This post is part of the On the Margin blog.
Earlier today, Papa John’s International Inc. founder and CEO John Schnatter blamed his chain’s weakening same-store sales on bad NFL ratings — and then blamed the ratings on the controversy over players kneeling during the anthem in protest over police brutality.
He said the NFL’s image took a hit as a result of the controversy, and by extension so did Papa John’s.
“The NFL hurt us,” Schnatter said, calling the controversy “an example of poor leadership.”
His comments generated a lot of controversy.
Indeed, in more than 10 years covering restaurants, I don’t know that anything I’ve written that has generated as much vitriol as did my tweets this morning on Schnatter’s comments.
And that illustrates his chain’s problem. Papa John’s and Schnatter are in a particularly difficult spot with the controversy over NFL protests.
First, I don’t know what is causing the NFL ratings decline. It’s certainly possible that the controversy is hurting ratings. It’s just as likely that the large number of games available on television, as the Fox CEO believes, is as much of a culprit. Netflix might be hurting ratings as it is everything else on television. Perhaps the games are terrible. And maybe the NFL just has a bad reputation because of concern over the lingering impact of head injuries.
But there is no question that weakening NFL ratings would hurt Papa John’s same-store sales. Sure, the chain’s same-store sales rose 3.8 percent in the past three months of 2016, when NFL ratings were also in decline. But the company had Pan Pizza to fall back upon then. And its sales had been stronger that year.
The chain’s same-store sales have been relatively weak so far this year, ranging from 1 percent in the third quarter to 2 percent in the first quarter.
Papa John’s made a bigger investment in the NFL this year, and that investment backfired. The chain’s generally weak sales this year probably emphasized its NFL-related sales issues.
The problems with the NFL could be causing the chain problems with its core group of consumers — a core group that Papa John’s has come to rely upon to generate sales.
As the primary voice for his chain’s advertisements, Schnatter might be the most recognizable CEO working today. He’s also among its most controversial, largely for his well-documented political views. Much of the reaction over Schnatter’s comments came from people with left-leaning viewpoints who had little love for Papa John. Schnatter has some well-documented political leanings, and hasn’t been afraid to make his opinion known on various issues.
As a rule, restaurant chains have a remarkable ability to survive political controversy because most people simply don’t care.
In 2012, for instance, Chick-fil-A CEO Dan Cathy stepped into the debate over gay marriage. Chick-fil-A is the hottest restaurant chain in the country right now
Papa John’s has never shown any ill effects from Schnatter’s comments in the past. The chain’s same-store sales have increased for 28 straight quarters. The current slowdown is the first real sign of weakness in years.
In simple terms, while some people care about the viewpoints of a company’s CEO, most people simply want a pizza or a chicken sandwich.
But in this instance, it appears that Papa John’s is finding itself at odds with people on both ends of the political spectrum. Vitriol is coming from both the left, who didn’t like Schnatter’s comments and never liked his politics, and the right who are angry with the NFL.
This explains Schnatter’s view that reaction to the protests has hurt the NFL’s image, and his company’s image by extension. Papa John’s has come to rely heavily on sports fans for its sales. And when a certain segment of the population turns those football games off out of anger, they may well turn away from the chain’s pizza.
Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.
Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze
