Papa John's pizza restaurant in Indianapolis. Picture: 123RF/ JONATHAN WEISS
Papa John's pizza restaurant in Indianapolis. Picture: 123RF/ JONATHAN WEISS

New York — The departure of Papa John’s International chairman John Schnatter over his use of a racist slur comforted wary investors who had fretted that the outspoken founder risked tarnishing the pizza maker’s reputation.

The independent directors of the company accepted Schnatter’s resignation on Wednesday. A new chairman would be appointed in coming weeks.

Shares of Papa John’s rose as much as 5.5% on Thursday before the start of regular trading in New York.

Seven months after exiting the CEO role over critical comments about the National Football League’s national anthem dispute, Schnatter came under pressure again on Wednesday following a media report that he used a racial slur and graphic descriptions of violence against minorities on a conference call with a media agency.

Schnatter admitted to using an offensive racial term during the call and apologised, according to a separate statement earlier on Wednesday.

“News reports attributing the use of inappropriate and hurtful language to me during a media training session regarding race are true,” Schnatter said. “Regardless of the context, I apologise. Simply stated, racism has no place in our society.”

Papa John’s shares slumped 4.8% in New York on Wednesday, closing at the lowest level since February 2016, as investors worried about reputational risk. The stock has dropped almost 30% since Schnatter’s remarks about the National Football League in November 2017. Schnatter apologised for the comments he made when he criticised the National Football League for its handling of players’ national anthem protests, saying the outspoken opinion hurt the pizza chain’s sales.

The departure of Schnatter follows an inappropriate language case in June at Netflix. The video-streaming giant fired its chief communications officer for using a racial slur more than once in a work setting. The executive, Jonathan Friedland, first used the N-word in discussing appropriate speech, and again later with human-resources executives.

You may have read the media reports today tied to our company culture. We want to make it clear to all of you that racism has no place at Papa John’s.

Forbes reported that the latest incident involving Papa John’s chairman took place on a May call arranged between company executives and Laundry Service, a media agency, as a role-playing exercise for Schnatter to prevent future public-relations missteps.

Laundry Service decided to cut ties after Schnatter’s behavior on the call, according to Forbes.

The company, owned by sports agency owner Casey Wasserman, told staff in a May 31 letter that it would be ending its work with an unnamed client due to “the regrettable recent events that several employees of Laundry Service witnessed during interactions with a client’s executive,” according to a copy of the letter obtained by Bloomberg News.

The agency did not name either the client or the executive in the letter. Laundry Service did not respond to requests for comment.

Papa John’s CEO Steve Ritchie sent an internal memo to team members, franchisees and operators on Wednesday addressing the event, though without mentioning Schnatter by name.

“You may have read the media reports today tied to our company culture. We want to make it clear to all of you that racism has no place at Papa John’s,” according to the memo obtained by Bloomberg News.

“The past six months we’ve had to take a hard look in the mirror and acknowledge that we’ve lost a bit of focus on the core values that this brand was built on and that delivered success for so many years,” Ritchie said. “We’ve got to own up and take the hit for our missteps and refocus on the constant pursuit of better that is the DNA of our brand.”

Bloomberg

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