Can Papa John’s New CEO Course-Correct Its Woes?

It isn’t clear whether his scrap with supporters of the NFL anthem protests is a factor, but Papa John’s Founder John Schnatter is abruptly vacating the No. 3 pizza chain’s CEO job in January.

Schnatter will remain chairman but will hand over the top management job to Steve Ritchie, who has been chief operating officer of the Louisville-based company since 2014. Ritchie was tapped as Schnatter’s eventual heir apparent in 2015 when he was named president, having joined the company in 1996 as a customer service representative.

Schnatter turned his company into a 3,400-unit chain in North America with a further 1,600 outlets overseas, into the clear third member of the Big Three of the American pizza business that is headed by Domino’s and Pizza Hut.

Its success has risen through a longstanding partnership with the National Football League. A heavy advertiser during NFL games, the brand has tapped football stars such as Peyton Manning as pitch men, with Schnatter himself often appearing in the TV ads. But is Papa John’s the same without its namesake founder?

Along with Schnatter himself, it seems, its board and shareholders feel that it’s time for a change. A few things are different now with Papa John’s than a year ago, and presumably each played a role in the timing of the transition that has Schnatter giving up the CEO’s job at his own (albeit now publicly-held) company.

First and likely among the most important, Papa John’s sales have slipped. At a time when streaking rival Domino’s keeps posting 6- to 12% same-store gains each quarter, during the third quarter Papa John’s North American growth slowed compared with a year ago, and the company lowered its full-year same-store sales-growth outlook for the region and its overall earnings guidance.

Second, investors have soured on Papa John’s. After peaking at a price of more than $89 a share about a year ago, the price has plummeted to about $56 a share. (Investors shaved about 4% off its value in Friday trading through mid-afternoon, in the wake of the transition announcement.)

And third, there is more pressure now to modernize the customer experience and to digitize ordering and delivery, which have become crucial differentiators in a pizza business where significant product innovation has pretty much come to a standstill over the last few years.

Other troubles began for Schnatter after he published a book this year about his business career. Then he got caught up in the controversy surrounding the University of Louisville athletics department, where Papa John’s has been a significant donor.

And then came the NFL flap. In November, Schnatter publicly complained about the NFL’s handling of the national anthem “take a knee” protests, claiming that the league’s handling of the controversy had hurt TV ratings and also Papa John’s sales.

“The NFL has hurt us by not resolving the current debacle to the players’ and owners’ satisfaction,” Schnatter said. His remarks immediately drew backlash on social media, where some chose to cite Papa John’s pizza quality for sluggish sales.

New CMO Brandon Rhoten has made it his mission to refocus American consumers on how the quality of Papa John’s products actually distinguishes it from its chief competitors, via a refurbishment of the chain’s long-standing, “Better Ingredients, Better Pizza” slogan.

“Clearly all of the PR things have been quite a distraction,” Ritchie told the Wall Street Journal on Thursday. “I want to put the focus back on our people and pizza.”

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