When things have been going wrong, doubling down on your strategy is usually a mistake. Doubling down is exactly what Papa John's founder, John Schnatter, has been doing since the blowup over his use of the n-word during a conference call with a marketing firm. Even though he's trying to dig out from a situation that he may think is unfair, all that happens is that the hole becomes deeper and damage to the company continues and gets even larger.
From claiming extortion on the part of the marketing group to reportedly wanting to return to the company, Schnatter again demonstrates why silence and patience are often the wisest strategy. The more you try to fix things, the deeper into the trouble you can fall.
For example, according to a Wall Street Journal report, Schnatter as chairman had been discussing with Wendy's a potential merger:
The talks between Wendy's officials and Mr. Schnatter, who still sits on the board and owns 29% of Papa John's, were preliminary and began before he stepped down as chairman last week over the use of a racial slur, the people said. The talks, which Papa John's board was aware of, have cooled since the incident, one of the people said.
A merger between the two would make sense given competition. Yum Brands owns KFC, Pizza Hut, and Taco Bell. Both Subways and McDonald's are larger than Papa John's and Wendy's put together. In a world where bulk is supposed to be necessary for business success, particularly in an industry as competitive and challenging as fast food, looking for a complementary combination of companies would be normal.
Schnatter's lack of control has cost the company. Another marketing firm, Fallon, had started doing work for Papa John's in June and now has resigned the account, according to a statement given to AdAge:
"In mid-June, Fallon was retained by Papa John's International to create work for the brand," the Publicis Groupe-owned agency said in a statement to Ad Age. "The agency was unaware of the incident with its previous agency and learned about it with the rest of the world. During our short time with Papa John's, Fallon produced limited product-focused advertising that has yet to air. The agency has decided not to pursue additional business with Papa John's."
Then came the television interview where Schnatter seemed to claim that the marketing firm on the conference call, Laundry Service, had tried to extort money to "make it [the problem] go away."
Laundry Service reportedly has taken great objection and calls the implications "completely false," according to an internal memo AdAge obtained.
And now that Schnatter was shaken loose, there are new allegations about the culture of the company, reported by Forbes, of "behavior ranges from spying on his workers to sexually inappropriate conduct, which has resulted in at least two confidential settlements" and that it had been "a public company operated like it is privately owned."
Forbes noted that, through a representative, Schnatter "disputed most of the story."
If true, Schnatter has hurt the company deeper than anyone outside of it has known. Even if not, how could he return?
Much of America loves a second act. The wayward daughter or son, finally contrite and confessing all to appropriately high ratings, a prodigal returned. But there are rules. One is that you have to stop, or at least appear to stop, with the behavior that was a problem in the first place.
Papa John's has tried to push Schnatter away but given the amount of time he's been the face of the company, that won't be easy. At least, not until he puts his ego in check and stops talking. So long as he remains strongly associated with the brand, it will continue to have trouble.
There's a concept in business that sometimes you need a new leader. The founder may not have the skills to handle a larger company. In this case, Schnatter doesn't seem able to treat a publicly-held business the way it should be, as a steward, not a proprietor.