LOUISVILLE, KY: The use of a racial epithet during a conference call by Papa John’s founder John Schnatter not only precipitated his own downfall, but also an avalanche of bad PR that could bring lasting damage to the brand, say PR pros.
Katie Sprehe, senior director of reputation research at APCO Worldwide, says Papa John’s didn’t have enough goodwill to squander.
"Papa John’s made the mistake of relying too heavily on one person to build their external corporate identity – their founder," Sprehe says via email. "The only thing the public really knows about the company is pizza and Papa John."
This kind of reputational crisis will cause consumers to question how the company is run, she adds.
"For Papa John’s, over the years they have built little reputation equity to stave off this hit," Sprehe concludes.
Papa John’s came under fire after a Forbes story revealed Schnatter said the n-word in a conference call during a discussion about how to avoid corporate crises in May.
Creative AOR Laundry Service, which was on the May call, terminated its relationship with Papa John’s shortly after. Then on Wednesday, Olson Engage ended its PR AOR relationship with the pizza chain, a piece of business it won in February.
An Olson representative cited "significant recurring differences" with Schattner "regarding the best way to address the controversies and restore and advance the brand’s corporate reputation."
"While having a company figure so closely associated and identified with a brand can be a sound strategy to make a brand feel more ‘human,’ the brand can suffer if that individual is caught in scandal," says Kellan Terry, PR data manager at Brandwatch.
Terry adds Schnatter’s status on social media as a meme came about as a result of his appearances at sporting events and his recent issues with the NFL.
After Papa John’s recorded meager sales in Q3 2017, Schnatter blamed the NFL’s handling of the National Anthem protests, started by former San Francisco 49ers Colin Kaepernick as a response to police brutality against African-Americans.
Papa John’s was the official NFL pizza sponsor, until the two parties cut ties. Pizza Hut then took over the account earlier this year.
Angie Schneider, CEO of Omnicom-backed startup Spry, says Schnatter’s latest comments reflect something deeper given his NFL dust-up.
"It definitely shows a pattern of intolerance, bigotry, and tone-deafness at the leadership level that wasn’t addressed earlier on, and obviously it continued and directly resulted in this," she says. "It makes everyone wonder: who else thinks this way? What other things were said? What other damage was done in other parts of the company?"
Schneider recommends Papa John’s conduct mandatory training sessions for any leaders at director-level and above. She says the company should highlight its zero tolerance policy with all employees.
The company should have meetings with minority rights groups, bring in their leaders, and take their advice to fix their corporate culture, according to Schneider and Sprehe.
Finally, Papa John’s should implement a strong internal comms program to make employees feel good about working there, Schneider says.
"Unless they do something different and swift, there will be long, sustainable reputational damage," Schneider says. "They have to start changing their talk and walk."
She notes that Papa John’s should follow Starbucks’ playbook. The coffee chain closed all its stores in May for a company-wide training session on diversity and inclusion after a Philadelphia manager called the police on two African-American patrons. The incident sparked weeks of protests.
"They should look at lessons learned to see if that created behavior and thought change," Schneider says of Starbucks’ move. "But they need to write their own page here. This is a top-down situation."
On Wednesday, Schnatter apologized for his "hurtful language" and said, "racism has no place in our society." The brand also said in a statement that it condemns racism and any insensitive language, no matter the situation or setting.
Later on Wednesday, Schnatter resigned as Papa John’s chairman, around the time Major League Baseball said it was indefinitely suspending its Papa Slam promotion, which began in 2016. He also resigned from the University of Louisville’s board of trustees on Wednesday.
Social media lit up with Papa John’s mentions, increasing almost 1,900% between July 10 and July 11, according to Brandwatch data provided to PRWeek.
Wednesday’s conversation sentiment was 78% negative, while Thursday’s was 72.4% negative within categorized mentions. For comparison, conversation sentiment last month was 61.8% negative.
The conversation is being driven by men, as 57% of unique authors are male.
Meanwhile, several hashtags have cropped up on social media in association with the pizza chain, including #BoycottPapaJohns, #Racism, and #JohnSchnatter.