Papa John's Founder Appeals to Employees in Fight Against Chain

(Bloomberg) -- Papa John’s International Inc.’s founder, blocked from the pizza chain’s headquarters amid a deepening dispute with the rest of the board, is betting that franchisees and workers will have his back.

John Schnatter, who resigned as chairman last month, took out a full-page ad in the company’s hometown paper, the Courier Journal, to direct employees of the Louisville, Kentucky-based firm to a website he’s launched, called SavePapaJohns.com. Papa John’s has about 120,000 workers worldwide, including those at its franchises.

“The Board wants to silence me,” Schnatter wrote on the website, which includes copies of legal documents in his fight with the pizza company. “So this is my website, and my way to talk to you.”

The website is part of Schnatter’s bid for new leadership at the chain, which is struggling with declining sales and controversies related to his comments. The 56-year-old came under pressure after a July media report that he used a racial slur and descriptions of violence against minorities on a call with a media agency. He admitted to using the slur but said he was taken out of context.

Papa John’s said in a statement Wednesday that it’s not dependent on one person among its corporate and franchise team members. Investors support the company’s actions to separate itself from Schnatter, it said.

‘Right Steps’

“We appreciate this support and are confident we are taking the right steps to move the company forward,” the company said. “No matter what John does, he will not be able to distract from the inappropriate comments he made.”

Months earlier, Schnatter had exited the chief executive officer job over critical comments about the National Football League’s national-anthem controversy. He’s since said he regrets resigning.

“Papa John’s is our life’s work and we will all get through this together somehow, some way,” Schnatter said in his website post to workers and franchisees. “I can only imagine how difficult this entire situation is on you, and I’m very sorry you all have to go through this.”

Earlier this month, after the pizza chain reported weaker-than-expected quarterly earnings, Schnatter published a blistering critique of the company’s leadership, including CEO Steve Ritchie.

The chain punched back, noting that Schnatter’s controversy is weighing down performance, with North American same-store sales falling 10.5 percent in July. The chain has had to give financial assistance to franchisees who’ve been hurt by Schnatter’s statements “to mitigate closings,” it said.

Poison Pill

On July 22, the company’s board adopted a poison pill designed to prevent Schnatter from adding to his roughly 30 percent stake in a bid to gain majority control. On Wednesday, Papa John’s shares rose 0.8 percent to $43.27 at 10:16 a.m. in New York. They’ve tumbled 24 percent this year through Tuesday.

While Schnatter is appealing to the company’s workers and franchisees, some restaurant owners have taken action to distance themselves from the founder. Franchisee groups across Florida issued statements last month stating they “do not share the same sentiments as the founder of Papa John’s.” Others have reported declines in sales.

Even so, Schnatter sees workers rallying around him.

“Know that in every minute of every day you are all in my thoughts and prayers,” Schnatter said. He adds: “We are getting the truth out there.”

--With assistance from K. Oanh Ha.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder, Lisa Wolfson

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