According to the news report by Bloomberg, Papa John’s share prices dropped as much as 5.9% during trading on Wednesday to touch $47.80 per share, which is the lowest the restaurant chain’s shares have fallen since February of 2016. This drop took away $96.2 million of the company’s market value. By the end of the day, the Papa John’s share prices recovered a little, closing down 4.8% to trade at $48.33 per share.
The reason for this was another unfortunate statement made by the co-founder and former CEO of the company, John Schnatter. Schnatter had already committed a public relations snafu in November 2017, when he had commented on the National Anthem protests during the NFL. Due to this, the co-founder of Papa John’s was forced to step down as Chief Executive Officer of the company.
A media report by Forbes gave details of the story. In May this year, during a conference call, Schnatter used the reprehensible “N-word”. This call had been arranged to help the executives at Papa John’s deal with circumstances where they needed to speak publically.
Participants in of the call were the company’s executives as well as representatives from the marketing agency Laundry Service, who were to train the Papa John’s team through role playing on handling public relations situations.
During this call, Schnatter was asked how he would handle online racist comments. Schnatter instead complained about excessive sensitivity and downplayed what happened during the NFL. We then went on to state that KFC’s Col Sanders had called black people “N..s” and did not face public backlash. He didn’t stop there. He went on to talk about how, during his early childhood in Indiana, black Americans were dragged to death behind trucks.
Apparently, Schnatter was trying to talk about how he hated racism, unfortunately, it did not sound at all like that. In fact, his comments were so offensive that when the owner of Laundry Service, Casey Wasserman heard about the incident, he moved to cancel their contract with Papa John’s.
Schnatter admitted that he had used offensive language during conference call with Laundry Service. In an email statement he stated that regardless of the context in which it was used, his language was regrettable and that he was sorry.
However, Schnatter’s apology was not enough to pacify people, especially investors, and so he was completely ousted from his own company. The co-founder of the restaurant chain was forced to resign as Chairman of his own company. The independent directors of Papa John’s accepted Schnatter’s resignation late on Wednesday evening and released a statement that the company would appoint a new chairman in the next few weeks.
Papa John’s CEO Steve Ritchie sent out an internal memo to all teams, franchisees as well as operators to address the issue. The memo – without naming Schnatter – referred to the latest media reports, and stated that racism would not be tolerated at the company.
The company’s shares went up as much as 5.5% in pre-market trading on Thursday. So far for the year, Papa John’s shares have fallen 13%, vis-à-vis Domino’s, whose shares are up by 48.5%.
This is the not the first case of a senior executive using racial slurs. Another company also asked one of its senior executives to leave due to using racist language. In June this year, video-streaming giant Netflix Inc. fired its chief communications officer for using the N-word on multiple occasions in work settings. The executive, Jonathan Friedland first used that word during a discussion about appropriate speech and then again later when speaking in a meeting with HR executives.