Papa John's: Worried Papa John Will Try to Take Over Company!

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On July 11, Papa John's namesake John Schnatter admitted to having used the n-word in a conference call and resigned as chairman of the company's board.

The company has removed his license from marketing. 

Unfortunately, some at the company fear that the man who has dragged the company down with him through multiple controversies will return -- with a hostile takeover.

John Schnatter

John Schattner is no longer the chairman of Papa John's board of directors. But he is still on the board.

It was only six months ago that he resigned as the company's CEO after making other controversial remarks -- which, by the way, were also laced with (less explicit) racism.

Will the company finally oust him and try to save the brand?

Right now, they're taking steps to at least limit the damage -- by adopting what is known in the business world as a "poison pill."

The Wall Street Journal reports that the Papa John's board voted to prevent John Schnatter from increasing his stake in the company beyond its current 29%.

John Schnatter Image

The fear, you see, is that the company's founder and former CEO will purchase enough stock to obtain a majority share in the company -- anything over 50%.

If he does that, then he would possess a controlling interest in the brand.

That would be a real coup for him, but absolutely devastating to Papa John's stock, which has continued to fall in recent months.

That is why they have introduced this poison pill -- or, as they called it in their statement, a "limited duration stockholder rights plan."

The board has already removed Schnatter's office at headquarters and, on July 13, made the wise decision to stop using his image in promotional materials.

John Schnatter Photo

This latest development stems from a July 11 report that claimed that John Schnatter had used the n-word during a conference call in May.

That word, which is unacceptable for use in any context, was allegedly accompanied by graphic descriptions of violence against racial minorities.

The fallout was swift, with the pizza company losing its media agency over the report and a swell of public outrage.

CEO Steve Ritchie (who replaced Schnatter just months earlier) released a statement: "Racism has no place at Papa John's."

Schnatter did admit to having used the slur. He resigned his position as chairman, but remains on the board.

John Schnatter Picture

An attorney for Schnatter has whined that the company is treating the founder as a "scapegoat" for struggles with investors.

That remark struck some as funny, given that Schnatter had complained that Papa John's stocks were falling as a result of NFL players protesting police brutality.

Papa John's was, at the time, the official pizza of the NFL, for whatever that's worth. They have since been replaced by Pizza Hut.

Schnatter also made waves for the company -- in a bad way -- in 2012, when he lashed out at the Affordable Care Act's requirements, and stated his intentions to pass on those (minor) costs to the consumer.

The man lives in a comically large mansion in the middle of a golf course. His complaints about "onerous" healthcare costs did not go over well.

John Schnatter Pic

It is possible, even likely, that Schnatter's fondness for stirring up racially charged and even explicitly racist controversies is not the only problem ailing Papa John's.

Their pizza is notable pricier than that of some of their competitors. A Domino's coupon can get you two medium two-topping pizzas for less than a Papa John's large specialty pizza costs -- also with a coupon.

Customers can do math. But a bad reputation can really sour a brand.

When it comes time for people to order pizza in groups, whether they're going to watch a sports game or play Dungeons and Dragons, no one wants to be the first to suggest the company that, in some minds, has become synonymous with racism.

The company itself is not to blame, but they have a lot of damage control work ahead of them.

And all of that will be for nothing if Schnatter ever does succeed in a hostile takeover.

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