Papa John's doesn't care what you think

Spam texts and political statements have turned up the heat on the pizzamaker and its CEO.

By Jason Notte Nov 14, 2012 5:40PM

Credit: Andrey Rudakov/Bloomberg via Getty Images
Caption: An employee shapes dough for a pizza base at a Papa John's International Inc. pizza restaurantIn the last week, Papa John's (PZZA) was socked with a $250 million lawsuit for jamming mobile phones with spam and faced heat for saying that it may have to cut employee hours to avoid the looming Obamacare health care mandate.


Meanwhile, the pizza maker has renewed a multimillion-dollar sponsorship deal with the NFL, given away 2 million free pizzas just to acknowledge the start of the NFL season and hosted Republican candidate Mitt Romney at CEO John Schnatter's 40,000-square-foot Kentucky mansion.


Amid these mixed signals is one very clear question: Does Papa John's or its CEO care about its brand at all? The answer since election season kind of sounds like "no," especially when issues affect Schnatter's estimated $600 million fortune.


Back in August, Schnatter estimated that the new national health care plan would cost he and his franchisees $5 million to $8 million a year, forcing him to raise pizza prices by roughly 10 to 14 cents a pie (though Forbes put that number closer to 3 to 6 cents per pie). Depending on which number you believe, Papa John's $2 delivery fee will cost consumers 20 to 67 times more than Papa John's employee health care costs would.


After President Obama was re-elected, Schnatter doubled down said it was likely that some Papa John's franchise owners would likely reduce hours to avoid penalties under the Affordable Care Act -- which states that full-time employees at companies with more than 50 workers must be provided with insurance by their employer. Schnatter notes that about a third of Papa John's employees have health care coverage through the company, but rising health care costs have precluded him from bringing that number closer to 100%.


That's kind of interesting, since Schnatter is parting with an estimated $24 million to $32 million -- or about four to six times the additional health care costs he so fears -- to give away free pizzas during the NFL season as part of a customer loyalty program. He's also struck a deal with Peyton Manning to make the star quarterback the owner of 21 Papa John's franchises in the Denver area and paid to make Papa John's the official pizza of the NFL's Arizona Cardinals, Atlanta Falcons, Baltimore Ravens, Dallas Cowboys, Houston Texans, Indianapolis Colts, Miami Dolphins, Philadelphia Eagles, St. Louis Rams, Tennessee Titans and Washington Redskins.


The pizza CEO hasn't exactly been crying poverty in his private life, either. He has a net worth of more than $600 million. He likes to tell stories about hocking his prized 1971 Chevy Camaro to save his dad's bar and start his business, but paid $250,000 for that same Camaro back in 2009. His giant estate outside of Louisville features 16 acres of swimming pools, a golf course, a private lake, a 22-car multi-level underground garage with valet office, a car wash and a turntable driveway for limousines. The 6,000-square-foot guest house alone is valued at nearly $7 million.


"Who would've imagined pizza could build this," Romney said during a fundraiser at the mansion in August. "This is really something. Don't you love this country? What a home this is, what grounds these are, the pool, the golf course... Republicans come here and say everyone should live like this."


Like Romney, however, Schnatter's using a lot of money and words to finish short of first place. Fast-food industry publication QSR Magazine ranked Papa John's third among pizza franchises behind Domino's and Pizza Hut and 18th overall. Its $2.2 billion in U.S. sales last year lagged behind Domino's (DPZ) $3.4 million and Pizza Hut's (YUM) $5.5 million. The $786,000 it brought in per restaurant in 2011 not only trailed Pizza Hut's $875,000, but Cici's $895,400. Keep in mind, Papa John's has about six times more locations than Cici's.


The franchises Schnatter claims he's defending, meanwhile, were just targeted by a $250 million class action lawsuit alleging that Papa John's and marketing firm OnTime4U teamed up to send spam texts to customers who hadn't given their consent to be texted. The suit now includes thousands of customers who claim that Papa John's outlets sent hundreds of thousands of unwanted texts as a result.


This wouldn't weigh on Papa John's so heavily if the company had staked its success to the "better ingredients" in its motto. On overall quality, Papa John's gets hammered by another, smaller papa. Consumers polled by both Zagat and trade publication Nation's Restaurant News picked take-and-bake pizza shop Papa Murphy's as their favorite pizza chain, despite the Papa John's tripling the upstart Papa's sales and location count.


So how does it play out when a big pizza chain goes partisan and loses to smaller competitors on quality? Just ask Domino's, whose founder Tom Monaghan used his pizza fortune to fund Republican candidates and Catholic institutions and activism -- including anti-abortion efforts -- before selling the company to Bain Capital in 1998.


Domino's quality dropped to baked cardboard levels before the company retooled its pizza formula in 2009 and launched it with an ad campaign acknowledging the company's sullied reputation and years of subpar pizza. Domino's has now kicked "pizza" out of its name altogether as it focuses on reinventing its brand and expanding the menu.


Papa John's may face similar concerns about its brand in the near future. By the looks of it, though, its current CEO may not come down from his political soapbox and pile of money long enough to address them.


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Tags: DPZPZZA
46Comments
Nov 14, 2012 11:43PM
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Lousy pizza anyway. John Schnatter needs to move his business to Somalia; no government, no taxes and no health care.  Taxes are the price we pay for a civilized society, John.  And your pizzas really, really suck.
Nov 15, 2012 9:21AM
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I worked for Papa Johns for 12 Years as driver cook ,manager and met John Schnatter's many times
Very nice man cares about his employees and customers .I am a cancer survivor I had to leave company because my cancer came back I could never afford health insurance through Papa Johns or preexisting condition receive Papa Johns Insurance  or  get help from the Supervisor or Managers in my time of need. They said that Papa Johns had a fund for sick employees ??Never a letter or call from Corporate Office  headquarters in  What happened with Papa Johns over the years I worked there was it became real big and Supervisors for each State where greedy and started to find ways to make   bonus bigger and stock options by taking from the managers.drivers and cooks there promised bonus,If you work 10 years you get $5000 bonus never saw that , Walmart gift cards and now charging the loyal customer a delivery fee.I don't  blame John Schnatter's very nice man  worked hard to build his business and now creates jobs for middle class, college students,single parents .I blame  Supervisors or Big Corporate Supervisors Office  headquarters in  who  lied to us  bullied ,would never give are messages to John Schnatter's .Especially after the old Blockbuster Video CEO Nigel Travis took over from John Schnatter's.And his only concern was pushing the stock price up.Great job by the way .Good luck with President of Dunkin' Donuts. 
Keep it simple John Schnatter's and visit more stores like you use to do and pull employees drivers cooks aside and talk to them under cover boss?
12 years sad to be treated like that by a company that promised so much  and no help from a Papa Johns fund I donated to when my Cancer came back.
Nov 14, 2012 6:48PM
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So, Jason, you wouldn't by chance have voted for Obama? Your "Stock" article sounds more like an Occupy Wallstreet rant than anything else.
Nov 15, 2012 4:36PM
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Never have had Papa Johns and now I never will.  Their move is idiocy at it's finest!

It is a free country and if they cut jobs or hours it's only because they won't take less money home for themselves!  If you think of it that's insane...they have more than millions and could most likely live a quite comfortable life for the rest of their lives and their kids lives and their grandkids lives and never take another penny of profit from their business!!!

Greed knows not ends and the greedy among us will do anything to keep their precious money.

It's not about money ya know...this life...it's about relationships!

Nov 15, 2012 12:15AM
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250 million dollar lawsuit for some unwanted txts? WOW
Nov 14, 2012 11:17PM
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You can take it to the bank that a Papa John's employee spit in your pizza.

 

Enjoy.  Yum.

 

 

 

 

 

 

Nov 15, 2012 12:38AM
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American Greed!  that is what the Republicans and John Schnatter are about.  We are talking about medical for your employees, come on.  Rich people like Mitt are not eating Papa Johns,  is the middle class that eats papa johns. I will never buy this product again.

Nov 16, 2012 2:23PM
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I would love to be at the pearly gates when the big Papa gets there .I would like to hear the bullcrap he will use for the excuse that the employees that bought him a 600 million dollar home dont deserve health care .I would pay .08 more for a pizza,but I dont like Papa Johns.They dont use better stuff.
Nov 20, 2012 7:14PM
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Sorry Papa, with your antics, you've lost a customer forever with me.  have two sons who like pizza a lot, so pizza hut?
Nov 15, 2012 7:47AM
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Don't think I have ever had a Papa John crap pizza

 

Don't think I ever will.

 

I advise all PJs employees to get a job else where.

 

All others, boycott this place. 

 

Nov 15, 2012 12:02AM
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Okay, let me understand this, if you support a republican your pizza will taste like card board? Can this be true. Domino's allways sucked. it has recently gotten a little better but like papa puke's it's not real pizza anyway. So, in conclusion, I think even if they backed a democrat they still would have and do suck!

Nov 15, 2012 8:39AM
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Sounds like opportunity to me. Pizza: flour, water, oil, REAL cheese (not that chemical stuff), tomatoes and basil. It has an excellent profit potential as long as you don't grow too big. Concentrate on a good meal deal package and they will order. What we need are fewer Papa John's (he's a total loser in his television spots) and more local establishments. Is a nuisance like Schnatter worth the bother? No. Go forth and enterprise, leave no brand name unchallenged!!!
Nov 20, 2012 6:57PM
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They're cutting their noses to spite their faces. DUMB!!!
Nov 14, 2012 11:52PM
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pj's is probably 4th or 5th on my list, not really that good.  Less inviting now....and I grew up in derby city.
Nov 21, 2012 7:16PM
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Restaurant owners have been getting away with murder for years. Name me one other industry that gets away with paying less than minimum wage. I don't begrudge any one creating a successful business but the truth is most business owners don't want to share ANY of the profit. Profit they would not have made if not for the employees who do the work that makes that profit.  There has to be a happy medium between profits and benefits.
Nov 21, 2012 4:54PM
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No more Papa Johns pizza for me. He has so much money made by his employees and not him, he could share just a little if he does clear close to 800,00.00 per business. The insurance will only cost him less than 20,000 per business per year at their rate and leave him with 780,000.00 per. MY, MY, can he afford that esp. if people stop buying like I am going to. Everyone should  make that a New Years res. not to buy any more pizza from Papa Johns. Even Manning might see the big picture and buy insurance for his P.J.s employees in CO. while he is also making MILLIONS on his deal with P.J.s AND football. LETS STAND BEHIND THE WORKERS who make min. wages at Papa Johns.
May 6, 2013 3:34AM
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You guys need to use your head and understand that the majority of Papa John's stores are franchisees. That means a local business man owns and operates the stores and gives Papa John's Corporate royalty fees. If you boycott Papa John's, you will do more damage to the business owner and then he will have to cut hours for employees. In the end the local business owner and local employees get hurt by these acts. Everything has a trickle down effect. Next time think things through.
Nov 24, 2012 10:38AM
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crappy chain pizza with cheap ingreedients, mabey if we tried to support individually owned restaurants and shops the dollars would stay here in this country.
Nov 15, 2012 12:42AM
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I'm ordering Pizza Hut tomorrow and often. 
Nov 15, 2012 9:16AM
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i agree, this author is a Dem....no doubt!  Let's see how a George Soros article by this guy reads, lol...
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