Papa John's Franchisees To Get Aid Amid Ex-CEO Row

With sales at Papa John’s International Inc. (PZZA) declining ever since its former chief executive John Schnatter criticized National Football League protests of the national anthem and made racist comments, the company is stepping in to provide financial assistant to franchisees in the U.S.  (See more: Papa John's And Wendy's Held Merger Talks: WSJ.)

Franchisees Get A Break On Fees

In a statement late last week the pizza chain operator said it would reduce royalties, food service pricing and online fees for the remainder of this year and will also provide funds to support new marketing and reimageing efforts. The moves come as sales have been declining in the U.S. ever since Schnatter publicly criticized the National Football League’s handling of players’ who protested during the national anthem. He was forced to step down as CEO in December as a result. During media training this past spring he was accused of making racist remarks. That prompted the company to ban him from appearing in ads and prevented him from using office space in the company’s headquarters in Louisville, Kentucky. Schnatter resigned as chair in July but has since said he regretted that decision and said he won’t distance himself from the company that he owns a 29% stake in.

North America Sales Have Been Declining

Last week Papa John’s reported a 6.1% decline in same-store sales for North America, marking it the third quarter in a row with declining sales. It also reduced its sales and profit forecasts for the full year. While the company points the blame squarely on Schnatter, the ousted CEO disagrees. In statement covered by the Wall Street Journal last week, he said: “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.” (See more: Papa John's Stock Faces Long Road to Recovery.)

Still, Papa John’s is sticking with its views and thus the need to step in and help franchisees owners out. “People are at the heart of our business, and this program is one of many actions we are taking to prioritize our team, address the recent challenges and move Papa John’s forward,” said Steve Ritchie, President, and CEO of Papa John’s said in a press release announcing the lifeline. The company also has the support of the Papa John’s Franchise Association. In the same press release Vaughn Frey, president of PJFA said it was time for Schnatter to “move on.” He said CEO Richie is pursuing the right initiative to boost growth. “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,” he said.

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