As recently reported, Papa John’s has had a rocky road since it was reported that founder John Schnatter used a racial slur during a marketing call, subsequently resigned, then subsequently regretted that resigning. Unsurprisingly, this barrage of bad P.R. has had a negative effect on individual Papa John’s outlets: Some franchisees have reported a sales drop of at least 30 percent. So Forbes announces today that “Amid falling sales and a declining stock price, the company will cut royalty payments and food costs, in addition to offering other measures of relief.”
The measure was announced in a franchisee letter from current Papa John’s CEO Steve Ritchie, who states in the letter, “We had an open conversation about this unprecedented situation and the impact the severely disappointing words and actions by our founder have had on the business.” Forbes reports that store managers in multiple regions have had to reduce hours and that “delivery drivers are suffering from thin routes and thus fewer tips.” The unusual financial move is designed to ease these hardships for the individual franchise branches.
Meanwhile, CNBC reports that on Friday, the Papa John’s Franchise Association publicly urged Schnatter “to move on from the company, as it continues to be rocked by the events following his use of the N-word on a conference call.” (Although he resigned as chair, Schnatter is still on the Papa John’s board.) In what might be construed as a silver lining, though, some investors say that now would be a good time to buy Papa John’s stock (PZZA), predicting some sort of eventual turnaround. As a Longbow Research analyst explains to CNBC, “it can only get better from here.”