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PAPA JOHN IS STILL OBSESSED WITH PAPA JOHN’S

John Schnatter stepped down as the pizza chain’s chairman following revelations
he’d uttered a racist slur. Now he’s cashed out over $500 million in stock and
wants to clear his name.



Schnatter at his home in Louisville.

Photographer: Tamara Reynolds for Bloomberg Businessweek
By
Devin Leonard
@devinleonard More stories by Devin Leonard
+Follow
November 3, 2021, 9:00 AM GMT


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“It was a crucifixion,” says John Schnatter. “It was unethical. It was immoral.
It was evil.” The founder of Papa John’s International Inc. is giving an
emotional account of his split three years ago with the world’s third-largest
pizza chain. Yes, Schnatter uttered a deplorable racial slur. Yes, he did so on
a corporate conference call. But he says there’s so much more to the story.



Schnatter is pleading his case in a building he calls the Outhouse, a hangout
spot beside the golf course on his estate near Louisville. He’s seated in a
leather-bound rocking chair with a decorative animal fleece draped over the
back. Sipping from a tall can of Liquid Death Mountain Water, he lists the
forces he says played a role in his downfall: duplicitous Papa John’s
executives, conniving ad agency reps, public-relations incompetents, the
“progressive elite left.” The last one, he says, has long resented him for
taking an operation begun in the broom closet of his father’s bar and
transforming it into a global chain with more than 5,000 outlets. “The Papa
John’s story totally debunks the left’s ideology,” he says. “This is America.
You can live the American dream.”


The first Papa John’s location in 1985.
Source: John Schnatter

Visible through the French doors behind the 59-year-old Schnatter is a
tree-lined path leading to a stone bridge over a flowing brook to his mansion,
which rises above a rock-encircled pond. Lately he’s been teasing his
half-million-plus followers on TikTok with glimpses of its opulent interior.
Another clip features him strutting to his helicopter, to the sounds of the
Notorious B.I.G.’s Big Poppa. The message: Sorry, haters. Papa John is still
large, if not in charge.

It’s hard to think of many entrepreneurs who have personified a company as
palpably as Schnatter. When their messy breakup began, he was Papa John’s
chairman, chief executive officer, and largest shareholder, with 31% of the
stock. He was also the company’s face, hawking chipotle-chicken-and-bacon pies
and exchanging shtick with former NFL quarterback Peyton Manning in TV
commercials.



Then Schnatter lost almost everything. In December 2017 he retired as CEO
complaining that Papa John’s shareholders were being harmed by the NFL, which
wasn’t punishing Black players and others protesting racism during the national
anthem before games. Calling the situation “a debacle,” Schnatter said it should
have been “nipped in the bud a year and a half ago.” Barely seven months later
he also quit as chairman, after word leaked about the slur he’d used on the
conference call. He’d been speaking with executives from Laundry Service, Papa
John’s former ad agency, who’d been working with Schnatter on a strategy to
counter the perception that he’s racist. “I wish I hadn’t said the word,” he
says. He points out that he’d been attributing it to someone else during the
call, and he accuses the ad agency people of craftily provoking him into doing
so.

Jonathan Maze, editor-in-chief of the trade magazine Restaurant Business, says
the crisis was comparable to the one Subway faced in 2015 when Jared Fogle, its
chief spokesperson, pleaded guilty to receiving and distributing child
pornography and to engaging in commercial sex with minors. Yet there was a
difference. “When the Fogle thing came down, Subway could dismiss him and try to
start fixing things,” Maze says. “With Schnatter, it’s not that easy.”

For Papa John’s, it took a corporate exorcism. It wasn’t simply a matter of
commissioning Schnatter-free TV spots. The company, which declined to discuss
its founder for this story, had to remove his face from its pizza boxes and
scrub references to him from its website. The pictures of Schnatter on the walls
of its Louisville headquarters had to go, too. Last September, Papa John’s
announced it was relocating many corporate functions to Atlanta, physically
distancing itself from its namesake.

All that remained was for Schnatter himself to exit the stage. But as far as
he’s concerned, he’s still Papa John. Since 2019 he’s been making the rounds of
cable shows and podcasts, many of them conservative outlets where he’s hailed as
another casualty of cancel culture. “The woke mob doesn’t want you to have
children’s books, as displayed by the cancellation of Dr. Seuss earlier this
year,” said a host on the One America News Network (OANN), introducing Schnatter
in March. “Now they’re apparently coming for your pizza.”



Schnatter is also seeking to clear his name. He says his exit was orchestrated
by some of the company’s former officials, the NFL, and possibly even the
Democratic National Committee. He’s eager to discuss a lawsuit he’s filed
against Laundry Service, and he’s been pointing to a recording of the notorious
conference call that he says exonerates him. Papa John’s and its former ad
agency, naturally, disagree.

As the legal proceedings play out, Schnatter goes about his days, courting his
fans’ approval. He’s cashed out over $500 million worth of stock in recent
years, and now he’s out there, jetting in his Dassault Falcon between his homes
in Kentucky, Florida, and Utah, posting highlights and motivational bromides on
TikTok. He’s projecting his best life, except his best life is the one he no
longer has—the one where he’s still running Papa John’s.
 


A 2018 open forum at Ball State University’s student center on the topic of
Schnatter’s use of a racist slur.
Photographer: Jordan Kartholl/Star Press/USA Today Network

The morning after detailing his martyrdom, Schnatter wants to show off his
mansion. Clad in a black T-shirt, jeans, and white Pumas, he strolls into the
dining room. Leaning on a high-backed chair, he points out the room’s many
wonders: the banquet table he says holds 34 people; the chandeliers that once
hung in a London bank; the Raphael-inspired frescoes, in which angels, cherubs,
and Biblical characters mingle. “That’s Moses getting circumcised,” he says.

He heads out the front door to the driveway, where a crew is adjusting the
height of one of three fountains that blaze with fire at night. Schnatter wants
it lowered to improve the sightline, but it’s proving tricky for the workers to
satisfy his perfectionist tendencies. They’re tearing up their latest effort so
they can try again. “It’s going to take them half a day,” he says. “I’ve laid
enough stone and enough drywall in my day to know. But it’s got to be right.”



He says he wanted to avoid building “an ostentatious four-story house,” which is
why much of his was built into a slope and can’t be seen from the road. He has
his project manager walk me around to the side, where we enter a tunnel designed
to look like a centuries-old Italian streetscape. It leads to the subterranean
garage where Schnatter parks his three vintage Chevrolet Camaro Z28s. There
Schnatter reappears and leads me through a door back into the house. We head to
his gym, a cavernous room decorated with wall-to-wall memorabilia documenting
his rise as a pizza mogul, and to an old-timey movie theater where he watches
football. Then we climb the circular staircase up to the foyer, the centerpiece
of which is a 16-foot-tall sculpture of two eagles descending from the sky,
mating. “It just speaks to me,” he says, gazing up at it. “I think it’s badass.”


Schnatter at home.
Photographer: Tamara Reynolds for Bloomberg Businessweek

Schnatter says his attention to detail at home mirrors his quest for sublimity
at Papa John’s, which he started in 1984 in the back of Mick’s Lounge, just
across the state line in Jeffersonville, Ind. Within two years he’d opened four
stores, and soon after he signed up his first franchisee. Malcolm Knapp, a
veteran New York restaurant consultant, attributes the company’s early success
to Schnatter’s charisma. “John was kind of a folk hero,” Knapp says. “He started
it all from a broom closet. He came up with the marketing slogan, ‘Better
ingredients. Better pizza.’ He hammered that idea home.” Schnatter would often
pop into stores, high-fiving team members and checking to see if the pies were
up to his standards. Whether the ingredients and pizza were really better or
not, Papa John’s grew until, in 1993, it went public with 254 stores.

The bigger the company became, the more its namesake found himself under attack.
Schnatter traces the shift to a late ’90s incident, in which the Louisville
Courier-Journal reported on a woman’s sexual harassment suit against him,
including claims that he’d kissed and groped her. Schnatter denied the
allegations and filed his own suit, accusing the woman of extorting him. They
later reached a confidential settlement. “I was a hometown hero. Then somewhere
between store 1,000 and store 2,000, I become a bad guy,” he says. “Something
happens where you get a certain size, and it just rubs people the wrong way.”



The penchant he developed for mixing pizza with politics didn’t help. During a
corporate earnings call in 2012, Schnatter warned that if the Affordable Care
Act wasn’t repealed, it might increase pizza costs by as much as 14¢ a pie. Fox
News anchors seized on Schnatter’s warning as evidence of Obamacare’s painful
consequences, while liberal comedy show hosts roasted him. “When you order a
Papa John’s pizza, it’s only after you’ve reached a state of such desperate
gnawing hunger that you could eat the ass off a raccoon that drowned in your
birdbath,” said Stephen Colbert on The Colbert Report. “Now Obama expects you to
shell out three extra nickels for this hot turd pie? Eat the nickels! You have
your dignity!”


Schnatter at the first Papa John’s in 1985.
Source: John Schnatter

“The upper elite progressive left worries about me,” Schnatter says of the
reaction. He takes their disdain as a compliment. He got plenty more of it in
2017, when he went after the NFL over the anthem demonstrations. Early that
season the league’s ratings were down, and while there were multiple reasons for
the decline, many conservatives were blaming it on players who were kneeling or
performing other gestures to protest racism. Some of the NFL’s major sponsors
issued bland statements about the protests, saying they respected both the flag
and the players’ right to express themselves. Not Papa John’s, which was
spending $34 million annually to be the league’s official pizza sponsor. On a
Nov. 1 call with investors, Schnatter said, “The NFL has hurt us. And more
importantly, by not resolving the current debacle to the players and owners’
satisfaction, NFL leadership has hurt Papa John’s shareholders.”

Schnatter says he was shocked when news outlets reported that he’d criticized
the protests. He recalls pleading with Papa John’s PR firm at the time, Edelman,
to clarify that he hadn’t said anything about the players kneeling, even if he
had seemed to trivialize their cause by failing to acknowledge its legitimacy.
Edelman’s advice, he recalls, was to keep quiet and let it blow over. “Y’all are
in denial,” Schnatter remembers replying. “I’m Papa John! This is not going to
blow over.” Two weeks later the company tepidly apologized to anyone who found
his remarks “divisive,” which did little to stifle the controversy. By the end
of the year, the company had announced that Schnatter was stepping down as CEO.
Papa John’s later said in legal papers that the response to his remarks was part
of the reason, though Schnatter says the decision was part of a succession plan
that had been in the works for a while. Edelman declined to comment.



Schnatter remained chairman. When Papa John’s made new ads in which he didn’t
appear, he recalls, he directed some of his own at the company’s expense. He
says that they didn’t elicit any negative response in the eight markets where
they ran, and that by May 2018, Papa John’s was ready to put him back on the
air. At the time, the company was working with Laundry Service, an ad agency
known for its work on behalf of Nike Inc. and Beats By Dre. Among the
suggestions Laundry Service’s then CEO, Jason Stein, had for Schnatter was for
him to speak to selected journalists and clear up any misconceptions about his
earnings call statement.

Toward the end of the month, Schnatter joined a conference call he says he
thought was going to be a routine discussion about the ads he’d appear in next.
He remembers being surprised when Stein instead presented him with a series of
racially themed questions he might encounter in the chats. “One question you’ll
get in some form is ‘John, are you racist?’ ” Stein told him, according to a
transcript of the conversation that later became public.

Stein told Schnatter they needed to craft some “very tight talking points” in
preparation for such queries. “Right now their imaginations are running wild,”
Stein said. They “think that you’re this right wing, extremist, neo-Nazi
racist.”

Schnatter says he feels as if Stein was trying to bait him into saying something
that might subsequently embarrass him. Running through Stein’s questions, he
expressed disbelief that anyone could accuse him of being a racist. Schnatter
said he’d grown up at a time when “they used to drag Black people around behind
a pickup truck until they were dead.” He called NFL Commissioner Roger Goodell a
“coward” and accused him of destroying players’ bodies and minds. “They’re all
beating their wives up,” Schnatter said. “They’re all on steroids or pot, and
now he’s going to let them protest.”



Near the end of the call, Schnatter expressed his exasperation with the backlash
against him. “What bothers me is Colonel Sanders called Blacks ‘[epithet],’ ”
Schnatter said. “I’m like, I’ve never used that word.” Switching to the royal
we, he added, “Yet we use the word ‘debacle,’ and we get framed in the same
genre. It’s crazy.” Almost two months later, on July 11, Forbes reported that
Schnatter had used the slur. The article described the circumstances of the call
and said he’d been attributing the epithet to Sanders, but it didn’t report the
conversation in detail. Schnatter resigned as chairman the same day. Two days
later, in an interview with a local radio station, he was contrite. “I can’t
talk like that, even if it’s confidential and it’s behind closed doors and
they’re trying to make sure that I don’t do exactly what I did,” he said. “I did
it, and I own it, and I’m sorry. I’m sick about it, frankly.”

The NFL had already parted ways with Papa John’s; now the University of
Louisville took the company’s name off its football stadium. Major League
Baseball suspended its “Papa Slam” promotion, which gave fans discounted pizza
whenever a player socked a grand slam. And the grandchildren of Colonel Harland
Sanders retorted that the Kentucky Fried Chicken founder had never used such
vile language.



When I mention this to Schnatter, he replies, “I’ve got two Black heads of
churches, heads of colleges that will come over right now and tell you that he
used the word when he talked to their congregation.”

“Tell him to produce the witnesses,” says J. Trigg Adams, a descendant of
Sanders. “I want to see if they will come into a court of law and swear they
heard the Colonel use that word. I don’t think he’ll get anybody.”
 


Schnatter enters a Delaware courthouse in 2018 to give testimony in his lawsuit
against Papa John’s.
Photographer: Jennifer Corbett/The News Journal/USA Today Network

With Schnatter’s name tarnished, it might have been a good moment for him to
walk away. But he says he cared too much about his former company. In August
2018 he took out a full-page ad in the Courier-Journal to let employees know.
“Dear fellow Papa John’s team members, I miss you all very much,” he wrote.
“More than words can express!”

The more Schnatter dwelt on the events that led up to his departure, the more he
saw an elaborate conspiracy. Take his remarks about the NFL. He’d made them at
10 a.m., and yet within a few hours they’d become a national story. Never mind
that earnings calls are closely watched in the financial press—he suspected that
someone at Papa John’s might have tipped off the NFL about what he was likely to
say, and that the league sounded the alarm with the press. That the league’s
spokesman then was Joe Lockhart, former White House press secretary under
President Bill Clinton, only heightened his suspicions. (The NFL says
Schnatter’s claims aren’t true. Lockhart says, “It’s pure nonsense that there
was a conspiracy to let him hang himself.”) As for the Laundry Service call,
Schnatter is convinced it was masterminded by people there and at Papa John’s
who wanted him gone. He notes that Casey Wasserman, whose company owns Laundry
Service, is a Democratic Party contributor. Wasserman declined to comment.



That summer Schnatter sued Papa John’s, seeking documents he hoped would reveal
the truth. Eight months later he announced that he’d reached a resolution with
the company, boasting in a press release that it entitled him to the materials
he was seeking. Instead, Schnatter claims, Papa John’s stiffed him. “They didn’t
turn over any records,” he says. “They found a loophole to get around that.” (A
spokesman for Schnatter later says the company didn’t provide any “meaningful
documents.”)

In late 2019, he filed a breach of contract suit against Laundry Service,
accusing it of passing confidential information about the conference call to
Forbes. It turned out the call had been taped, and a judge ordered it unsealed.
Finally, in Schnatter’s view, the public could see he’d used the word only to
profess that he never used it. “What I said was antiracist,” he says.



He was heartened to learn that someone at the agency had also left the recorder
running after the call, capturing Stein’s conversation with his employees.
Several said they couldn’t believe what they’d just heard. “Did he just use the
N-word?” a woman asked. “He’s a racist,” Stein said.

Stein then said he wanted Schnatter “to go and speak the truth” to reporters.
“Just have to make sure it’s an hourlong conversation, so that he says shit like
he said here,” Stein added. “It’s gonna come out. He can’t control it.”

Listening, Schnatter believed he’d found proof Stein had it in for him. He
promoted the “hot mic moment” on his website, along with a transcript of the
call. It’s unclear what impact, if any, the tape will have on the case, which is
still in the discovery phase before the U.S. District Court in Louisville. In
court papers contesting Schnatter’s accusations, Laundry Service’s attorneys
called his contention that the agency goaded him into using a noxious word “a
lie” and said it was false that he was the victim of a setup. Laundry Service
declined to comment for this story, as did Stein.

As the court fight progressed, Schnatter began speaking more freely with
reporters, on the advice of a PR firm he’d hired, ProActive Communications, led
by Mark Serrano, a former senior adviser to President Donald Trump’s reelection
campaign. In interviews, Schnatter often touted an investigation he’d paid for
by former FBI Director Louis Freeh, which sought to determine if there was
evidence of racial bias in his NFL statement and the Laundry Service call.
Freeh’s report included praise for Schnatter from Kevin Cosby, president of
Simmons College of Kentucky, an historically Black institution, and Samuel
Tolbert, president of the National Baptist Convention of America. Schnatter’s
family foundation has donated or pledged a total of $1 million to Simmons and
the convention. “The FBI investigation,” as Schnatter often called it, fully
exonerated him. Freeh declined to discuss the report. Cosby and Tolbert say
Schnatter’s donations didn’t influence their statements. “I have tremendous
respect for John,” Cosby says.



Schnatter’s remarks in the media occasionally went viral, if not necessarily for
the reasons he intended. This March he told OANN one of his goals for the past
20 months had been “to get rid of this N-word in my vocabulary and dictionary
and everything else,” prompting his critics to wonder why he required so much
time to refrain from using such an offensive term. He later issued a statement
saying he meant he was trying to erase the word from the media’s vocabulary in
its “false and malicious” reporting about him.

Serrano also encouraged Schnatter to get busier on social media. Along with
displaying his helicopter, he’s used TikTok to make the case that the quality of
Papa John’s pies has deteriorated in his absence. He says he’s tested 800 in the
past 18 months. “Some were burnt,” he says. “Some were undercooked.” The main
thing that’s kept the company afloat, he claims, has been the food delivery boom
caused by the pandemic. “It kind of makes me laugh at Rob Lynch,” he says,
referring to Papa John’s CEO. “This guy is delusional. He has no idea how we
built this company and the fundamentals. But he thinks it’s him. He really
thinks that he’s done something magical.”


Lynch in 2019.
Photographer: Richard Drew/AP Photo

The company had certainly had to do something after Schnatter’s ignominious
departure. With sales tumbling and stores closing in North America, in 2018 Papa
John’s waived millions of dollars in fees owed by franchises. The following
year, Starboard Value, a New York hedge fund, invested $200 million in the chain
in exchange for two board seats and significant influence over its direction.
Schnatter filed paperwork saying he’d made a similar offer, only to be rebuffed.


PAPA JOHN’S SHARE PRICE





Data: Compiled by Bloomberg



With Starboard behind Papa John’s, one of its first moves was to recruit former
NBA star Shaquille O’Neal to be its first Black board member and its new brand
ambassador. That August, the fund brought in Lynch, the former president of
Arby’s Restaurant Group Inc., to be CEO. Lynch was decidedly bland, but that
might have been the point. He set about boosting employee morale and encouraging
innovation, and by the second half of 2019, sales began to grow again. In 2020
and the first half of 2021, as the pandemic unfolded, U.S. quarterly same-store
growth outpaced that of Domino’s Pizza Inc. and Pizza Hut, the largest and
second-largest publicly traded pizza chains, according to the research service
Technomic. Peter Saleh, a restaurant industry analyst at BTIG LLC, attributes
some of Papa John’s recent success to the Epic Stuffed Crust Pizza it introduced
last December. “I think it’s fair to say it’s the best product in their
history,” he says.



So while Schnatter is putting himself out there in the courts and the media, his
old company appears to be doing fine. “Papa John’s positive results over the
past two years speak for themselves,” a spokesperson said in a statement. “We
are proud of the company we have become and the diverse, inclusive and
innovative culture we are creating.”

In other words, they’ve moved on.
 


O’Neal at a Papa John’s product launch party in 2020.
Photographer: Manuel Mazzanti/AP Photo

On a Friday morning, around 11:30, there’s already a healthy crowd inside Mick’s
Lounge. Schnatter enters and heads back to the broom closet. “Can we get a
picture of you?” the cook calls out. “Can we put it on Facebook?”

“I would love it,” Schnatter says. “Put it anywhere you want.”

First he peeks at the room where it all started. The pizza oven is long gone,
but still, Schnatter becomes wistful. “This was probably more fun than anything
I ever did,” he says. “We did 200 bucks on a Tuesday, and we were jumping up and
down.”



Once he’s done reminiscing, he steps behind the bar and poses for a picture with
the cook and the bartender. “It’s time for a beer!” he proclaims. “Papa’s
buying. Happy hour. Let’s rock!” The late-morning crew erupts with applause, and
Schnatter’s social media coordinator captures the moment.


Mick’s Lounge in 1983.
Source: John Schnatter

Later on, Schnatter gives me a ride back to my hotel in his black Ford F-150
Raptor and talks again about the conspiracy against him. “As you dig in, you
realize that, wow, the roots on this thing are wide, and they’re deep,” he says,
crossing the Ohio River and heading into Louisville. “This may go all the way up
the food chain to the powers that be in the progressive elite left.”

What he wants from Papa John’s, Schnatter says, is an apology and an admission
that it mistreated him. “They know what they did,” he says. “There’s a whole lot
of shredding and computers getting thrown away right now at Papa John’s to make
sure that if I do get back in, they don’t leave a paper trail.”

Get back in? Papa John wants to be reunited with Papa John’s? It may not happen
soon, Schnatter allows. But perhaps one day, the company will need him again.
“You never want to say never.”
 
Read next: American Workers Leave Jobs by the Millions, Spurring Labor Movement
in 2021



 


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