Papa John's CEO apologizes to customers in wake of Schnatter's racial slur
What a surprise
Papa John's CEO Steve Ritchie sent an email to customers Sunday, apologizing for the week that saw the founder John Schnatter resign from the company's board.
Speaking to college students five years ago in Florida, Louisville pizza magnate John Schnatter bragged he’d scored a nearly perfect 790 on his SAT in math but a dismal 200 on the verbal exam.
"I have a real problem with the English language," he said, laughing.
But now Schnatter’s inability to control his tongue is no laughing matter. It has cost him his reputation, his seat on the University of Louisville board of trustees, removal of his nickname from Cardinal Stadium, and his role atop the world’s fifth-largest pizza chain, which he founded 34 years ago in a broom closet.
To some of his former employees — and to Louisville-based restaurant industry journalist Steve Coomes, who has interviewed Schnatter a dozen times — the fact that Schnatter destroyed himself with his mouth is not surprising.
"Teflon John has always said too much, criticizing people within his company, its franchisees and nearly always those who left Papa John’s to work elsewhere," Coomes wrote in a Facebook post last week titled, "A tale of a man who couldn’t tame his tongue."
Added a former Papa John's International board member who asked to go unnamed to protect his current business: "When you’re in retail and you have to deal with the public, sometimes you have to bite your tongue, and I don’t think he always did a good job biting his tongue."
In 2012 Schnatter complained that President Barack Obama’s health care overhaul might add 14 cents to the price of a pizza, for which Schnatter was mocked and vilified.
Last fall he set off an uproar by complaining that the NFL’s handling of protests by black players caused a slump in Papa John’s pizza sales. When white supremacists embraced the remarks, the company was forced to apologize and Schnatter had to step down as CEO.
The University of Louisville said it will remove the Papa John's name from its football stadium, and that it will rename the John H. Schnatter Center for Free Enterprise at its business college. (July 13)
And in what turned out to be the last straw, Forbes reported this week that Schnatter, 56, complained in a conference call with his marketing agency in May that Col. Harland Sanders, the Kentucky Fried Chicken founder, had used a racial slur to describe black people without enduring the backlash that Schnatter encountered for his NFL comments.
Editorial: U of L's president made a tough call on Papa John, and we applaud her
In a WHAS Radio interview Friday, Schnatter told Terry Meiners the marketing company "pushed" him into using the offensive vocabulary during a role-playing session designed to help him learn how to avoid a public relations snafus.
"I was just talking the way the Colonel talked and, again, shame on me,” Schnatter said.
Schnatter’s fall was swift – and remarkable. As recently as 2013, he was rated one of the two most effective CEO spokesmen in the country by Ace Metrix, which measures the impact of advertising.
Friends and former employees say they never heard Schnatter use a racial slur, even in private.
"I have no sense whatsoever that Schnatter … is a racist," Coomes wrote in his post. "What I know for sure is he lacks an understanding of conversational propriety and nuance. With some regularity he struggled to tap his mental brakes when an inappropriate thought arrived at his vocal chords."
John Schnatter stands in the lobby at Papa John's headquarters in 2016. (Photo: By Pat McDonogh/The Courier Journal)
Schnatter is so unfiltered — he once condemned "fat and happy franchisees" making bad pizzas — the company had to assign someone to restrain him during interviews, Coomes said.
Schnatter’s supporters, like global crisis manager Mike Sitrick, whom Papa John’s hired in 2013 to deal with the aftermath of Schnatter’s Obamacare remarks, say there is nothing wrong with an executive being outspoken.
Sitrick, whose Los Angeles-based Sitrick and Company no longer represents Papa John's, said Schatter’s comments on the health care law were taken out of context and that others share his view that the NFL mismanaged the player protests.
Meiners, a longtime friend of Schnatter, noted that thousands of people have benefited from his philanthropy or from jobs at Papa John’s.
"What he said on the conference call was deplorable, but it comes from his quirky personality," Meiners said. "He’s the guy who’ll make an obtuse comment to trigger conversation or as a stepping-stone to a larger point. In the case of this conference call, he dropped a grenade that blew up in his own pants."
Others are less charitable.
Gary Langstaff, who worked for Papa John’s as a marketing director in 2003, attributed Schnatter’s problems to his inflated sense of self-worth.
"When you have an ego the size of Louisville," Langstaff said, "you say things without considering the ramifications."
Ryan Easterly, who once worked at Anchorage's Village Anchor, where Schnatter was a regular, said he treated and tipped him generously. But one day, Easterly said, he walked by as Schnatter was eating lunch and heard him say, “I’m rich. I can do whatever I want.”
"Let that sink in," Easterly wrote on Facebook, responding to Coomes’ post. "He has unlimited wealth and knows no boundaries."
He gets to keep the money
Don’t cry for John Schnatter.
He still owns about 30 percent of Papa John’s, which was worth about $531 million at the close of business Friday.
He lives with his wife, Annette, in Louisville's most expensive home, an 18,000-square-foot limestone mansion modeled after an Italian villa on 15 acres in Anchorage that is assessed at $11.2 million.
Through a business, Hampton Airways Inc., Schnatter also owns the fastest civilian business jet in the world, a Citation 750, on which his family can fly to their other residences, a $6 million condo in Naples, Florida, and condos at Deer Valley, Utah, they bought for $23 million.
And to the chagrin of some neighbors, he often travels the 5 miles between his mansion on Stone Gate Road and Papa John’s corporate office by helicopter. (Thirty-nine takeoffs and landings from Sept. 1 through June 30, according to the city of Anchorage.)
His real estate company owns an additional 57 acres in Anchorage.
In an interview for a 2013 Courier Journal profile, from which portions of this story are drawn, Schnatter said the size of his Anchorage home has been greatly exaggerated. The Wall Street Journal once reported it had a 22-car garage. It only holds four cars, Schnatter said, though he added that he owned 16 bicycles.
"We have no chef, no butlers, no nannies," he said.
“What (Schnatter) said on the conference call was deplorable, but it comes from his quirky personality.”Terry Meiners
At that time, he said he and his company had given more than $30 million in charitable contributions to the community — "more than my house costs."
The company did not immediately respond to a request last week for an updated figure, although news accounts show that he has since given $4.6 million to U of L and $8 million to University of Kentucky to create centers for the study of free enterprise. The centers are also supported by the conservative Koch Foundation. Schnatter gave another $8 million to Purdue University.
When it comes to politics, Schnatter's contributions are relatively modest.
Since 2010 the registered Republican has contributed about $250,000 to political action committees supporting GOP candidates, including U.S. Sen. Rand Paul and Sen. Majority Leader Mitch McConnell. He gave no money to Democrats in federal races, but in Kentucky he gave $15,250 to Democrats and $36,000 to Republicans. He also contributed $50,000 to cover costs of Gov. Matt Bevin’s 2015 inauguration.
Schatter makes no apologies for his money or how he spends it.
"When you have built a $3 billion company out of a broom closet,” he said in the 2013 profile, “I think you are entitled to a nice house."
In a speech to Greater Louisville Inc., last year, Schnatter said a consultant advised him that based on the company’s $4 billion in annual sales, he could justify a salary as high as $18 million.
But he said it is "immoral" to pay an executive that much when employees barely make a living. He told the crowd that his $3.5 million salary that year was more than enough.
He also told the gathering that the minimum wage of $7.25 an hour was too low and should be raised.
Starting from scratch
The origin of Papa John’s is widely known in Louisville, and as of Friday, it was still featured on the company’s website, along with Schnatter’s picture.
“We didn't start our business in a boardroom,” the site says. “We started it in a broom closet. Back in 1984, our Founder, John Schnatter (that's Papa John to you) sold his beloved muscle car to buy pizza-making equipment. Armed with only an oven and a love for making quality pizza, John opened the very first Papa John's in the crowded broom closet of his father's tavern.”
Though the company started with nothing, Schnatter's own story is hardly rags to riches. He grew up in an upper-middle-class family. His mother, Mary Beth Ackerson, was a real estate agent; his father, Robert Schnatter, a lawyer and entrepreneur.
Robert launched solar heating, wine distribution and cable TV companies. All failed, and sometimes the family's electricity and water got turned off, the younger Schnatter later recalled.
He told People magazine in a 1997 profile that he still worried the same might happen at his sprawling Anchorage home.
"I wake up scared every morning," he said then.
The roots of Papa John’s were planted when he was 15 and making pizzas at Rocky's Sub Pub at night. Later he worked his way through Ball State University at another pizzeria in Muncie.
After Schnatter was rejected by the U of L law school (“I took the LSAT twice and flunked it — I don't do well on long tests,” he said) and his father bought a failing Jeffersonville tavern, he jumped at the chance to run it.
He took over Mick's Lounge on Sept. 29, 1983, and seven months later knocked out a broom closet to make way for a pizza oven. Within three months, he paid off half the tavern's debt and refinanced the rest.
"At 22, I had something I loved to do, make pizza, and something I was good at, running a business," he said.
He was the rare entrepreneur able to start a company and also run it. Keeping his focus solely on pizza, the company grew spectacularly, went public in 1993, opened its 500th store the next year and its 1,500th four years after that. It now has 4,600 stores in 34 countries.
But there were bumps along the way.
In 1998, top-selling Pizza Hut sued over Papa John’s claim to sell better pizza, setting off what the press dubbed a "pizza holy war." A jury decided that Papa John's claims were deceptive and awarded Pizza Hut $467,619 in damages, but a federal appeals court reversed the verdict, finding that the better-ingredients slogan was so exaggerated nobody was fooled by it.
In 1999, a cellphone service saleswoman, Lesli Workman, then 29, sued Schnatter and the company, alleging that he had sexually harassed her for months, sending her roses, repeatedly stopping by her home and throwing rocks at her window, and kissing her and touching her breasts while they were in his pool and hot tub, according to her complaint.
Schnatter denied the allegations and in a counterclaim alleged that Workman pursued him, telephoning and paging him dozens of times, asked him for loans and ultimately tried to extort $5 million from him and his company. The suit was dismissed and neither side would say if there was a settlement.
The company itself experienced some hiccups, including a decline in sales in the early 2000s that Schnatter blamed in part on self-satisfied franchisees.
"Our system was asleep," he told PizzaMarketplace.com a few years later. "We were on our boats, on our yachts, on our golf club memberships, but we weren't paying attention to the fundamentals of the business."
Not always a better boss
At Papa John's headquarters, Schnatter was a demanding boss who could be difficult to work for, former executives said.
The late Jack Trout, a marketing whiz who came up with the "Better Ingredients" slogan and was the first to suggest that Schnatter tout his pizza on TV, said in a 2012 interview that Schnatter made employees nervous and sometimes drove talent away.
In a 1998 article, The New York Times said Schnatter could be "counted on to pop into his restaurants without notice, checking on the cheese, the sauce, the shape and quality of the crust" — and to "blow his stack if any aspect falls short."
The story noted that five executives, including Papa John's president, had quit over 18 months, all complaining about his management style.
“When you have an ego the size of Louisville, you say things without considering the ramifications.”Gary Langstaff
Schnatter told the Courier Journal in 2012 that he had “mellowed” with age and experience.
Executives selected then by the company to talk to Courier Journal in 2013 described him as demanding but fair.
Chief Development Officer Tim O'Hern said Schnatter cared about employees, "whether they be janitors, restaurant team members, truck drivers, administrative assistants or executives."
Steve Ritchie, who was senior president of North American and Latin American operations and president and CEO since December, said Schnatter had high expectations.
“If you compromise the fundamentals, he will call you, and it will be a tough conversation,” he said.
As the face of his company, Schnatter stepped up when things went wrong.
In 2013, he personally apologized to a customer in Florida who was the target of "hurtful and painful words" from fired employees who made racist slurs in voicemail messages. And the next year, when an employee was killed during a robbery attempt at a Tennessee store, Schnatter attended the funeral and paid for the service, according to a family member who said his personal “support was so much more meaningful than any monetary donation."
But for someone whose face was constantly on TV, Schnatter largely stayed out of the public eye in Louisville until 2016, when Gov. Matt Bevin appointed him to the U of L board of trustees.
John Schnatter at a U of L Foundation board meeting in June 2017. (Photo: Matt Stone/The Courier Journal)
There and on the board of U of L’s foundation, Schnatter asked tough questions, including whether byzantine real estate deals and risky investments approved in previous years were “really focused on kids.”
Citing the university’s budget woes, he also challenged the athletic department’s decision to undergo a $63 million expansion of what he jokingly called “my stadium.”
And without explanation he dropped a bombshell, charging that athletic director Tom Jurich’s leadership was "invisible" and declaring that “until you fix athletics, you cannot fix this university.”
Now Schnatter is gone from the university, and from his company.
Although he remains on the board of Papa John’s, his forced exit as chairman has to be painful.
Trout once called Schnatter "a guy who lives, eats and drinks pizza," and Schnatter himself told Nation’s Restaurant News in 1997 that he would never retire.
"I'm not going anywhere," he told stock analysts in the Aug. 1, 2012, conference call in which he criticized Obamacare. "I love what I do."
Schatter told Meiners on Friday he won't have any problem filling his days and that he hasn't missed the daily grind for a while.
"My days are full and I pretty well get to do what I like to do everyday," he said.
Like many entrepreneurs, Schnatter’s spontaneity took him to great heights, but it is also what brought him down, said Coomes, the restaurant industry writer.
"They are used to being the boss who is large and in charge," he said. "And they get used to saying what they want to say."
According to Forbes, the call was arranged between Papa John’s executives and a marketing agency called Laundry Service. It was to be a role-playing exercise for Schnatter to help prevent future public-relations problems.
In November, Schnatter's comments linking slow pizza sales to NFL player national anthem protests had set off a firestorm of criticism and caused shares of Papa John's to drop 13 percent from when he made them until he stepped down as CEO the next month.
Schnatter was asked how he would distance himself from racist groups online. He responded by downplaying the significance of his NFL statement.
“Colonel Sanders called blacks n—–s,” Schnatter said, complaining that Sanders never faced a public backlash.
Schnatter also reflected on his early life in Indiana, where, he said, people used to drag African-Americans to death with trucks. He apparently intended for the remarks to convey his antipathy to racism, but multiple individuals on the call were offended and the marketing agency dropped Papa John's as a client, Forbes reported Wednesday.
Schnatter confirmed he had used the N-word and apologized after the Forbes report.
John H. Schnatter
• Born: Nov. 22, 1961
• Residence: Anchorage, Kentucky
• Title: Founder, former CEO and chairman, Papa John's International
• Siblings: Anne Schnatter Ackerson and Charles W. "Chuck" Schnatter, an attorney who formerly worked for Papa John's and served on its board
• Family: Wife, Annette; adult children Beau, Danielle and Kristine
John H. Schnatter Family Foundation
• Assets (2016) $8.8 million
• Grants (2015) $1.7 million
Recipients, 2012-16: Louisville Zoo, 21st Century Parks, University of Louisville, University of Kentucky, Purdue University