Steve’s inner circle, and relating to board members as well,” Schnatter’s letter said.
What do you think of the high-profile nature of these moves and counter-moves?