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The IUP Journal of Organizational Behavior

Crisis at Papa John's Pizza: Fall of John Schnatter

Article Details

Pub. Date	: October, 2021
Product Name	: The IUP Journal of Organizational Behavior
Product Type	: Article
Product Code	: IJOB301021
Author Name	: Memendu Showry* and Indu Perepu
Availability	: YES
Subject/Domain	: Arts & Humanities
Download Format	: PDF Format
No. of Pages	: 20

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Abstract

This case describes the struggle of the US-based pizza chain Papa John's International Inc. (Papa John) to recover from the PR crisis. In 2018, the troubles for the company began when Forbes reported about the racial slur made by the founder of the company John H Schnatter (Schnatter). Forbes' article also detailed about the company's 'toxic' culture and a number of deep-rooted issues involving Schnatter. Following the controversy, Schnatter had to step down as chairman of the company, but did not stop putting his foot in his mouth. In 2017, he lost his position as CEO after he set off an uproar by blaming the National Football League (NFL) players for the pizza chain's lagging sales. His statement led to a drop in sales. Further, marketing partners and consultants were breaking ties with the pizza chain. The numerous allegations against the founder posed a threat to the company's image. Struggling to put an end to the fiasco, the board of Papa John's finally decided to ward off Schnatter from the business by adopting 'poison pill'.

Introduction

On July 23, 2018, the board of directors of US-based pizza chain Papa John's International Inc.'s (Papa John's) adopted the 'poison pill'2 (also known as stockholder rights plan) to prevent the founder, John H Schnatter (Schnatter), from taking over control of the company. Schnatter, who owned a 29% stake in the 34-year-old chain, meanwhile, signaled that he was not going away without a fight. Patricia Glaser, Schnatter's lawyer, said, "John is not going to go quietly into the night and watch the company he worked so hard to build fall off a cliff. He is going to protect shareholders and the company as much as he can."iii