Just as Papa John’s International Inc. (NASDAQ: PZZA) offered financial assistance to some of its retailers, the head of its franchise association hammered founder John Schnatter and aggressively stated it is time for him to go.
Papa John’s said it would reduce franchise fees and lower the price of food it supplies to its stores. It will even offer some loans. Falling sales and a dispute between Schnatter and the company’s board have caused chaos at the company and presumably have hurt sales further. Schnatter, who was board chair until recently, made racially charged remarks that led to his resignation. He is working to get the chairman’s job back.
The franchises have sided with the board, at least in their desire to see Schnatter go away. Papa John’s Franchise Association’s president, Vaughn Frey, said in a press release:
We believe it is time for the founder to move on. Steve is pursuing the right initiatives to reinvigorate growth and recognizes the importance of working together to move forward successfully. We appreciate the assistance being extended to our franchisees and believe the assistance program will help mitigate the impact that the founder’s inexcusable words and actions have had on franchisees.
In other words, please leave before you destroy the company, and along with it our franchises.
The risk the franchises take is that they are pouring gasoline on an already raging fire, adding one more factor to the war between Schnatter and Papa John’s that could undermine further both consumer and shareholder views of the company. On the other hand, some already are sinking and may believe they have no other recourse.
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