Papa John's Founder Bent on Wrecking Papa John's

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Published: September 1, 2018 8:15 am

Last Updated: January 11, 2020 6:31 pm

Papa John’s International Inc. (NASDAQ: PAPA) founder John Schnatter took another stab at destroying the company in which he is also the largest shareholder. He plans to file a suit that says that Papa John’s management and board have done substantial damage to the company. It is not clear what he will do should he win. Presumably, he would seek financial damages and perhaps a return to Papa John’s board, which might give him effective control of the public corporation.

ABC News reported Schnatter’s plan and that the company responded that the suit will only “distract” management and the board as they try to turn around Papa John’s sales and shrinking share price.

The suit is the most recent part of a battle of words between Schnatter and the board that dismissed him for making racially charged comments. He was, at the same time, thrown out as board chair. He lost the CEO’s job last year.

Schnatter’s thesis is probably that if he can run the company again, he can reverse its nosedive. He was a board member, chair and, for part of the decline, CEO. That makes his case suspect. It is also questionable whether someone who is doing so much to destroy the company could be qualified to salvage it.

Among Schnatter’s criticisms is that new CEO Steve Ritchie has done a poor job as the company’s leader. Schnatter hand-picked Ritchie and tutored him, another warning about Schnatter’s judgment.

As Schnatter battles the board, the company’s franchisees have to sit by to see how much the company will be harmed, no matter what the outcome of the suit is. The battles have been so public that many of Papa John’s customers have been exposed to it. Perhaps next, some franchisees will sue Papa John’s board or Schnatter for ruining their prospects. The legal wrangling could go on for months without a single winner. Schnatter may get his wish and burn the company down in the process.

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