Papa John's Offers Financial Assistance to Help Struggling Franchisees

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Papa John’s earlier this week reported its third consecutive quarterly sales decline.

Papa John’s earlier this week reported its third consecutive quarterly sales decline.


Photo:

Luke Sharrett/Bloomberg News

Papa John’s International
Inc.


PZZA -2.34%

said it would provide financial assistance to its U.S. franchisees through the remainder of the year as it tries to turn around the business it says has been hurt by its founder’s remarks.

Relations between the pizza chain and founder

John Schnatter

have become increasingly fraught in recent weeks. Papa John’s domestic sales have been sliding ever since Mr. Schnatter last fall criticized the National Football League for its handling of players’ national anthem protests. Mr. Schnatter, who stepped down as CEO in December and agreed to temporarily remove himself from ads, has blamed his successor,

Steve Ritchie,

for the sales problems and the company has blamed him.

In an effort to help franchise owners who are now struggling, Papa John’s said Friday it will reduce franchisees’ royalty payments, food prices and online fees and also provide funds to help them with marketing and remodeling.

The company has been trying to distance itself from Mr. Schnatter in the months following his use of a racial slur in May during a call with a marketing agency that was intended to prepare him for returning to advertising and public appearances. Papa John’s banned him from appearing in future ads and marketing and cut off his use of office space at the company’s Louisville, Ky., headquarters. Mr. Schnatter stepped down as chairman last month but has since said he regrets the decision and that he doesn’t plan to back away from the company, of which he still owns 29%.

The pizza chain earlier this week reported its third consecutive quarterly sales decline, with a 6.1% drop in North America same-store sales, and lowered its full-year sales and profit outlook.

The report fueled another round of finger-pointing. Mr. Schnatter issued a statement saying, “The company is trying to deflect attention from the source of the problem—management’s ongoing failures with regard to financial performance—and blame me for its problems.”

The company said it was time to move on from Mr. Schnatter.

Vaughn Frey, president of the Papa John’s Franchise Association, said in a statement on Friday: “We believe it is time for the founder to move on. Steve is pursuing the right initiatives to reinvigorate growth and recognizes the importance of working together to move forward successfully. We appreciate the assistance being extended to our franchisees and believe the assistance program will help mitigate the impact that the founder’s inexcusable words and actions have had on franchisees.”

Mr. Schnatter doesn’t appear to have the support of investors, either.

Stephens restaurant analyst

Will Slabaugh

said in a note to investors this week that he feels Mr. Ritchie’s plans for new marketing and value offerings “present a much greater chance for success (versus) remaining tethered to Mr. Schnatter’s image” and that “this opinion is overwhelmingly shared by the investment community.”

Papa John’s shares are down 49% in the past 12 months.

Write to Julie Jargon at julie.jargon@wsj.com

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