John Schnatter—the founder and public face of pizza chain Papa John’s—used the N-word on a conference call in May. Schnatter confirmed the incident in an emailed statement to Forbes on Wednesday. He resigned as chairman of Papa John’s on Wednesday evening.
The call was arranged between Papa John’s executives and marketing agency Laundry Service. It was designed as a role-playing exercise for Schnatter in an effort to prevent future public-relations snafus. Schnatter caused an uproar in November 2017 when he waded into the debate over national anthem protests in the NFL and partly blamed the league for slowing sales at Papa John’s.
On the May call, Schnatter was asked how he would distance himself from racist groups online. He responded by downplaying the significance of his NFL statement. “Colonel Sanders called blacks n—–s,” Schnatter said, before complaining that Sanders never faced public backlash.
Schnatter also reflected on his early life in Indiana, where, he said, people used to drag African-Americans from trucks until they died. He apparently intended for the remarks to convey his antipathy to racism, but multiple individuals on the call found them to be offensive, a source familiar with the matter said. After learning about the incident, Laundry Service owner Casey Wasserman moved to terminate the company’s contract with Papa John’s.
In an emailed statement on Wednesday afternoon, Schnatter confirmed the allegations. “News reports attributing the use of inappropriate and hurtful language to me during a media training session regarding race are true,” he said. “Regardless of the context, I apologize. Simply stated, racism has no place in our society.”
Both Wasserman and Laundry Service declined to comment.
Schnatter, 56, founded Papa John’s in Jeffersonville, Indiana, after he installed a pizza oven at his father’s tavern. The business exploded into an international giant with more than 5,000 locations and annual revenue north of $1.7 billion. He stepped down as CEO in January following the November flare-up. “The NFL has hurt us by not resolving the current debacle,” Schnatter said on the company’s third-quarter earnings call, in reference to national anthem protests. Papa John’s stock subsequently fell 11% in hours, knocking $70 million off Schnatter’s net worth; he is now worth an estimated $700 million. In all, company shares have fallen 25% since the remarks.
The NFL incident forced Schnatter to lie low, and Papa John’s diminished his prominence in advertisements. That change did not sit well with Schnatter. He personally hired a marketing agency (not Laundry Service) to create ads featuring him that would air in key markets, a source close to the company told Forbes. Then, in May, he pushed out Papa John’s CMO Brandon Rhoten, who lobbied to keep Schnatter off the airwaves, multiple insiders say. With Rhoten gone, Papa John’s tasked Laundry Service with helping to manage Schnatter’s comeback.
Since 2015, Laundry Service has been owned by Wasserman, a sports and marketing agency owned by Casey Wasserman, who is also the grandson of famed studio executive Lew Wasserman. This week, Laundry Service laid off 10% of its workforce in response to financial pressure, attributable in part to its revocation of the Papa John’s contract.