Papa John's Is Back, a Little

Papa John’s International took a beating as sales fell and tensions rose between its board and founder John Schnatter, which nearly tore the company apart. The worst of those days are well behind one of America’s largest pizza makers.

Papa John’s reported a profit, the first in three quarters, of $8.3 million. Although the number was down from last year’s $11.2 million, the company has proven it can mount at least the early stages of a turnaround. Revenue fell 7.1% to $399.7 million from the second quarter a year ago. Same-store sales were down 3.8% from the same period a year ago.

Steve Ritchie, president and chief executive, commented, “Papa John’s made strong progress in the key pillars of its strategy in the second quarter, recording another sequential improvement in comparable sales.” He has argued for the past two quarters that, given time, the pizza chain can leave its history with Schnatter behind.

In July 2018, Schnatter made a racial slur on a phone call. One of the other participants made the comments public. Schnatter apologized, but the damage was down. Within a matter of hours, he was out of his job as chairman.

Schnatter decided he would not leave the company’s board. In turn, the board tried to block his ability to take over the company. After a bitter exchange, Schnatter left the board in March. At the board and management level, things have been quiet since then.

Papa John’s still has to contend with the fact that the pizza business is among the most crowded retail sectors in the country. It is in fourth place in annual revenue behind Domino’s, Pizza Hut and Little Caesars. Moreover, Domino’s and Pizza Hut are about three times its size based on revenue of about $12 billion a year. There are 37 pizza chains in America with revenue of over $100 million.

That is a sign of how tough the competition is as the chains try to edge one another out. Papa John’s also has the hurdle of not being on the list of America’s 25 favorite pizzerias.