The Recipe Behind The Papa John’s Scandal

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John Schnatter, CEO of Papa John’s, first came under attack after his address to shareholders in August. What wasn’t meant to be a public declaration of being against the Affordable Healthcare Act as introduced under the administration of President Barack Obama, turned into a discussion gaining a lot of confusion and animosity towards the pizza chain.

John proclaimed in August that, “We’re not supportive of Obamacare, like most businesses in our industry. But our business model and unit economics are about as ideal as you can get for a food company to absorb Obamacare.” The Politico article containing words from the call went on to include the company would use tactics to protect its shareholders. In the same call John went on to say, “Our best estimate is that the Obamacare will cost 11 to 14 cents per pizza, or 15 to 20 cents per order from a corporate basis.”

Now for the general public who sees that Schnatter was a huge donor and supporter of the Republican Presidential Candidate, Governor Mitt Romney, they can equate the use of his term of Obamacare and his personal support to mean an attack on policies and lack of consideration to employees. However, I do not believe this is where John went wrong. Stick with me, I’ll show you where his words started to bite him.

• After the shareholders meeting, Papa John’s announced its NFL promotion to giveaway 2 million pizzas.

• Schnatter says that franchises will more than likely reduce employee hours. This news reignited the public spurring a boycott of Papa John’s.

I do not believe that it is the concern of people who support the healthcare act or not, that is really driving the criticism, it’s the simple math of it all. The mixed statements coming from John has caused this backlash. Here’s why.

The public sees an increase in rates, free pizzas being given away and a reduction in employee hours. Period. John has not clearly addressed the fact that instead of raising rates, the employee hours will be reduced. Although, as seen, it was not swallowed as easily. But making a statement to amend a previous one would have placed some indication that there is an “either or” or not both in this situation. But instead of clarifying the company’s position, he left individuals to ask the question, “why raise the rates and give away pizzas if you still intend to not provide healthcare to your employees and reduce their income?”

Now that probably isn’t the message John was intending on sending, but due to the inconsistency or not providing clarity in their business’ possible solutions, he created an uproar to those who like to do arithmetic, such as Caleb Melby of Forbes Magazine. You see, Caleb decided to break down the proposed revenue of the increase and even the promotional giveaway. Like many others, this giveaway was really putting a wrench in to the thought of customers seeing employees lose income instead of Papa John’s incorporating the insurance. Even in the August call, John indicated that his company is structured to handle such a change. So if this is a manageable change to the business model, why continue to speak about the regulation in a new public appearance? Now this just comes off to the public as a man upset with the outcome of the election.

What really draws my interest as a media professional to his original statement to the shareholders, is that if he had used words to not draw an emotional response to government policy, increasing the price of the pizza would have been forgotten after it was implemented. Instead his words then have tangled with his words now. Truth be told, the cost of food increases every year. In fact, food increases are felt by consumers often throughout the year. The increase would have been assumed by many as the cost of inflation not disdain for providing healthcare to employees. Had emotions over politics never entered the original statement, the majority of the public may have never been the wiser. Just think about it, if Frito-Lay decides to make a huge spend within their company, does the typical American know the reason behind it?

I wanted to give Schnatter some credit from his recent statement. He said he isn’t in support or against the Affordable Care Act. But as mentioned above in his words at the stakeholder’s meeting, that isn’t the truth. It makes it hard for the public to believe, “the good news is 100 percent of the population is going to have health insurance” when a couple of months ago you stated you were not in support of Obamacare. Unfortunately, by the time he publicly mentioned this in a recent appearance, everyone had already stoned him for going against their company’s mission of protecting their best asset, their employees and had NOT forgotten his original comment of being against the healthcare act.

John Schnatter really has only one thing left to do at this point in his crisis, slice up and eat some humble pie. Here is what I recommend:

• John needs to make one final and clarifying statement on the topic of how his company will handle healthcare as it concerns his employees.

• His final statement should be either pro-customer or pro-employee. If he has paid attention to the comments, he would realize that none have been highlighted as saying, the public will not pay the extra cents so others can have health insurance. Either way, he needs to make one final statement and stop discussing it from various angles. The inconsistency is not sitting well with customers.

• The company needs to focus on publicly highlighting their mission to their employees and to the customers. Ensuring to the public, a business that started off small, can still relate to the working class (his demographic).

• Until this is completed, the emphasis on giving away 2 million pizzas needs to simmer in the oven before serving it back to the public. (Pun intended.)

• This should all be done before the boycott gets legs and runs away too far for him to fix.

What do you think? How has the Papa John’s discussion played out among your family members, friends or business associates? Above all, please walk away with this reminder to not incorporate political emotions into your company’s public stance.

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