Papa John's founder resigns hours after apologizing for using N-word during conference call

John Schnatter resigned from the pizza chain he founded in 1984 after it was found that he used the N-word during one of the company's meetings

                            Papa John's founder resigns hours after apologizing for using N-word during conference call
(Source:Getty Images)

Just hours after being forced to apologize for using a racial slur during a conference call in May, the founder and chairman of Pizza giant Papa John has resigned from its board of directors. John Schnatter reportedly used the N-word during a media training exercise, according to the Forbes news site. Upon being asked how he would distance himself from racist groups, Schnatter complained that Colonel Sanders never faced any public backlash for using the word. For those who don't know, Colonel Sanders was the founder of Kentucky Fried Chicken.

Schnatter revealed that reports attributing the use of “inappropriate and hurtful” language to him were true, according to a statement released by the Kentucky-based pizza company. In the statement, he said, “Regardless of the context, I apologize.”

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

According to the company, it would appoint a new chairman in the coming week, with Olivia Kirtley acting as the lead independent director for the time being.

Last year in December, Schnatter blamed the slowing sales growth to the outrage surrounding football players kneeling during the national anthem and subsequently resigned as chief executive. At the time, Schnatter had been undergoing training on how to prevent future blunders on a PR level with media agency Laundry Service. "The NFL has hurt us by not resolving the current debacle to the players' and owners' satisfaction," he reportedly said on a conference call with shareholders at the time. 

Schnatter had founded the company in 1984.

A Papa John's restaurant is seen on July 11, 2018, in Miami, Florida. The founder of Papa John's pizza, John Schnatter, apologized Wednesday for using the N-word on a conference call in May. (Photo by Joe Raedle/Getty Images)

In February, Papa John's was replaced by Yum Brands Inc's Pizza Hut as the official sponsor of the NFL, thus concluding the former's eight-year association with the premier US football league.

Allegedly, he had tried to downplay his NFL remarks by saying "Colonel Sanders called blacks n*****s" while maintaining that the KFC founder never faced any public outrage for his words.

But he also supplemented his statement by giving graphic descriptions of violence faced by African Americans at the time, recounting how slavemasters would drag black people behind trucks until they were dead.

Interestingly, when the news of his racial slurs broke on Wednesday, the company saw its share prices plummet by a whopping 5.9%, instantly wiping $96.2million off its market value and landing its share price at $48.33 per share.

Papa John's had to issue a public apology two weeks later after white supremacists reportedly praised Schnatter's comments.

In an internal memo obtained by CNBC, Papa John's CEO Steve Richie addressed staff, franchisees, and operators about the alleged incident on Wednesday.

"The past six months we've had to take a hard look in the mirror and acknowledge that we've lost a bit of focus on the core values that this brand was built on and that delivered success for so many years," he wrote. 

"We've got to own up and take the hit for our missteps and refocus on the constant pursuit of better that is the DNA of our brand."

While many were of the opinion that Schnatter's comments were a misguided attempt to show his hatred towards racism, most people attending the call chose to ignore his motive and were offended, according to reports.

Shortly after the incident, Laundry Service cut ties with Papa John's.

Previously, before the news was confirmed, the company released an ambiguous statement, saying: "Papa John's condemns racism and any insensitive language, no matter the situation or setting. Diversity is an essential ingredient in our pursuit of providing a better product and better service to our customers and to the communities where we operate and live," the statement further read.  

"We take great pride in the diversity of the Papa John's family, though diversity and inclusion is an area where we will continue to strive to do better."

This leaves the company with a challenge in terms of branding, owing to the fact that the then-chairman of the board appeared in most of the chain's commercials as well as on its pizza boxes. However, he is still the company's biggest shareholder.

The Lexington Herald Leader reported that following his most recent PR blunder, Schnatter immediately resigned from his spot on the University of Louisville Board of Trustees, according to J. David Grissom, the chairman of the board.

"After speaking with John, I'm confident that his comments, while inappropriate, do not reflect his personal beliefs or values," Grissom said.

"No member of the board of trustees condones racism or insensitive language regardless of the setting. The University of Louisville embraces and celebrates diversity and is a supporter of all its students and stakeholders regardless as to their identity. The board appreciates his two years of service and thanks him for his generous support for so many years."