Papa John Is Still Obsessed With Papa John’s
(Bloomberg Businessweek) -- “It was a crucifixion,” says John Schnatter. “It was unethical. It was immoral. It was evil.” The founder of Papa John’s International Inc. is giving an emotional account of his split three years ago with the world’s third-largest pizza chain. Yes, Schnatter uttered a deplorable racial slur. Yes, he did so on a corporate conference call. But he says there’s so much more to the story.
Schnatter is pleading his case in a building he calls the Outhouse, a hangout spot beside the golf course on his estate near Louisville. He’s seated in a leather-bound rocking chair with a decorative animal fleece draped over the back. Sipping from a tall can of Liquid Death Mountain Water, he lists the forces he says played a role in his downfall: duplicitous Papa John’s executives, conniving ad agency reps, public-relations incompetents, the “progressive elite left.” The last one, he says, has long resented him for taking an operation begun in the broom closet of his father’s bar and transforming it into a global chain with more than 5,000 outlets. “The Papa John’s story totally debunks the left’s ideology,” he says. “This is America. You can live the American dream.”
Visible through the French doors behind the 59-year-old Schnatter is a tree-lined path leading to a stone bridge over a flowing brook to his mansion, which rises above a rock-encircled pond. Lately he’s been teasing his half-million-plus followers on TikTok with glimpses of its opulent interior. Another clip features him strutting to his helicopter, to the sounds of the Notorious B.I.G.’s Big Poppa. The message: Sorry, haters. Papa John is still large, if not in charge.
It’s hard to think of many entrepreneurs who have personified a company as palpably as Schnatter. When their messy breakup began, he was Papa John’s chairman, chief executive officer, and largest shareholder, with 31% of the stock. He was also the company’s face, hawking chipotle-chicken-and-bacon pies and exchanging shtick with former NFL quarterback Peyton Manning in TV commercials.
Then Schnatter lost almost everything. In December 2017 he retired as CEO complaining that Papa John’s shareholders were being harmed by the NFL, which wasn’t punishing Black players and others protesting racism during the national anthem before games. Calling the situation “a debacle,” Schnatter said it should have been “nipped in the bud a year and a half ago.” Barely seven months later he also quit as chairman, after word leaked about the slur he’d used on the conference call. He’d been speaking with executives from Laundry Service, Papa John’s former ad agency, who’d been working with Schnatter on a strategy to counter the perception that he’s racist. “I wish I hadn’t said the word,” he says. He points out that he’d been attributing it to someone else during the call, and he accuses the ad agency people of craftily provoking him into doing so.
Jonathan Maze, editor-in-chief of the trade magazine Restaurant Business, says the crisis was comparable to the one Subway faced in 2015 when Jared Fogle, its chief spokesperson, pleaded guilty to receiving and distributing child pornography and to engaging in commercial sex with minors. Yet there was a difference. “When the Fogle thing came down, Subway could dismiss him and try to start fixing things,” Maze says. “With Schnatter, it’s not that easy.”
For Papa John’s, it took a corporate exorcism. It wasn’t simply a matter of commissioning Schnatter-free TV spots. The company, which declined to discuss its founder for this story, had to remove his face from its pizza boxes and scrub references to him from its website. The pictures of Schnatter on the walls of its Louisville headquarters had to go, too. Last September, Papa John’s announced it was relocating many corporate functions to Atlanta, physically distancing itself from its namesake.
All that remained was for Schnatter himself to exit the stage. But as far as he’s concerned, he’s still Papa John. Since 2019 he’s been making the rounds of cable shows and podcasts, many of them conservative outlets where he’s hailed as another casualty of cancel culture. “The woke mob doesn’t want you to have children’s books, as displayed by the cancellation of Dr. Seuss earlier this year,” said a host on the One America News Network (OANN), introducing Schnatter in March. “Now they’re apparently coming for your pizza.”
Schnatter is also seeking to clear his name. He says his exit was orchestrated by some of the company’s former officials, the NFL, and possibly even the Democratic National Committee. He’s eager to discuss a lawsuit he’s filed against Laundry Service, and he’s been pointing to a recording of the notorious conference call that he says exonerates him. Papa John’s and its former ad agency, naturally, disagree.
As the legal proceedings play out, Schnatter goes about his days, courting his fans’ approval. He’s cashed out over $500 million worth of stock in recent years, and now he’s out there, jetting in his Dassault Falcon between his homes in Kentucky, Florida, and Utah, posting highlights and motivational bromides on TikTok. He’s projecting his best life, except his best life is the one he no longer has—the one where he’s still running Papa John’s.
The morning after detailing his martyrdom, Schnatter wants to show off his mansion. Clad in a black T-shirt, jeans, and white Pumas, he strolls into the dining room. Leaning on a high-backed chair, he points out the room’s many wonders: the banquet table he says holds 34 people; the chandeliers that once hung in a London bank; the Raphael-inspired frescoes, in which angels, cherubs, and Biblical characters mingle. “That’s Moses getting circumcised,” he says.
He heads out the front door to the driveway, where a crew is adjusting the height of one of three fountains that blaze with fire at night. Schnatter wants it lowered to improve the sightline, but it’s proving tricky for the workers to satisfy his perfectionist tendencies. They’re tearing up their latest effort so they can try again. “It’s going to take them half a day,” he says. “I’ve laid enough stone and enough drywall in my day to know. But it’s got to be right.”
He says he wanted to avoid building “an ostentatious four-story house,” which is why much of his was built into a slope and can’t be seen from the road. He has his project manager walk me around to the side, where we enter a tunnel designed to look like a centuries-old Italian streetscape. It leads to the subterranean garage where Schnatter parks his three vintage Chevrolet Camaro Z28s. There Schnatter reappears and leads me through a door back into the house. We head to his gym, a cavernous room decorated with wall-to-wall memorabilia documenting his rise as a pizza mogul, and to an old-timey movie theater where he watches football. Then we climb the circular staircase up to the foyer, the centerpiece of which is a 16-foot-tall sculpture of two eagles descending from the sky, mating. “It just speaks to me,” he says, gazing up at it. “I think it’s badass.”
Schnatter says his attention to detail at home mirrors his quest for sublimity at Papa John’s, which he started in 1984 in the back of Mick’s Lounge, just across the state line in Jeffersonville, Ind. Within two years he’d opened four stores, and soon after he signed up his first franchisee. Malcolm Knapp, a veteran New York restaurant consultant, attributes the company’s early success to Schnatter’s charisma. “John was kind of a folk hero,” Knapp says. “He started it all from a broom closet. He came up with the marketing slogan, ‘Better ingredients. Better pizza.’ He hammered that idea home.” Schnatter would often pop into stores, high-fiving team members and checking to see if the pies were up to his standards. Whether the ingredients and pizza were really better or not, Papa John’s grew until, in 1993, it went public with 254 stores.
The bigger the company became, the more its namesake found himself under attack. Schnatter traces the shift to a late ’90s incident, in which the Louisville Courier-Journal reported on a woman’s sexual harassment suit against him, including claims that he’d kissed and groped her. Schnatter denied the allegations and filed his own suit, accusing the woman of extorting him. They later reached a confidential settlement. “I was a hometown hero. Then somewhere between store 1,000 and store 2,000, I become a bad guy,” he says. “Something happens where you get a certain size, and it just rubs people the wrong way.”
The penchant he developed for mixing pizza with politics didn’t help. During a corporate earnings call in 2012, Schnatter warned that if the Affordable Care Act wasn’t repealed, it might increase pizza costs by as much as 14¢ a pie. Fox News anchors seized on Schnatter’s warning as evidence of Obamacare’s painful consequences, while liberal comedy show hosts roasted him. “When you order a Papa John’s pizza, it’s only after you’ve reached a state of such desperate gnawing hunger that you could eat the ass off a raccoon that drowned in your birdbath,” said Stephen Colbert on The Colbert Report. “Now Obama expects you to shell out three extra nickels for this hot turd pie? Eat the nickels! You have your dignity!”
“The upper elite progressive left worries about me,” Schnatter says of the reaction. He takes their disdain as a compliment. He got plenty more of it in 2017, when he went after the NFL over the anthem demonstrations. Early that season the league’s ratings were down, and while there were multiple reasons for the decline, many conservatives were blaming it on players who were kneeling or performing other gestures to protest racism. Some of the NFL’s major sponsors issued bland statements about the protests, saying they respected both the flag and the players’ right to express themselves. Not Papa John’s, which was spending $34 million annually to be the league’s official pizza sponsor. On a Nov. 1 call with investors, Schnatter said, “The NFL has hurt us. And more importantly, by not resolving the current debacle to the players and owners’ satisfaction, NFL leadership has hurt Papa John’s shareholders.”
Schnatter says he was shocked when news outlets reported that he’d criticized the protests. He recalls pleading with Papa John’s PR firm at the time, Edelman, to clarify that he hadn’t said anything about the players kneeling, even if he had seemed to trivialize their cause by failing to acknowledge its legitimacy. Edelman’s advice, he recalls, was to keep quiet and let it blow over. “Y’all are in denial,” Schnatter remembers replying. “I’m Papa John! This is not going to blow over.” Two weeks later the company tepidly apologized to anyone who found his remarks “divisive,” which did little to stifle the controversy. By the end of the year, the company had announced that Schnatter was stepping down as CEO. Papa John’s later said in legal papers that the response to his remarks was part of the reason, though Schnatter says the decision was part of a succession plan that had been in the works for a while. Edelman declined to comment.
Schnatter remained chairman. When Papa John’s made new ads in which he didn’t appear, he recalls, he directed some of his own at the company’s expense. He says that they didn’t elicit any negative response in the eight markets where they ran, and that by May 2018, Papa John’s was ready to put him back on the air. At the time, the company was working with Laundry Service, an ad agency known for its work on behalf of Nike Inc. and Beats By Dre. Among the suggestions Laundry Service’s then CEO, Jason Stein, had for Schnatter was for him to speak to selected journalists and clear up any misconceptions about his earnings call statement.
Toward the end of the month, Schnatter joined a conference call he says he thought was going to be a routine discussion about the ads he’d appear in next. He remembers being surprised when Stein instead presented him with a series of racially themed questions he might encounter in the chats. “One question you’ll get in some form is ‘John, are you racist?’ ” Stein told him, according to a transcript of the conversation that later became public.
Stein told Schnatter they needed to craft some “very tight talking points” in preparation for such queries. “Right now their imaginations are running wild,” Stein said. They “think that you’re this right wing, extremist, neo-Nazi racist.”
Schnatter says he feels as if Stein was trying to bait him into saying something that might subsequently embarrass him. Running through Stein’s questions, he expressed disbelief that anyone could accuse him of being a racist. Schnatter said he’d grown up at a time when “they used to drag Black people around behind a pickup truck until they were dead.” He called NFL Commissioner Roger Goodell a “coward” and accused him of destroying players’ bodies and minds. “They’re all beating their wives up,” Schnatter said. “They’re all on steroids or pot, and now he’s going to let them protest.”
Near the end of the call, Schnatter expressed his exasperation with the backlash against him. “What bothers me is Colonel Sanders called Blacks ‘[epithet],’ ” Schnatter said. “I’m like, I’ve never used that word.” Switching to the royal we, he added, “Yet we use the word ‘debacle,’ and we get framed in the same genre. It’s crazy.” Almost two months later, on July 11, Forbes reported that Schnatter had used the slur. The article described the circumstances of the call and said he’d been attributing the epithet to Sanders, but it didn’t report the conversation in detail. Schnatter resigned as chairman the same day. Two days later, in an interview with a local radio station, he was contrite. “I can’t talk like that, even if it’s confidential and it’s behind closed doors and they’re trying to make sure that I don’t do exactly what I did,” he said. “I did it, and I own it, and I’m sorry. I’m sick about it, frankly.”
The NFL had already parted ways with Papa John’s; now the University of Louisville took the company’s name off its football stadium. Major League Baseball suspended its “Papa Slam” promotion, which gave fans discounted pizza whenever a player socked a grand slam. And the grandchildren of Colonel Harland Sanders retorted that the Kentucky Fried Chicken founder had never used such vile language.
When I mention this to Schnatter, he replies, “I’ve got two Black heads of churches, heads of colleges that will come over right now and tell you that he used the word when he talked to their congregation.”
“Tell him to produce the witnesses,” says J. Trigg Adams, a descendant of Sanders. “I want to see if they will come into a court of law and swear they heard the Colonel use that word. I don’t think he’ll get anybody.”
With Schnatter’s name tarnished, it might have been a good moment for him to walk away. But he says he cared too much about his former company. In August 2018 he took out a full-page ad in the Courier-Journal to let employees know. “Dear fellow Papa John’s team members, I miss you all very much,” he wrote. “More than words can express!”
The more Schnatter dwelt on the events that led up to his departure, the more he saw an elaborate conspiracy. Take his remarks about the NFL. He’d made them at 10 a.m., and yet within a few hours they’d become a national story. Never mind that earnings calls are closely watched in the financial press—he suspected that someone at Papa John’s might have tipped off the NFL about what he was likely to say, and that the league sounded the alarm with the press. That the league’s spokesman then was Joe Lockhart, former White House press secretary under President Bill Clinton, only heightened his suspicions. (The NFL says Schnatter’s claims aren’t true. Lockhart says, “It’s pure nonsense that there was a conspiracy to let him hang himself.”) As for the Laundry Service call, Schnatter is convinced it was masterminded by people there and at Papa John’s who wanted him gone. He notes that Casey Wasserman, whose company owns Laundry Service, is a Democratic Party contributor. Wasserman declined to comment.
That summer Schnatter sued Papa John’s, seeking documents he hoped would reveal the truth. Eight months later he announced that he’d reached a resolution with the company, boasting in a press release that it entitled him to the materials he was seeking. Instead, Schnatter claims, Papa John’s stiffed him. “They didn’t turn over any records,” he says. “They found a loophole to get around that.” (A spokesman for Schnatter later says the company didn’t provide any “meaningful documents.”)
In late 2019, he filed a breach of contract suit against Laundry Service, accusing it of passing confidential information about the conference call to Forbes. It turned out the call had been taped, and a judge ordered it unsealed. Finally, in Schnatter’s view, the public could see he’d used the word only to profess that he never used it. “What I said was antiracist,” he says.
He was heartened to learn that someone at the agency had also left the recorder running after the call, capturing Stein’s conversation with his employees. Several said they couldn’t believe what they’d just heard. “Did he just use the N-word?” a woman asked. “He’s a racist,” Stein said.
Stein then said he wanted Schnatter “to go and speak the truth” to reporters. “Just have to make sure it’s an hourlong conversation, so that he says shit like he said here,” Stein added. “It’s gonna come out. He can’t control it.”
Listening, Schnatter believed he’d found proof Stein had it in for him. He promoted the “hot mic moment” on his website, along with a transcript of the call. It’s unclear what impact, if any, the tape will have on the case, which is still in the discovery phase before the U.S. District Court in Louisville. In court papers contesting Schnatter’s accusations, Laundry Service’s attorneys called his contention that the agency goaded him into using a noxious word “a lie” and said it was false that he was the victim of a setup. Laundry Service declined to comment for this story, as did Stein.
As the court fight progressed, Schnatter began speaking more freely with reporters, on the advice of a PR firm he’d hired, ProActive Communications, led by Mark Serrano, a former senior adviser to President Donald Trump’s reelection campaign. In interviews, Schnatter often touted an investigation he’d paid for by former FBI Director Louis Freeh, which sought to determine if there was evidence of racial bias in his NFL statement and the Laundry Service call. Freeh’s report included praise for Schnatter from Kevin Cosby, president of Simmons College of Kentucky, an historically Black institution, and Samuel Tolbert, president of the National Baptist Convention of America. Schnatter’s family foundation has donated or pledged a total of $1 million to Simmons and the convention. “The FBI investigation,” as Schnatter often called it, fully exonerated him. Freeh declined to discuss the report. Cosby and Tolbert say Schnatter’s donations didn’t influence their statements. “I have tremendous respect for John,” Cosby says.
Schnatter’s remarks in the media occasionally went viral, if not necessarily for the reasons he intended. This March he told OANN one of his goals for the past 20 months had been “to get rid of this N-word in my vocabulary and dictionary and everything else,” prompting his critics to wonder why he required so much time to refrain from using such an offensive term. He later issued a statement saying he meant he was trying to erase the word from the media’s vocabulary in its “false and malicious” reporting about him.
Serrano also encouraged Schnatter to get busier on social media. Along with displaying his helicopter, he’s used TikTok to make the case that the quality of Papa John’s pies has deteriorated in his absence. He says he’s tested 800 in the past 18 months. “Some were burnt,” he says. “Some were undercooked.” The main thing that’s kept the company afloat, he claims, has been the food delivery boom caused by the pandemic. “It kind of makes me laugh at Rob Lynch,” he says, referring to Papa John’s CEO. “This guy is delusional. He has no idea how we built this company and the fundamentals. But he thinks it’s him. He really thinks that he’s done something magical.”
The company had certainly had to do something after Schnatter’s ignominious departure. With sales tumbling and stores closing in North America, in 2018 Papa John’s waived millions of dollars in fees owed by franchises. The following year, Starboard Value, a New York hedge fund, invested $200 million in the chain in exchange for two board seats and significant influence over its direction. Schnatter filed paperwork saying he’d made a similar offer, only to be rebuffed.
With Starboard behind Papa John’s, one of its first moves was to recruit former NBA star Shaquille O’Neal to be its first Black board member and its new brand ambassador. That August, the fund brought in Lynch, the former president of Arby’s Restaurant Group Inc., to be CEO. Lynch was decidedly bland, but that might have been the point. He set about boosting employee morale and encouraging innovation, and by the second half of 2019, sales began to grow again. In 2020 and the first half of 2021, as the pandemic unfolded, U.S. quarterly same-store growth outpaced that of Domino’s Pizza Inc. and Pizza Hut, the largest and second-largest publicly traded pizza chains, according to the research service Technomic. Peter Saleh, a restaurant industry analyst at BTIG LLC, attributes some of Papa John’s recent success to the Epic Stuffed Crust Pizza it introduced last December. “I think it’s fair to say it’s the best product in their history,” he says.
So while Schnatter is putting himself out there in the courts and the media, his old company appears to be doing fine. “Papa John’s positive results over the past two years speak for themselves,” a spokesperson said in a statement. “We are proud of the company we have become and the diverse, inclusive and innovative culture we are creating.”
In other words, they’ve moved on.
On a Friday morning, around 11:30, there’s already a healthy crowd inside Mick’s Lounge. Schnatter enters and heads back to the broom closet. “Can we get a picture of you?” the cook calls out. “Can we put it on Facebook?”
“I would love it,” Schnatter says. “Put it anywhere you want.”
First he peeks at the room where it all started. The pizza oven is long gone, but still, Schnatter becomes wistful. “This was probably more fun than anything I ever did,” he says. “We did 200 bucks on a Tuesday, and we were jumping up and down.”
Once he’s done reminiscing, he steps behind the bar and poses for a picture with the cook and the bartender. “It’s time for a beer!” he proclaims. “Papa’s buying. Happy hour. Let’s rock!” The late-morning crew erupts with applause, and Schnatter’s social media coordinator captures the moment.
Later on, Schnatter gives me a ride back to my hotel in his black Ford F-150 Raptor and talks again about the conspiracy against him. “As you dig in, you realize that, wow, the roots on this thing are wide, and they’re deep,” he says, crossing the Ohio River and heading into Louisville. “This may go all the way up the food chain to the powers that be in the progressive elite left.”
What he wants from Papa John’s, Schnatter says, is an apology and an admission that it mistreated him. “They know what they did,” he says. “There’s a whole lot of shredding and computers getting thrown away right now at Papa John’s to make sure that if I do get back in, they don’t leave a paper trail.”
Get back in? Papa John wants to be reunited with Papa John’s? It may not happen soon, Schnatter allows. But perhaps one day, the company will need him again. “You never want to say never.”
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