Papa John's Franchisees Call in Specialist Lawyer as Sales Sag

(Bloomberg) -- Papa John’s International Inc.’s franchisees are fed up.

The restaurant owners’ association, whose members operate more than 1,200 Papa John’s locations, has hired industry attorney Robert Zarco to represent it in talks with the company and former chairman John Schnatter.

The group, which represents about 44 percent of franchised restaurants in North America, says franchisees have incurred “tremendous financial losses” after it was reported that Schnatter used a racial slur, his controversial comments on the NFL anthem protests and reports of sexual harassment at the chain.

“His comments about the NFL during the earnings call, and his use of a racial slur in the media training session with the company’s marketing firm have significantly harmed the brand and our membership’s store sales,” said Vaughn Frey, chairman of the Papa John’s Franchise Association board, in an emailed statement. “The brand image has been severely tarnished.”

While Papa John’s is offering royalty reductions and funding for advertising to its franchisees, it hasn’t been enough to stem the losses: The company earlier this week reported comparable sales that plunged 9.8 percent in North America last quarter. It said it may need to continue its financial assistance programs for owners into 2019.

“The Papa John’s system continues to struggle,” Zarco said in the statement. “The damage to the brand image and the franchisees’ businesses has persisted and continues to persist.”

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

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