Commentary

Papa John's Stock Pops As It Recruits Arby's Lynch As CEO

Papa John’s yesterday named Rob Lynch -- a well-credentialed marketing guy who has been president of Arby’s for a couple of years -- to be its next CEO as it continues to struggle in the wake of founder John Schnatter’s controversial statements and use of racist language in a conference call with marketing agency Laundry Service.

“He was the man behind ‘we have the meats.’ Now he’s trading roast beef for pizza,” writes  David Yaffe-Bellany for The New York Times.

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“Lynch joined Arby’s in 2013 after holding marketing positions at Taco Bell, H.J. Heinz and Procter & Gamble. … Since he became Arby’s chief executive in 2017, Mr. Lynch has been a vocal opponent of the plant-based meat movement: In June, the company unveiled a ‘meat-based carrot’ as a tongue-in-cheek response to rumors that it was considering a partnership with the alternative meat company Impossible Foods,” Yaffe-Bellany adds.

Papa’s John’s shares were up 9.1% to $48.82 yesterday on news of the appointment and its reaffirming its full-year outlook for earnings and global same-store sales, Barron’s David Marino-Nachison writes.

“Mr. Lynch will take over immediately from current head Steve Ritchie, the Louisville, Ky.-based company said Tuesday. Mr. Lynch said he was eager to push the chain past controversy surrounding racially charged remarks by founder and former CEO John Schnatter and refocus on its reputation for variety and fresh ingredients,” Heather Haddon writes  for The Wall Street Journal.

“That’s what Papa John’s is about, not an individual,” Mr. Lynch said. “I’m a big believer in the brand.”

“Ritchie, a longtime Papa John’s franchisee, became CEO 18 months ago in a broader shake-up orchestrated by activist investor Starboard Value LP. Sales declines have narrowed recently and the company recorded its first profit since last year in its most recent quarter. New marketing plans and a suspension of some royalty fees have also helped to improve relations with franchisees,” Haddon adds.

Those plans include using basketball legend and board member Shaquille O’Neal as a roving ambassador for the brand.

Papa’s John’s chairman and Starboard Value CEO Jeff Smith tells Yahoo Finance’s Brian Sozzi he helped recruit Lynch and appreciated Ritchie’s efforts to right the ship. 

“Smith’s Starboard Value disclosed a $200 million investment in Papa John’s in February. It recently exercised an option to buy $50 million more in Papa John’s stock,” Sozzi writes.

Schnatter, who founded the chain in Jeffersonville, Indiana, in 1984, resigned as chairman last year. Earlier, he’d stepped down as CEO after blaming a Papa John’s sales slump on NFL players taking a knee to protest racism while the pizza chain was the league’s official pizza sponsor.

“Ritchie, Schnatter’s one-time protege, took over the role of Papa John’s CEO in January 2018.… Ritchie also worked as a delivery driver and store manager before becoming operating chief in 2014 and president in 2015,” Leslie Patton writes for Bloomberg, which broke the story of Lynch’s appointment Monday evening.

“Schnatter, long the largest shareholder, has been reducing his stake in Papa John’s, recently selling shares worth more than $30 million, according to a filing. Schnatter still controls almost 17% of the company’s shares, while Starboard holds about 15%,” Patton adds.

“While I still have many reservations about the actions of the board of directors and their ability to fix this business, the decision to terminate Steve Ritchie is a step in the right direction,” Schnatter told CNBC.

“Schnatter handpicked Ritchie to serve as his successor in 2018. However, after Schnatter was ousted as chairman in July following a Forbes report that he used a racist slur on a conference call, his relationship with Ritchie soured,” CNBC’s Kate Rogers and Amelia Lucas report.

“I advised chairman Jeff Smith directly as soon as Starboard invested in Papa John’s that he needed to replace Steve Ritchie,” Schnatter said.

He also sued him, alleging that Ritchie fabricated a claim that he was racist, Andrew Wolfson reported  for the Louisville Courier Journal.

Meanwhile, Inspire Brands, the company that owns Arby’s, Buffalo Wild Wings, Sonic Drive-In and Rusty Taco, says the sandwich chain’s CMO, Jim Taylor, will replace Lynch as president, reporting to Inspire CEO Paul Brown.

“Taylor was a key figure in developing products that supported the ‘meats’ claim, from extremely limited offers of venison and elk sandwiches to more mainstream protein-focused items. Among his most recent efforts was a tongue-in-cheek campaign that made fun of competitors’ embrace of faux meat products such as the Impossible Burger,” Peter Romeo writes  for Restaurant Business.

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