Papa John wants to fix Papa John's

Papa John is keeping a close eye on Papa John's, and he doesn't like what he sees.

Continue Reading Below

John Schnatter, who founded the chain in 1984 and remains the company's largest shareholder with a 15.35 percent stake valued at more than $242 million, thinks the pizza chain and its franchises should be doing a lot better.

"I am the only person who can fix Papa John's, you are not going to fix Papa John’s without Papa John," Schnatter tells FOX Business in an exclusive interview.

TickerSecurityLastChangeChange %
PZZAPAPA JOHNS INTL59.64-0.10-0.17%

While Schnatter is ready to roll up his sleeves, he says he hasn't been contacted by current management.

Schnatter resigned as chairman in July 2018 after using a racial slur on a company diversity training call. At the time, then CEO Steve Ritchie stated that Schnatter, the very public face and voice of the brand, would no longer do advertising or marketing.

In an interview with Maria Bartiromo last month, Schnatter said his controversial comments were taped and "got twisted." The company's deal with the NFL also collapsed, a move Schnatter says came amid his criticism of Chairman Roger Goodell over his handling of the Colin Kaepernick kneeling controversy which spiraled into a broader league issue.

One of the first tasks may include reversing declining sales.

Store-sales at the pizza chain have been in freefall for over a year, at least, pressuring the company's franchises.

"The franchises are under a lot of duress because the unit economics are not healthy," he argues. That sentiment was acknowledged on the company's August earnings conference call and in June, the company announced a financial assistance program for its franchises as well.

CLICK TO READ MORE ON FOX BUSINESS

Even so, the comments created a firestorm that was followed by an upheaval in management. In February 2019, Starboard Value made a $200 million investment in the company in exchange for two new board seats which put CEO Jeff Smith at the helm of the board. In August, Ritchie was out, replaced by former Arby's President Rob Lynch.

The new team, in Schnatter's opinion, doesn't have the chops or drive to orchestrate an operational turnaround.

"The problem that Rob Lynch's got, the problem that Jeff Smith's got the problem that the board has got is none of them know anything about pizza. They've never been in the pizza business."

FOX Business' inquiries to Papa John's and Starboard were not returned at the time of publication.

For their part, the new management team has made some strategic moves, including a big hire, literally.

NBA legend Shaquille O'Neal joined its board of directors and invested in several restaurants earlier this year, days after the company settled a longstanding legal dispute with Schnatter.

O'Neal invested in nine Papa John's locations in the Atlanta area, the company said, and he will also become a brand ambassador for Papa John's and appear in its marketing campaigns.

And CEO Rob Lynch, in one of his first moves, is ramping up the company's relationship with delivery apps, according to an interview with a rival news organization.

Despite the star power and strategy moves, Schnatter doesn't see business improving anytime soon.

"The people I care most about, the franchises and the employees are being hurt the most ... the company is not in good shape and it's going to continue to get worse," he warns.

Despite Schnatter's concerns, investors this year have made a decent amount of dough. The stock has gained over 43 percent, outpacing the S&P 500’s 19 percent gain.

While Wall Street is winning, Schnatter insists the 120,000 corporate and franchise employees are getting short-changed in the form of lower compensation and bonus plans.

GET FOX BUSINESS ON THE GO BY CLICKING HERE