Fallout swift for John Schnatter at Papa John's after he admits using N-word

Grace Schneider | Courier Journal

Show Caption Hide Caption Papa John's founder accused of using racial slur in conference call The former CEO of Papa John’s allegedly said the n word during a conference call in May. Veuer's Sam Berman has the full story.

LOUISVILLE, Ky. – The fallout for Papa John's pizza founder John Schnatter was swift Wednesday after he admitted to using a highly offensive racial slur during a May conference call, including his resignation from the University of Louisville board of trustees.

The pizza baron and self-made billionaire apologized for using the N-word after a report by Forbes magazine surfaced early Wednesday citing comments he made while discussing how to prevent future public relations fumbles with the company's marketing contractor.

"News reports attributing the use of inappropriate and hurtful language to me during a media training session regarding race are true," Schnatter said. "Regardless of the context, I apologize. Simply stated, racism has no place in our society."

University of Louisville trustees Chairman J. David Grissom said in announcing the resignation that while Schnatter's remarks were "inappropriate, (they) do not reflect his personal beliefs or values. No member of the board of trustees condones racism or insensitive language regardless of the setting."

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Papa John's CEO stepping down after criticizing the NFL John Schnatter is leaving as CEO of Papa John's Pizza. No reason was given for Schnatter's decision, but he recently faced criticism for blaming protesting NFL players for slumping pizza sales.

There was no escaping the irony that while attempting to avoid another public relations crisis, Schnatter touched off a new one. He ignited a firestorm last November when he blamed poor sales at Papa John’s on the NFL's “poor leadership” in handling players' demonstrations during the national anthem. White supremacist groups hailed the pizza maker, forcing the company to denounce their racist views.

On Wednesday, the free fall was swift:

• 5 a.m. EDT: Forbes' story cites a source alleging that Schnatter was asked during a May conference call to role-play through scenarios to help him learn to respond to questions about racial issues. Asked how he would distance himself from racist groups online, Schnatter was quoted as saying that "Colonel Sanders called blacks n-----s," but Sanders never faced backlash.

The report said Schnatter "also reflected on his early life in Indiana, where, he said, people used to drag African-Americans from trucks until they died." The reference apparently was meant to show that he found racism deplorable, but the Forbes source said that multiple people on the call were offended.

• 10:30 a.m. Papa John's releases a statement saying the company "condemns racism and any insensitive language, no matter the situation or setting."

• 11 a.m. After opening at about $51 per share, the company stock hits a low, sliding below $48. After a minor rebound, Papa John's market capitalization drops nearly $84 million on the day.

• 11:30 a.m. Social media comments begin to appear, some defending Schnatter but most decrying the remarks.

• 2 p.m. Schnatter issues a statement admitting to the remarks. Forbes updates its story.

• 3:50 p.m.The NAACP's Louisville branch calls on Schnatter to step down as a University of Louisville trustee and or be removed. The Kentucky Democratic Party follows suit moments later.

• 4:30 p.m. The mayor of Jeffersonville, Indiana – Schnatter's hometown – orders the name John H. Schnatter – Nachand Fieldhouse to be removed from a decades-old gym. The facility had been renamed in Schnatter's honor last year after he gave $800,000 toward its renovation.

• 4:54 p.m. Grissom announces that he'd spoken with Schnatter, who tendered his resignation, effective immediately.

Forbes reported that the owner of Laundry Service, the marketing firm working with Schnatter, terminated its contract with Papa John's after it learned about the comments.

Papa John's began slumping long before Schnatter's remarks about the NFL last fall got him in hot water. The company has posted sales declines in every quarter since the fall of 2016, including a 5.3 percent drop in its North American business reported in May. Executives have acknowledged that they've lost market share to aggressive fast-food competitors that have deployed delivery services, such as Uber Eats and Grubhub.

During the May earnings release, Papa John's CEO Steve Ritchie disclosed that chief marketing officer Brandon Rhoten, a rising star hired a year earlier after a successful run at Wendy's, had been let go. Rhoten's vision had been to refocus the brand on its quality and less on Schnatter.

Schnatter's meteoric rise, launched in the closet of his father's failing Jeffersonville bar in 1984, is integral to the Papa John's story. The business has grown to become a publicly traded international franchise with more than $1 billion in annual sales. Papa John's franchises over 4,700 stores, 3,500 in the U.S. and over 1,200 in nearly 40 other countries and territories.

Schnatter, who owns roughly $700 million in company stock, is seen on pizza boxes and, until the last few months, in many Papa John's TV spots where he's rubbed elbows with NFL stars like retired quarterback Peyton Manning.

And even without the CEO tag and a lower TV profile, Schnatter still is a commanding presence in Louisville.

The University of Louisville football team plays at Papa John's Cardinal Stadium. Thanks to multimillion-dollar gifts, three university entrepreneurship centers in the region bear his name — at Purdue, Louisville and Ball State, Schnatter's alma mater.

University of Louisville spokesman John Karman said discussions about possibly removing the “Papa John’s” name from the school's football stadium are premature at this time.

Purdue said late Wednesday afternoon that it would "continue to assess the situation" after the reports on Schnatter's comments.Contributing: Morgan Watkins of The Courier Journal; follow Grace Schneider on Twitter: @gesinfkThe report said Schnatter "also reflected on his early life in Indiana, where, he said, people used to drag African-Americans from trucks until they died." The reference apparently was meant to show that he found racism deplorable, but the source told Forbes that multiple people on the call were offended.

Forbes reported that the owner of the PR firm working with Schnatter terminated its contract with Papa John's after it learned about the call.

Grace Schneider: 502-582-4082; gschneider@courierjournal.com; Twitter: @gesinfk. Support strong local journalism by subscribing today: courier-journal.com/graces