Papa John's was the biggest loser in fast food this year
- Papa John's - and Papa John himself - were the biggest losers of the restaurant industry in 2018.
- Papa John's founder, John Schnatter, was ousted from the company after news broke that he had used the N-word on a company conference call.
- Sales have plummeted as the pizza chain tries desperately to win back customers.
Papa John's - and Papa John - were the biggest losers of the restaurant industry in 2018.
In fact, the chain and its disgraced founder, John Schnatter, might be some of the biggest losers in America, based on their dismal 2018.
Things started to fall apart at Papa John's in 2017.
Schnatter sparked controversy in November when he slammed NFL leadership over players' kneeling during the national anthem to protest racial injustice and police brutality. In December, the company announced that Schnatter was stepping down as CEO.
In theory, this should have been the end of Papa John's issues. In February, the chain announced it was ending its NFL sponsorship deal, with Pizza Hut becoming the league's official sponsor. Schnatter was meeting with outside marketing firms in an effort to figure out how someone who was the founder and face of the company could play a role going forward, without offending customers.
Instead of a solution, the meetings led to an incident that tore Papa John's apart.
In July, Forbes reported that Schnatter used the N-word in a conference call with marketing agency Laundry Service.
"On the May call, Schnatter was asked how he would distance himself from racist groups online," a source told Forbes. "He responded by downplaying the significance of his NFL statement. 'Colonel Sanders called blacks n-----s,' Schnatter allegedly said, before complaining that Sanders never faced public backlash."
Schnatter was banned from the office and scrubbed from advertising. While he initially apologized and resigned, he soon started fighting back. Near the end of July, Schnatter sued the company.
Papa John's and Schnatter, who owns roughly 29% of the company, have paid for the drama. System-wide US comparable sales fell 6.1% in the second quarter, dragged down by a decline of 10.5% in July. In the third quarter, they fell 9.8%. The company anticipates that comparable sales in North America will fall by 7% to 10% for the full year.
Executives said on a call with investors in August that the company planned to spend between $30 million and $50 million over the rest of the year on costs related to the scandal, including removing Schnatter from marketing, an internal audit, and additional legal costs.
Now, the company is reportedly scrambling to sell itself. In late November, The Wall Street Journal reported that private-equity firm Trian Fund Management had pulled out of the bidding for the pizza chain and that no bidders were interested in buying the entire company.
- Read more in our Retailer of the Year series:
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- Amazon's likely multimillion-dollar disaster on Prime Day proved it's not immune from embarrassment
- These are the brands that blew up in 2018
- Abercrombie removed its shirtless models and turned up the lights in stores, leading to the biggest retail comeback of the year
- We visited dozens of stores this year, and these were the messiest by far