The bitterness between Papa John’s International Inc. (NASDAQ: PAPA) and its founder broke out into a brutal war. The board of the company viciously attacked its founder, who has tried to blame it and the new CEO for ruining Papa John’s. In the meantime, both Papa John’s financial results and its stock price have suffered.
Founder John Schnatter was pushed out after the board evaluated negative comments about black Americans. He now regrets his decision and believes the board railroaded him. He recently attacked CEO Steve Ritchie, who Schnatter helped put into the job. Recently, revenue at the pizza chain has fallen, along with its stock.
The board wants to defend its record, both with the way it treated Schnatter and its oversight of the struggling company. In its letter to Schnatter, the Special Committee of the Papa John’s board of directors wrote:
John Schnatter is promoting his self-interest at the expense of all others in an attempt to regain control. John Schnatter is harming the Company, not helping it, as evidenced by the negative impact his comments and actions have had on our business and that of our franchisees.
More specifically the committee’s members wrote that he had harmed the company and defied the board in comments he made about the NFL’s friction with players who do not stand during the national anthem, met with management without telling the CEO and produced TV commercials, in which he starred, without the company’s permission.
The board also said that the battle between it and Schnatter has distracted management and hurt the company’s results.
A day before the board’s statement, Schnatter sent a letter to Papa’s John’s franchises in which he wrote in particular about the performance of new CEO Ritchie. Essentially, Schnatter wrote, Ritchie is not up for the job, needs to be replaced and helped to push him out.
In the past year, Papa John’s stock is down 38%, compared to an 18% increase in the S&P 500. Whichever party is to blame, and perhaps both are, the company is in a period of ruin that will continue.