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Papa John's founder resignation mistake John Schnatter racial slur Rob Kim/Getty Images Entertainment/Getty Images

Papa John’s founder calls resignation ‘a mistake’

John Schnatter questions board action in wake of racial slur report

Papa John’s International Inc.’s founder calls his resignation as chairman “a mistake” and questions the board’s handling of the issue over his use of a racial slur, according to a letter sent to directors over the weekend.

John Schnatter sent the letter, reported Tuesday by the Wall Street Journal, several days after his July 11 resignation and his apology, in the wake of an initial Forbes report, for using the N-word during media training with a marketing agency.

“The board asked me to step down as chairman without apparently doing any investigation. I agreed, though today I believe it was a mistake to do so,” Schnatter said in the July 14 letter. “I will not allow either my good name or the good name of the company I founded and love to be unfairly tainted.”

Schnatter still owns about 30 percent of the stock in the company he founded in 1984, and he retains a board seat.

On Sunday, the board of Louisville, Ky.-based Papa John’s said it sent written notice to Schnatter that it was terminating its 2007 Founder Agreement, which called for him to attend corporate events, participate in management and investor meetings and act as brand spokesman. The company also removed Schnatter from its advertising.

Papa John’s board also asked Schnatter to cease media appearances on behalf of the company and evicted him from the headquarters building.

On Friday, before the company requested that he not make media appearances, Schnatter was interviewed by WLKY, a CBS affiliate in Kentucky, and accused the marketing agency, Laundry Service, of trying extort $6 million to keep quiet the use of the racial slur during a May conference call.

“They wanted $6 million to make it go away,” Schnatter said during that WLKY interview.

“They made it pretty clear. The words were, ‘If I don’t get my [expletive] money, I’m going to bury the founder. … I’m not for sale. They tried to extort us, and we held firm. And they took what I said, and they ran to Forbes.”

In an earlier controversy, Schnatter stepped down as Papa John’s president and CEO in December in the wake of his comments during the chain’s Nov. 1 third-quarter earnings call, when he blamed the brand’s flagging sales on the National Football League for not quelling players’ on-field “take a knee” protests.

The Wall Street Journal on Tuesday, citing sources close the situation, said the board’s lead independent director and acting chair, Olivia Kirtley, sent Schnatter a letter late last week, saying the board wanted to discuss his full board resignation at a meeting for this past Sunday night.

That promoted Schnatter’s letter in reply to the board.

“I am confident that an examination of the facts will bear out what I have written in this letter and show that once again our company has demonstrated that it does not know how to handle a crisis based on misinformation,” Schnatter wrote, according to the Wall Street Journal report.

On Friday, Papa John’s new CEO, Steve Ritchie, said the company would “retain an independent and outside expert to audit all of our existing processes, policies and systems related to diversity and inclusion, supplier engagement and Papa John’s culture.”

Ritchie said the brand’s senior management team would be visiting key locations “and hold listening sessions with employees in our stores to talk about what they are seeing and give them a platform to voice their concerns.”

The Papa John’s actions echoed those of Starbucks Corp., which closed 8,000 stores on May 29 for employee education after an April racial profiling incident with a café a manager and two African-Americans.

Papa John’s, which went public in June 1993, has seen its stock price decline 9 percent since the first of the year, closing at $51.41 on Monday. The stock had traded between $81.09 and $47.80 a share over the past 52 weeks.

Papa’s John’s is the nation’s third largest pizza delivery company with 5,212 units worldwide as of April 1. It operates in all 50 states and 45 other nations and territories.

Contact Ron Ruggless at [email protected] 

Follow him on Twitter: @RonRuggless

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