Papa John’s Takes a Slice Out of its Stock Price With Racial Epithet

By Lamar Johnson

• Papa John’s stock hit a two-year-low after its founder dropped the N-word
• The MLB along with 11 teams ended their sponsorship deals with Papa John’s

Former Papa John’s (PZZA -4.00%) CEO John Schnatter, can’t seem to keep his foot out of his mouth. On a conference call intended to prevent future public relations snafus, Schnatter let the N-word slip. Since news broke, multiple sports teams have cut ties with the pizza chain causing the company’s stock free fall.

Why This Matters: Schnatter confirmed to Forbes on July 11 that he said the epithet during a May call with the marketing agency Laundry Service. The chain’s stock took an immediate hit, falling as much as 5.9% that day to $47.80, its lowest price since February 2016, according to Bloomberg. Schnatter subsequently resigned as chairman.

The pizza chain’s also lost a number of promotional partners due Schnatter’s racist comments. After being dropped as the National Football League’s official sponsor in February, Major League Baseball ended its promotional deal in the wake of the recent news. Nine MLB teams and Atlanta’s football and soccer teams, the Falcons and United, also pulled marketing deals with the chain. Also, the University of Louisville removed Schnatter’s name from its football stadium.

Papa John’s is now working overtime to distance itself from its founder, ending an agreement that would have allowed him to retain his status as the public face of the company, according to Yahoo Finance. His likeness will be removed from its pizza boxes, and Schnatter’s also been banned from using office space at the company’s headquarters.

He had been in the process of working on a comeback campaign for a prior misstep when he dropped the slur. Even after distancing itself, Papa John’s has a lot of work to do to recoup its losses. In total, shares have fallen 25% since November 2017.

Situational Awareness: This all started when Schnatter got involved in the NFL’s protests against police brutality. Last November, the then-CEO claimed the protests were affecting pizza sales, a characterization others in the industry pushed back on. Schnatter later apologized and resigned, but the damage was already done as its stock had fallen 12%, according to ESPN.

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