Papa John's urges NFL to fix ratings decline, address anthem controversy

By Thomas Barrabi
Published November 09, 2017
FOXBusiness

Top Papa John’s (NASDAQ:PZZA) executives are urging the NFL to address its declining viewership and public backlash to player national anthem protests in order to preserve their corporate partnership.

The Kentucky-based pizza chain remains adamant that the NFL’s mishandling of its business challenges negatively impacted sales this year, due in large part to Papa John’s heavy investment in marketing to drive business on fall and winter NFL Sundays. While executives say Papa John’s CEO John Schnatter’s criticism of “poor leadership” among NFL officials was not meant to indicate he was taking a side in the ongoing national anthem debate, the company doubled down on its stance that change is necessary.

“Those things got mischaracterized and misconstrued, that Papa John’s has some sort of a position politically on the protests. We have no position,” Papa John’s President and COO Steve Ritchie told FOX Business on Wednesday. “Our only position is that we want the NFL to improve. … I think it’s fair to say that clearly some things need to change for the relationship to be mutually successful moving forward.”

NFL ratings are down 5.5% through the first nine weeks of the 2017 season compared to last year, according to the latest Nielsen data. The ratings decline has occurred alongside an unprecedented wave of NFL player protests during the national anthem, though it’s unclear how large of a role the public’s reaction to the protests has played in the drop.

The company cited the NFL’s struggles when it lowered its sales guidance for the rest of the fiscal year earlier this month. At the time, Schnatter told analysts on an earnings call that the league’s failure to resolve “the current debacle to the players’ and owners’ satisfaction” has “hurt Papa John’s shareholders.”

Critics ripped Papa John’s for failing to provide adequate proof that the NFL was responsible for its sales struggles. The company’s stock is down roughly 15% since its Nov. 1 results. Separately, the CEO of Yum Brands (NYSE:YUM), the parent company of the rival Pizza Hut brand, said it has seen no NFL-related impact on its business.

However, Papa John’s executives say they reached their determination based on solid data. During the early stages of the NFL season, an analysis of email open rates, website traffic, online orders and A/B testing on NFL-related marketing campaigns showed that Papa John’s NFL sponsorship was having a negative impact on consumer engagement, according to Papa John’s Chief Marketing Officer Brandon Rhoten.

“We have very detailed information that tells us what is aiding and what’s not aiding our sales, and the picture was very clear,” Rhoten said.

The company has also tracked a decline in Sunday pizza sales during the NFL season in both 2017 and 2016, which coincides with the league’s viewership decline. Officials did not to provide a percentage for the sales decline, but said Sundays had seen “improving performance” in the earlier years of its NFL partnership, which began in 2010. Papa John’s executives also would not say how much of their marketing budget is tied to the NFL, though Rhoten confirmed it composes “the majority” of their fall and winter spending.

Papa John’s harsh comments toward the NFL also drew an unwanted consumer segment. The Daily Stormer, a neo-Nazi website known for its role in organizing violent protests in Charlottesville, Virginia, praised Papa John’s as the “official pizza of the alt-right.” Papa John’s subsequently disavowed racism and said it did not want individuals from hate groups to buy its pizza.

Papa John’s close ties to Dallas Cowboys owner Jerry Jones, who is in the midst of a war of words with the NFL league office over its handling of star running back Ezekiel Elliott’s suspension for alleged domestic violence, gave rise to rumors that Jones had colluded with the pizza company to weaken the league’s position. Jones, who has investments in more than 100 Papa John’s store locations, recently warned that he would bench any player who kneels during the national anthem.

Ritchie said there is “absolutely no truth” to allegations that Jones and Papa John’s conspired to challenge the NFL on player protests.

The NFL has yet to publicly respond to Papa John’s claims about its sales. Ritchie says Papa John’s will continually evaluate its relationship with the NFL in the coming months to determine how best to allocate marketing resources, whether to the company’s other corporate partners or to digital efforts at customer outreach.

In the meantime, Papa John’s is looking to the NFL to address its growing reputation as a polarizing brand, as well as the public divide between its owners and players.

“To state the obvious, coming up with a mutual solution for the players and the owners and the league and their partners would be a good first step to solving some of the recent issues,” Ritchie said. “We certainly don’t know what they would be, but doing nothing appears to not be improving the performance of the league.”