Dive Brief:
- Papa John's has reached a settlement with founder John Schnatter, who agreed to resign from the board of directors if a mutually agreed upon independent director is appointed prior to the 2019 annual meeting of stockholders, according to an SEC filing.
- Schnatter's recent submission to nominate himself to be re-elected to the board will be withdrawn.
- The company also agreed to remove a provision in which Starboard would have voted in favor of the board's nominees.
Dive Insight:
Papa John's year-long controversy could be coming to a close, putting the struggling company on a much clearer path forward. The drama, which began after then-CEO Schnatter said racist comments during an investor call, has been an expensive one — costing the company nearly $51 million last year. The company spent $3.6 million alone to remove Schnatter's image from marketing materials. The pizza chain also reported a 20% revenue decline and over a 7% same-store sales decrease for 2018. Schnatter still owns about a third of the company’s shares.
Earlier this year, the conflict appeared to be reaching a new level when Starboard invested $200 million in the company and new board members were appointed.
The company is hoping for a turnaround, launching new marketing efforts, including partnering with star athletes and social media influencers. It is also rolling out new specialty pizza flavors this month, such as a chicken and waffle pizza, and revamped its rewards program. It's also looking to add cheaper $6 pizzas. This move would make it more competitive against rivals Pizza Hut and Domino's, which already offer value pizzas.
The chain also has been testing third-party delivery with DoorDash, which may give it boost against growing competition from other restaurants dipping their toes into delivery.
While these moves likely won't put the pizza chain back into positive same-store sales — even the company is expecting a sales decline of 1% to 5% this year — it may give it a chance to gain much needed momentum in the highly competitive pizza industry.
