How the NFL protests led to Papa John Schnatter's downfall

Less than one year ago, John Schnatter’s company was the official pizza of the National Football League. Schnatter’s face graced, Papa John’s pizza boxes and delivery vans, and he constantly appeared in national TV ads with NFL stars like Peyton Manning and JJ Watt. Meanwhile, Major League Baseball had a long-running “Papa Slam” promotion that rewarded fans with a big pizza discount whenever a player hit a grand slam.

There was arguably no food brand more closely associated with American pro sports.

Now Schnatter is out as chairman of the company he founded in 1984 (he is still a member of the board), and the company has announced it will scrub his face from all its marketing materials. The official pizza of the NFL is Pizza Hut, and MLB has ended its Papa Slam promotion.

What happened?

Graphic by David Foster/Oath

Schnatter waded into the NFL anthem controversy

The string of corporate missteps began in November 2017, when Papa John’s reported its 2017 Q3 earnings. The report reflected flat same-store sales growth, which was below analyst expectations. On the earnings call, Schnatter, CEO at the time, blamed Papa John’s flat sales on the NFL player protests.

Schnatter mentioned the NFL 44 times on his company’s earnings call, Bloomberg counted. He claimed “significant negative consumer sentiment of our association with the league” and declared: “The NFL has hurt us by not resolving the current debacle to the players’ and owners’ satisfaction… NFL leadership has hurt Papa John’s shareholders.”

That notion led to jeers, although Bloomberg analyst Michael Halen said it was not outlandish: “I’m not blaming them for citing it.” More jeers came after Schnatter remarked that the player protests “should have been nipped in the bud” in the previous season, during which Colin Kaepernick first began kneeling during the anthem. In saying so, Schnatter put himself in the same camp as President Trump, who has spent nearly a year publicly criticizing the NFL, and NFL team owners Jerry Jones and Dan Snyder. (Jerry Jones is a Papa John’s franchisee, leading some to speculate that Jones was behind Schnatter’s comments.)

Amid the backlash from consumers, it only took two days for neo-Nazi website The Daily Stormer to christen Papa John’s “the official pizza of the alt-right.” The website used a photo of a Papa John’s pizza with a swastika made of pepperoni. It was extremely damaging to Papa John’s brand. And pizza competitors piled on: When the CEO of Yum Brands, parent company of Pizza Hut, was asked on Yum’s earnings call about Schnatter’s comments, he said: “We’re not seeing any impact from any of that.” Frozen pizza maker DiGiorno mocked Papa John’s slogan in a viral tweet.

Better Pizza.
Better Sales.

— DiGiorno (@DiGiorno) November 1, 2017

The next month, in December 2017, the heat was still loud, and Schnatter resigned as Papa John’s CEO. The company said he would remain as chairman.

By February, on its Q4 2017 earnings call (profit missed expectations, but revenue beat), Papa John’s divulged that it would no longer be the “official pizza of the NFL” after holding the sponsorship since 2010. It was the end of an era for the pizza brand. Pizza Hut immediately succeeded Papa John’s as the NFL sponsor, which also indicated that Yum Brands didn’t concur with Schnatter’s assessment that an association with the league was bad for business.

Following its exit from the NFL, Papa John’s news went quiet for a few months. Schnatter could have remained chairman of his company, and perhaps the company would have made innovations to engineer a turnaround, sans NFL sponsorship.

Schnatter said the n-word on a business call

But a July 11 Forbes story reported that on a May conference call, Schnatter used the n-word. The context was a training exercise, with a marketing agency called Laundry Service (owned by PR agency Wasserman), to train Schnatter to prevent PR gaffes. According to Forbes, Schnatter complained on the call that “Colonel Sanders called blacks n*****s” and was not publicly criticized for it. Schnatter issued an apology and did not deny the story.

But the dominos fell in a matter of hours on Wednesday as various organizations associated with Papa John’s, or Schnatter personally, cut ties.

First, Schnatter resigned from the University of Louisville board. Next, MLB announced it was ending the longtime “Papa Slam” promotion. Finally, late on Wednesday night, Papa John’s announced Schnatter would resign as chairman. (He is remaining a board member, and he has a 30% equity stake in the company.) In the aftermath, many wonder: Will Papa John’s change its brand name?

That remains to be seen, but the company has already now announced it will remove Schnatter’s image from its marketing materials and pizza boxes. (His face was even in its logo.) And the University of Louisville announced on Friday that it will remove the Papa John’s name from its stadium, called Papa John’s Cardinal Stadium.

Louisville coach Bobby Petrino statement on Papa John’s removal from the Cardinals’ stadium name: pic.twitter.com/DGhSzssIb3

— Matt Fortuna (@Matt_Fortuna) July 13, 2018

Papa John’s shareholders actually applauded the news of Schnatter’s ouster: shares rebounded more than 10% on Thursday on the news of his exit.

In 2018, brands cannot stay out of politics

The entire debacle is one example among many of how many people and companies have been sucked into the controversy over the NFL player protests, as well as how many consumer brands have become political in 2017 and 2018—in some cases inadvertently, in some cases by choice. Some executives might look at what happened to Schnatter and think twice about publicly offering political opinions.

Schnatter’s downfall also provides a case study in corporate crisis response. It is reminiscent of a CEO scandal involving a much lesser-known, sports-adjacent company in 2014: Des Hague, the CEO of stadium caterer Centerplate, was caught on camera kicking a small dog in an elevator. When the backlash ensued on social media, Centerplate tried almost every possible response before finally ousting him as CEO. First, on Aug. 25, 2014, the company issued a statement that called the situation “a personal matter involving Des Hague” and distancing the company from his actions. The next day, on Aug. 26, the company announced that Hague would undergo anger management counseling. It did not quell the backlash. The third statement, on Aug. 27, said Hague had been put on probation and would donate $100,000 of his own money to an animal charity. That still wasn’t enough. On Sept. 2, Hague resigned.

More recently, last summer President Trump’s business council collapsed after CEOs resigned one by one. Much like how Centerplate tried to avoid the inevitable nuclear option, some CEOs tried to avoid resigning from the council as long as they could, until Campbell’s CEO Denise Morrison became the eighth to step down. Trump proactively tweeted that he had disbanded the council before the rest could follow suit.

Once an executive has become mired in a political controversy, and offended a large chunk of customers, it’s often nearly impossible to rebound. And now Papa John’s must scramble to rebrand.

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Daniel Roberts is a senior writer at Yahoo Finance, covering media, sports and tech. Follow him on Twitter at @readDanwrite.

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