Forbes: A recent town hall was canceled due to employee questions and the arrival of Mr. Schnatter.
FACT: The meeting was rescheduled – not canceled – for August 14 due to the significant volume of questions that the company received from employees. Separately, Mr. Schnatter was on the corporate campus that day. His presence continues to
be disruptive for many employees. We continue to encourage Mr. Schnatter to move on from the company. His behavior has turned our most loyal customers away from our pizza.
The rescheduled town hall was devoted to answering the employee questions and covered a wide range of topics, including those about the business, the strategy, recent leadership appointments, the audit and culture investigation, the company’s new
operating priorities, the company’s financial performance and the company’s stock performance, among others.
Forbes: Papa John’s monitors employee emails, phones, and computers.
FACT: Although company phones, emails and computers are company property, the company does not regularly monitor phones, emails or computers of our employees. We strive to ensure a workplace environment that is welcoming and respectful, and
if employees have any concerns to the contrary, we encourage them to report them.
Forbes: Steve Ritchie and other company leaders have contributed to a toxic culture within the organization.
FACT: Mr. Ritchie has denied any allegations of misconduct and does not permit, condone or tolerate any form of harassment or sexism in the workplace or at work-related functions.
Mr. Ritchie has been an advocate for women in leadership. He was instrumental in the recent promotion of Caroline Oyler to Chief Legal Officer. In addition, he recently promoted Victoria Russell to Chief of Diversity, Equity and Inclusion. She is
the first person of color on the Executive Leadership Team. Mr. Ritchie has promoted or hired multiple women and people of color into VP positions.
A special committee of Papa John’s Board of Directors, comprised solely of independent directors, has retained Akin Gump Strauss Hauer & Feld LLP, an outside law firm, to oversee an audit and investigation of the company’s culture. The audit and investigation
will examine all of the existing processes, policies and systems related to diversity and inclusion, supplier and vendor engagement and Papa John’s culture.
If the investigation uncovers issues that need to be addressed, the company is committed to taking action with the goal of ensuring that it is driven by the values of diversity, equity, inclusion and respect.
This is a priority for the special committee and they are moving forward accordingly, although a timeline to complete the audit and investigation has not been announced. The company will provide an update once the investigation is complete.
Forbes: Mr. Schnatter did not request his images be removed from company headquarters.
FACT: This is inaccurate – Mr. Schnatter asked that some of the images of himself be removed. Separately, the decision to remove Mr. Schnatter’s likeness from marketing followed independent testing that showed consumers were no longer connecting
with a brand dominated by his image. This sentiment was exacerbated after Mr. Schnatter blamed weakening sales on leadership at the National Football League.
Franchisees, partners and independent financial industry analysts have all expressed support for the new direction of the company including the recent actions steps including the top-to-bottom culture audit and our decision to remove Mr. Schnatter
as brand spokesperson:
- “We applaud the actions taken by the Company to define the future for the Papa John’s brand. The full FAC supports this collaborative agreement as well as other new marketing, technology and operational initiatives the Company is taking to move
the brand forward.” (Bill Green, Chairman of the Papa John’s Franchisee Advisory Council)
- “We believe it is time for the founder to move on. Steve is pursuing the right initiatives to reinvigorate growth and recognizes the importance of working together to move forward successfully. We appreciate the assistance being extended to our
franchisees and believe the assistance program will help mitigate the impact that the founder’s inexcusable words and actions have had on franchisees.” (Vaughn Frey, President of Papa John’s Franchise Association)
- “While we have been vocal in wanting to see more in the way of innovative value messaging and traffic driving initiatives, we feel strongly that an aggressive focus on the Company’s new initiatives (particularly brand, value, and technology) present
a much greater chance for success vs. remaining tethered to Mr. Schnatter’s image, which we believe would make a sales recovery incrementally more difficult. We would also note that we believe this opinion is overwhelmingly shared by the investment
community.” (Will Slabaugh, Analyst, Stephens Inc.)
Forbes: Morale is low within the organization and people fear retaliation for supporting Mr. Schnatter.
FACT: Many stakeholders, including employees, franchisees, customers, partners, investors and analysts, support the changes the company is making to move the brand forward.
While we have also heard from employees who recognize and appreciate Mr. Schnatter’s role as the founder of the company, our focus is on doing what is in the best interest of all stakeholders to best position the company for sustainable success, and
we are confident that we are.
Forbes: Mr. Schnatter is not responsible for the current state of the business.
FACT:In 2017, the business, which continued to be overseen by John Schnatter, slowed down due to three primary factors:
- Competitive pressures (including competitive inroads on technology)
- Advertising that was overly weighted to sports
- A founder-based brand message that independent testing showed was no longer resonating with targeted consumers, including millennials.
These challenges were exacerbated by the founder’s comments on the third quarter 2017 earnings call, which further alienated the company’s customer base.
The sales trends show these facts. In September and October 2017, sales were essentially flat. On November 2, 2017, there was an immediate double-digit sales decline that has persisted for multiple quarters – resulting from Mr. Schnatter’s comments
about NFL leadership.
The new leadership team can now make the changes necessary to reinvigorate sales and growth. Indeed, Steve Ritchie announced five new strategic initiatives earlier this year:
- Making People a Priority: We are investing in our people and doubling down on our commitment to diversity and inclusion as a top strategic priority across all aspects of our business operations. We have created new roles in this area and
engaged a multicultural agency of record.
- Improving Our Brand Differentiation: These efforts take into account what consumers - in particular millennials and gen z consumers - expect from businesses, including that companies have an active role in making the world a better place.
- Creating Accessible Value: We continue to focus on driving value perception by providing everyday accessible value to our customers and ensuring we build consumer trust through transparent and consistent pricing models.
- Implementing Technological Advancements: Our digital teams continue to make significant strides towards deploying an aggressive portfolio of technologies aimed at radically improving the consumer experience.
- Improving Unit Economics: We are building a stronger unit economic model through the use of business tools and user flow redesign to drive effectiveness.
Forbes: Victoria Russell is not qualified for her position as Chief of Diversity, Equity & Inclusion.
FACT: As discussed on the company’s Q2 2018 earnings call on August 7, 2018, recognizing recent events, we realized that we need to do more to put our best foot forward and ensure we are doing right by all members of the Papa John's family.
We recently promoted Victoria Russell to become the first Chief of Diversity, Equity & Inclusion for Papa John's International. In this newly created position, Victoria will be leading efforts that ensure our company’s commitment to diversity and
inclusion remains a top strategic priority across all aspects of our business operations.
A long-time advocate for diversity at Papa John’s, Victoria took on added responsibilities last winter with the creation of the Diversity & Inclusion (D&I) Committee and she was elected Chairperson in April 2018. In June, Victoria took on the role
full-time as Head of Diversity & Inclusion.
According to Steve Ritchie:
Victoria has stepped up as a true leader and shines brightly as a confident voice of change and reason. Naming her as the Chief of Diversity, Equity & Inclusion was a natural choice. I look forward to Victoria’s continued leadership in amplifying diversity, equity, and inclusion throughout the Papa John’s culture and the communities in which our team members live and work.
The company’s DE&I mission is, Doing Better: Our Commitment to Diversity, Equity and Inclusion –
At Papa John’s, our best ingredients are our people. Our Papa John’s family is 120,000 corporate and franchise team members strong, representing all walks of life around the globe. We are in communities large and small, and proudly partner with and serve customers from all backgrounds and experiences. For Papa John’s, our commitment to diversity is rooted in our belief that having a Papa John’s family that fully reflects and celebrates the global nature of our brand is the right way to do business.
We’re committed to doing better in this mission through expanded and new diversity initiatives, including developing a Diversity, Equity and Inclusion committee to better foster an inclusive environment that reflects the communities we serve. To make sure we get it right, we are assessing the culture at Papa John’s, are expanding our diversity and inclusion trainings and are bringing more accountability to our diversity recruitment efforts so that we all can do better—as a company and as individuals. We’re meeting with and listening to the concerns of our customers, our community partners, our store owners and our Papa John’s team members. We’re not only listening to feedback, we’re taking meaningful steps to celebrate the rich diversity within Papa John’s and in the communities in which we operate.
We are steadfast in fostering an inclusive and equitable environment for all who work with us, who partner with us, and importantly, who enjoy our product. We will unite as a company, guide and support each other, and hold each other accountable in embracing the global, diverse nature of Papa John’s. Together, we’re going to do better.
As part of her efforts, six subcommittees of 35 to 40 people already have been focused on minority recruitment, LGBTQ issues, marketing, statistics and social responsibility. Their goal is to offer recommendations to transform the company and make
it more purpose-driven.
Consistent with these commitments, the company has also engaged NIMBUS, a multicultural agency of record, to help us further align our internal and external DE&I efforts.