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Bad news is bad business

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Julian Dailly EVP 01/02/2019

The impact of Papa John's news disaster

A lot has been written about the downfall of John Schnatter, Papa John’s disgraced founder.
In 2017 Schnatter linked the poor commercial performance of Papa John’s NFL sponsorship with players dropping to one knee during the national anthem. In making this connection Schnatter inadvertently positioned the hugely significant Black Lives Matter movement as an unfortunate obstacle standing in the path of marketing ROI.

Has Schnatter managed to destroy the company’s reputation alongside his own?”

Following the ensuing outrage, Schnatter ‘stepped down’ as CEO. Then in June 2018 Schnatter put his foot in it again by using ‘the n-word’, ironically whilst receiving coaching on how to deal more sensitively with difficult questions. This saw Schnatter ‘resign’ once again, this time as Chairman, but in a final twist he is now seeking his reinstatement and the ousting of the incumbent management.

How has this mess impacted the Papa John’s brand? Has Schnatter managed to destroy the company’s reputation alongside his own?

Papa John's negative buzz score has soared”

Savanta’s BrandVue Eating Out sentiment tracker, based on a monthly survey of 5,000 US consumers, reveals that the brand, and sales, have suffered significant damage. Papa John’s ‘Negative Buzz’ score, the percentage of consumers having heard something bad about the brand recently, has soared from 5% before the crisis to 17% at its peak. This is a big deal because negative buzz is a predictor of falling sales:

  • Before the crisis, quarterly figures show Papa John’s revenues up 6% year on year (YOY)
  • March 2018 quarterly data showed that revenue had fallen by 5% YOY
  • June 2018 quarterly shows that the pace of decline had accelerated with revenue now down a further 6% YOY
  • And for the 3rd quarter, as negative buzz rises further, the company said sales would decline even further by between 7% and 10%

So the Papa John’s story reminds us of the truism that bad press is bad for business. Very bad.

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