When a business like Papa Johns starts shuttering stores, you can bet news of a decline in sales isn't far behind. Lo and behold, 2024 was dotted with reports of poor sales for the pizza chain, with its third quarter marked by a 6% decline across North America, putting sales at their worst since the second quarter of 2019. This followed a string of equally rough quarters for Papa Johns. In 2023, its CEO Rob Lynch (who has since left the company, but more on that later) noted that April had been the worst month for sales at locations open for at least a year since he'd joined the business.
Like a lot of its competitors, the chain has been battling soaring food and labor costs, as well as a general reluctance from customers to splash cash on regular food orders. In May 2024, Papa Johns noted that when customers did place an order, they were much more frugal than in the past. While pizza sales remained strong, it was sides and drinks that really suffered. The company added that customers were opting to place their orders via third parties -- such as Door Dash or UberEats -- instead of directly from the restaurant itself. These are industry-wide issues, but that doesn't change the fact that Papa Johns seems to be taking a harder hit than some of its competitors. Domino's, for example, reported sales increases throughout 2024.
Papa Johns took a major blow in March 2024 when its president and CEO, Robert Lynch, resigned. "This was an incredibly difficult decision for me, as I see all of the upside potential that exists for this great company," Lynch said in a press release, where he also expressed his optimism for the chain's future. "I am certain that Papa Johns' incredible leaders, franchisees and team members will continue to do what only Papa Johns can: deliver better pizza to the world."
Despite all the pro-Papa Johns sentiment, Lynch jumped ship to Shake Shack -- a fast food behemoth that, unlike Papa Johns, experienced serious growth in 2024. As shares dropped, Papa Johns introduced an interim CEO until Wendy's alumnus Todd Penegor stepped into the role in August. Realistically, CEOs switch jobs all the time, and a change in leadership doesn't always mean a company is on a downward spiral. However, combined with its recent disappointing sales stats, it doesn't exactly paint the most optimistic picture of the inner workings of the business.
John Schnatter may have given Papa Johns his name, but his behavior in the years since hasn't done the company any favors. While we won't exhaust you (or ourselves) with Schnatter's full list of controversies, some of his most infamous moments as CEO include claiming that Obamacare would increase the price of pizza in 2012, being accused of stalking in 1999, and sexual misconduct in 2009 (with Schnatter confidentially settling both cases), and blaming the NFL's failure to stop national anthem protests against systemic racism for a slump in pizza sales.
The latter ultimately served as the final straw for Schnatter. Not long after, he stepped down as CEO. Less than a year after that, Schnatter also stepped down as chairman when it emerged that he had used racial slurs during a conference call (which, ironically, had been arranged as a training exercise to prevent Schnatter from making future PR blunders).
While Papa Johns took its founder's face off its pizza boxes back in 2018, it's hard to totally distance yourself from someone who not only shares the same name but has since publicly denounced the company. Schnatter has criticized both its internal politics and products, having eaten 40 pizzas in 30 days to prove a supposed drop in quality. Its shares may have recovered from the sharp declines that followed Schnatter's more controversial moments, but it will be tough for Papa Johns to ever completely escape its founder's shadow.
Papa Johns spent seven fruitful years as an NFL sponsor, having first signed on in 2010. Founder John Schnatter even personally appeared in several Papa Johns ads alongside NFL players, such as former Denver Broncos quarterback Peyton Manning. That all came crashing down in 2017 when Schnatter made his now-infamous comments about the league's stance towards players kneeling during the national anthem, the subsequent decline in ratings, and the NFL's failure to intervene on the matter. "This year the ratings are going backwards because of this controversy," The Washington Post quotes Schnatter as complaining. "And so the controversy is polarizing the customer, polarizing the country."
As we know, this didn't exactly end well for Schnatter. It also didn't do much for the relationship between the NFL and Papa Johns as a whole. In February 2018, just three months after Schnatter's outburst, it was announced that they had made a "mutual decision" to officially end their partnership, (via Forbes). Instead, Papa Johns would shift its focus to partnering with local teams. The NFL wasted no time in moving on; within 24 hours, Pizza Hut was announced as its new sponsor, with Little Caesar's taking its spot in 2022. While neither NFL and Papa Johns ever openly pinned their professional breakup on the Schnatter debacle, the timing says it all.
A common trend since the pandemic is that customers want value. The likes of McDonald's, Starbucks, and Chili's have all leaned hard into promotions and deals to entice the budget-conscious. This is somewhere that Papa Johns has fallen short, with the company itself acknowledging that it has a pricing problem that has ultimately given its restaurants a reputation for being expensive.
As then-CEO Rob Lynch admitted in 2023, costs had soared at some of the chain's franchised locations. "Some of the pricing... had gotten out in front of where the consumer was willing to spend," he said during an analyst call, adding that these locations were "increasing their prices at a faster rate than [its] company-owned restaurants," (via CNN Business). This isn't a new problem for the company. Back in 2018, former CEO Steve Ritchie admitted that "there is a perception that we are overpriced. And because that perception exists, even the people who prefer our brand -- our loyalists -- use our competitors when times are tight," (via WDRB.com).
With the issue persisting years later (and many bemoaning the chain's high prices compared to the likes of Domino's and Little Caesars on social media), it seems like Papa Johns still has a long way to go in nailing its pricing strategy. The real question is whether or not it's too late to fix its pricey reputation in the cultural consciousness.
In the wake of the PR nightmares that was John Schnatter's exit from the company, Papa Johns hurried to improve its image in the eyes of the public. The solution? Paying NBA Hall-of-Famer Shaquille O'Neal $8.25 million a year to serve as a company ambassador, of course. This deal involved O'Neal starring in a string of Papa Johns advertisements, as well as investing in nine stores and taking a seat on the board of directors. "Papa Johns is building a better culture, and I want to be a part of improving the [company] from the inside," O'Neal said, (via CNN Business).
O'Neal played a key role in that transformation for five years, during which time he inspired the Shaq-a-Roni pizza -- through which Papa Johns has raised $13.1 million for The Papa Johns Foundation -- and was an integral part of the company's post-Schnatter recovery. "Papa Johns is in a much different place thanks, in part, to Shaquille's involvement with the brand," former CEO Rob Lynch said in 2024. However, that time came to an end in 2024 when O'Neal announced that he would step down from the board due to other business commitments. While he continues to serve as an ambassador (and, most importantly, the Shaq-a-Roni is going nowhere), Papa Johns has lost an important voice behind the scenes.
As if John Schnatter's NFL comments hadn't done enough damage, Papa Johns was slammed with a second wave of marketing disasters when its pizza was coopted by white supremacists. In November 2017, the website Daily Stormer shared a picture of a pie adorned with a pepperoni Swastika, captioned, "Papa John: Official pizza of the alt-right?"
This came as a direct response to Schnatter criticizing the NFL for not cracking down on players protesting police brutality, which some members of the far-right took as a sign that he was on their side. They soon flocked to his defense, with Daily Stormer writer Adrian Sol claiming that "this might be the first time ever in modern history that a major institution is going to be completely destroyed explicitly because of public outrage over their anti-white agenda," (via Newsweek).
Papa Johns was quick to distance itself from these sentiments. As it bluntly told the Huffington Post, "We condemn racism in all forms and any and all hate groups that support it. We do not want these individuals or groups to buy our pizza." However, it was too late to stop the controversy from fanning the flames that already surrounded Schnatter's comments.
Whoever coined the term "if it ain't broke, don't fix it" had clearly never worked in fast food product development. Restaurants are always coining new menu items to peak customer interest, some of which are massive successes, and others... well, not so much. Unfortunately for Papa Johns, the past few years have seen a string of underwhelming launches that have done nothing to endear the chain in the eyes of customers.
The most obvious is the infamous Papa Bowl. Added to the menu in 2019, this essentially takes your standard pizza toppings and dumps them in a plastic bowl, sans bread. If that sounds unappetizing, that's because it is. Responses were largely negative, with some mocking the chain for essentially undermining its hero product with a launch that referenced "pizza fatigue," (via CNN Business). As The Washington Post put it, "Papa Johns new pizza bowls are a bad execution of a bad idea." Harsh, but true.
Other stabs at new launches also fell flat. The Pepperoni Stuffed Pizza failed to impress, with customers criticizing the ratio of bread to toppings and the sheer lack of pepperoni, while there were also complaints about the quality of the new boneless chicken wings.
As a general rule, anyone with celiac disease or a severe gluten intolerance should be wary when a fast food restaurant declares any item to be "gluten-free." While it may be true that the dish is made without gluten, the nature of fast food kitchens often bears multiple risks of cross-contamination.
That's the case for Papa Johns gluten-free crust. Back in 2017, gluten-free customers were excited to learn that the chain would soon start serving a pizza base made with sorghum, teff, amaranth, and quinoa. However, they were soon met with the disappointing news that the pizza actually wasn't safe for them to eat. As the company told CNBC, "Although Papa Johns Ancient Grains Gluten-Free Crust is gluten-free and Papa Johns employs procedures to prevent contact with gluten, it is possible that a pizza with Papa Johns Ancient Grains Gluten-Free Crust is exposed to gluten during the ordinary preparation process."
Unsurprisingly, this news was met with mass disappointment. Considering how much the gluten-free market has grown in recent years, it stands to reason that a product that was actually gluten-free would've drummed up loyal business from those who actually required it for health reasons. Sadly, we'll never know.
Delivery drivers are the glue that holds the fast food industry together. That's why it's so frustrating to see companies undervalue the employees who make their orders happen. Unfortunately, Papa Johns falls into this category, with drivers in Kentucky, Colorado, Florida, Maryland, Minnesota, and Illinois complaining for years that the company had failed to properly reimburse them for the usage of their personal vehicles.
As per a lawsuit filed on behalf of 50,000 drivers in 2017, the Papa Johns reimbursement policy only covered a set amount per order instead of the IRS standard business mileage rate. This meant that they weren't being reimbursed for the full costs incurred by making deliveries, which in turn pushed their earnings below minimum wage, violating the Fair Labor Standards Act (FLSA) and several state and federal wage laws.
It took seven years of litigation for the case to reach its end, with drivers ultimately asking for a $20 million settlement. While several Papa Johns rivals have been hit by similar accusations by their delivery drivers in the past -- including Pizza Hut and Domino's -- that doesn't change the fact that it's a bad look for a company that's already dealt with its fair share of PR issues over the years.
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