Pizza chain Papa John's International said on Wednesday its founder and former chief executive, John Schnatter, resigned as chairman of the board.
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The stock bounced back on Thursday after falling over 4% after the news broke.
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Olivia Kirtley will act as lead independent director, according to a company statement.
Papa John’s will appoint a new chairman in the coming weeks.
The resignation comes after Forbes reported earlier in the day that Schnatter used a racial slur on a conference call.
Forbes reported that the incident occurred during a call between Schnatter, other Papa John’s executives and the marketing agency Laundry Service. The call was set up as a training session for Schnatter on preventing public relations mishaps, months after he stepped down as CEO shortly after publicly criticizing the NFL for its response to national anthem protests.
During the call, Schnatter downplayed the severity of his critical comments about the NFL, arguing that KFC founder Colonel Harland Sanders had "called black people [the N-word]" without facing a backlash. Schnatter confirmed in a statement that Forbes’ report about the call was accurate.
“News reports attributing the use of inappropriate and hurtful language to me during a media training session regarding race are true,” Schnatter said. “Regardless of the context, I apologize. Simply stated, racism has no place in our society.”
Laundry Service declined to comment on the situation.
"Papa John’s condemns racism and any insensitive language, no matter the situation or setting,” the company said in a statement. “Our company was built on a foundation of mutual respect and acceptance.”
Schnatter resigned from his role on the University of Louisville's board of trustees within hours of Forbes' report, the school's board chairman David Grissom said in a statement.
Papa John’s same-store sales have plunged in recent quarters amid tough competition from rivals Domino’s and Pizza Hut, which have experienced success by emphasizing online sales. Schnatter drew scrutiny last November when he blamed the sales slump on how the NFL, which it sponsored at the time, had handled national anthem protests.
Pizza Hut replaced Papa John’s as the NFL’s official pizza sponsor last February.
This story has been updated.