Papa John’s faces image difficulties despite Schnatter’s resignation

Papa John's founder John Schnatter, who resigned as CEO last year after complaining about NFL protests, is now out as chairman after reportedly using a racial slur. His image remains on the pizza chain's logo, though, illustrating the difficulty for companies closely tied to an individual's image.

The chain announced that Schnatter was leaving the company's board late Wednesday, hours after he apologized for using a slur during a conference call in May. Schnatter, who has appeared in TV ads for the chain, still owns about 30 percent of the company's shares.

Papa John's has noted in regulatory filings that its business could be harmed if Schnatter's reputation was damaged. Last year, Schnatter blamed disappointing pizza delivery sales on the outcry surrounding football players kneeling during the national anthem.

Barron Harvey, dean of Howard University's business school, said Papa John's needs to distance itself from Schnatter's image, and that this is a chance for the company to retool its marketing strategy so it's not so tied to one person.

"They have to see this as an opportunity, not a challenge," Harvey said.

As of Thursday morning, Schnatter's image remained all over Papa John's website. Papa John's did not immediately respond to whether the company would keep using it.

The two incidents with Schnatter seem to be linked, as Forbes reported that Schnatter used the N-word during a media training exercise. When asked how he would distance himself from racist groups, Schnatter reportedly complained that Colonel Sanders never faced a backlash for using the word.

In a statement released by Louisville-based Papa John's, Schnatter said Wednesday that the reports attributing use of "inappropriate and hurtful" language to him were true.

"Regardless of the context, I apologize," the statement says.

The incident prompted Papa John's marketing firm to break ties with the company, Forbes said. The University of Louisville also said Wednesday that Schnatter resigned from its board of trustees, effective immediately.

Schnatter's departure as chairman of Papa John's board comes after Netflix last month fired its top spokesman over use of the N-word. Netflix said Jonathan Friedland used the word in a meeting of public relations staff about sensitive words. Several people told Friedland how inappropriate and hurtful his use of the word was.

Friedland, who is white, later repeated the word with human resources staff trying to address the original incident, Netflix said.

Starbucks also recently fired a store employee for insensitivity, and earlier this year closed thousands of U.S. stores for an afternoon to give employees anti-racial bias training after an uproar over two black men being arrested while waiting for a meeting.

Papa John's began operations in 1984 and had more than 5,200 locations globally. For the first three months of this year, the chain said a key sales figure fell 5.3 percent in North America. The company's shares, which had fallen nearly 5 percent Wednesday, rebounded 11 percent Thursday after the company announced Schnatter's departure.