Papa John’s Rises After Reportedly Hiring Advisers To ‘Stabilize’ The Chain

Shares of Papa John’s (PZZA) are rising after Reuters reported that the pizza chain has hired financial advisers to help it find ways to “stabilize” the company.

WHAT’S NEW: Papa John’s has tapped Bank of America and Lazard as financial advisers in an effort to find ways to “stabilize” the chain, which is currently under pressure from founder and former chairman John Schnatter, Reuters reported, citing people familiar with the matter. The banks are still at a preliminary stage of assessing the company’s options, and there is no wider exploration of strategic alternatives or sales process currently underway, according to Reuters.

BACKLASH: Papa John’s has had a tumultuous summer, as founder John Schnatter resigned as chairman last month following reports that he had used a racist slur on a media training conference call. Following the founder’s resignation, multiple Papa John’s franchisees told Bloomberg that they were seeing a decline in business, causing many store owners to attempt to distance themselves from Schnatter. Such struggles were reflected in the company’s move to slash its fiscal 2018 adjusted earnings per share view to $1.30-$1.80 from $2.40-$2.60, with the pizza chain saying that the recent negative publicity negatively impacted July sales in North America. In addition, two weeks ago, Papa John’s announced a new assistance program for its franchisees in the U.S. and Canada in an effort to “help address the sales and operating challenges following comments made by the company’s founder”. 

SCHNATTER FIGHTS BACK: The New York Times reported in mid-July that Schnatter and his lawyer Patricia Glaser sent letters to the company’s board suggesting he was pressured to resign without any investigation into the circumstances, which Schnatter alleges involved an extortion attempt. Additionally, Bloomberg reported late last month that Schnatter was suing the company he founded, demanding internal files related to the board’s handling of his ouster. A week afterward, the Papa John’s founder told CNBC in an interview that he had “no confidence” in the pizza chain’s current management team, including CEO Steve Ritchie, and does not believe the team “has the capability to run the company”. Schnatter continued his crusade this week, launching a website called savepapajohns.com in an attempt to get “the truth out there”. “The Board wants to silence me,” the site’s homepage reads. “So this is my website and my way to talk to you”.