Papa John’s founder John Schnatter says replacing CEO Ritchie is ‘step in the right direction’

Papa John’s Pizza founder John Schnatter arrives at the 2012 Academy of Country Music Awards in Las Vegas.

Denise Truscello | WireImage | Getty Images

Papa John’s founder John Schnatter said Tuesday that replacing CEO Steve Ritchie is a “step in the right direction” for the pizza chain.

The company named Rob Lynch, the former president of Arby’s, as Ritchie’s replacement earlier on Tuesday, effectively immediately.

“While I still have many reservations about the actions of the board of directors and their ability to fix this business, the decision to terminate Steve Ritchie is a step in the right direction,” Schnatter said in a statement to CNBC.

Schnatter handpicked Ritchie to serve as his successor in 2018. However, after Schnatter was ousted as chairman in July following a Forbes report that he used a racist slur on a conference call, his relationship with Ritchie soured.

In February, amid plunging sales, activist hedge fund Starboard Value invested in Papa John’s, which gave its CEO the role of chairman as part of the deal.

“I advised Chairman Jeff Smith directly as soon as Starboard invested in Papa John’s that he needed to replace Steve Ritchie,” Schnatter said.

Schnatter filed several lawsuits against the company in a bid to gain control. He eventually dismissed his claims as part of a settlement with Papa John’s and has been selling off his stake in the chain. Still, Schnatter currently retains a 16.7% stake in the company, which still makes him the company’s largest shareholder. He no longer has a formal role within the company after he did not seek reelection for his board seat, one of the terms of the settlement.

“Rob Lynch has proven to be an effective marketing leader in previous roles,” Schnatter said. “As the company’s largest shareholder, I’m hopeful that he can be successful at Papa John’s.”

Lynch helped lead Arby’s to 16 consecutive quarters of same-store sales growth, as well as record sales and profits last year. Prior to becoming president, he was chief marketing officer of Arby’s between 2013 and 2017. His accomplishments include its “We have the meats” tagline. Inspire Brands, which is privately held by Roark Capital Group, owns Arby’s and does not publicly release financial results.

As CEO, Lynch will be in charge of the embattled pizza chain’s turnaround. He said that he plans a bigger role for Shaquille O’Neal, who joined the board in March, and wants to engage with workers, franchisees and shareholders.

Papa John’s has been providing financial assistance through reduced royalties to franchisees in the hopes of mitigating store closures. Papa John’s has also been investing in marketing. The chain struck a deal with former basketball star Shaquille O’Neal, making him the new face of the brand.

Sales at stores open at least a year have been improving over the last three quarters, although same-store sales growth remains negative.

Read Schnatter’s full statement below:

“As I have told the Papa John’s board on many occasions for the past 15 months, a new CEO was needed to get the Company moving in the right direction. I advised Chairman Jeff Smith directly as soon as Starboard invested in Papa John’s that he needed to replace Steve Ritchie. I am pleased that Jeff Smith and the board have finally come to that realization and made a change in leadership. Rob Lynch has proven to be an effective marketing leader in previous roles. As the Company’s largest shareholder, I’m hopeful that he can be successful at Papa John’s. Under Steve Ritchie’s leadership these past two years, the Company was run very poorly. While I still have many reservations about the actions of the board of directors and their ability to fix this business, the decision to terminate Steve Ritchie is a step in the right direction.”

Papa John’s shares were trading up more than 9% on Tuesday, in the wake of the news.

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