Papa John’s blames Papa John for big sales decline

Lloyd Doyle
August 8, 2018

In a statement on Tuesday, Schnatter said he is concerned about the direction of the company under Ritchie, according to CNBC.

Papa John's says a key sales figure dropped 10.5 percent in July, and that it can't predict how long and badly it will be affected by the fallout with its founder.

For the year, Papa John's now expects sales to fall 7 percent to 10 percent at established North American locations. Schnatter remains Papa John's largest shareholder.

"Today's results highlight the further deterioration of Papa John's financial performance under the tenure of Steve Ritchie, since he assumed CEO responsibilities in mid-2016", Schnatter said.

The pizza chain has struggled in recent quarters amid tough competition from rivals Pizza Hut and tech-savvy Domino's.

Before resigning as chairman, Schnatter had already stepped down as the company's CEO previous year after facing criticism for saying that NFL players protesting the national anthem caused sales to decline for Papa John's, a sponsor of the NFL.

"We are not dependent, nor should we be, on one person", he said.

Putting aside things the company is working on - including changing pricing after doing a study at every one of its USA restaurants, a third-party audit of company culture, possible discussions with lenders, its possible financial assistance for franchisees, such as short-term reductions in royalty payments, to keep them from shutting down, and its partnership with DoorDash to expand delivery to zones restaurants don't cover - there's a lot to be done to fix the brand.

"We have to be more than a product and an experience to be relevant to the consumers we have lost and the consumers who simply felt we weren't for them", Ritchie said on the call.

A Papa John's restaurant is seen on July 11, 2018 in Miami, Florida. A $12.99 bundle didn't help sales much in the second quarter.

"The research and analysis we conducted after comments by our founder in November of 2017 have made it clear that we needed to move away from a founder-centric marketing plan", Ritchie said. Pizza Hut replaced Papa John's as the NFL's official pizza sponsor last February.

"Sometimes the greatest opportunities happen in the most inopportune times".

Shares in Papa John's dropped more than 10 percent to $36.77 in extended trading. "Franchisees and partners have expressed overwhelming support for ... our decision to remove John as brand spokesperson".

Days after the racial slur scandal broke, Papa John's announced that it would remove Schnatter's image from its marketing materials, where he featured prominently.

Other reports by Iphone Fresh

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