Can Shaquille O’Neal help Papa John’s revive its image?
Papa John’s International Inc. — briefly embraced by neo-Nazis as their pizza chain of choice after its then-chief executive blamed disappointing sales on NFL protests against police brutality and later used a racial epithet during a marketing call — has been on a yearlong quest to rehabilitate its corporate image.
The company forced out John Schnatter, its founder and longtime public face. It appointed its first executive focused on diversity and inclusion. It established a foundation that gave a $500,000 grant to help a historically black women’s college hold on to its accreditation.
And on Friday, in perhaps its most high-profile move, Papa John’s announced a new brand ambassador: NBA Hall of Famer Shaquille O’Neal.
O’Neal will join the company’s board of directors and invest in nine Papa John’s restaurants in his hometown of Atlanta, in addition to his marketing agreement with the company. The three-year endorsement deal will net him $8.25 million in cash and stock.
“Papa John’s is building a better culture, and I want to be a part of improving the company from the inside out,” O’Neal said in a statement.
The partnership with O’Neal could significantly boost the company’s quest to win back customers, especially among minorities, marketing experts say. But they caution against relying on the former Lakers star alone, as a “shiny marketing object,” to accomplish that objective.
O’Neal “is well-liked, without controversy and known as an entrepreneur. His involvement may help them to feel OK about patronizing the brand, especially in Atlanta,” said Sonya Grier, an American University marketing professor who focuses on race. “His engagement may also help to create perceptions of the brand as community-focused and help to overcome the destroyed trust.”
Grier said featuring O’Neal in Papa John’s advertising builds on the company’s campaign to showcase diversity among its franchisees and employees as a way of publicly distancing itself from Schnatter. The company spent $5.8 million last year on rebranding costs, removing Schnatter’s face from its marketing materials and pizza boxes.
Schnatter, who resigned as chairman last summer, recently quit the company’s board and settled a lawsuit he had filed to regain control of the company after he was pushed out as CEO in 2017.
Papa John’s sales in North America fell 7.3% in 2018 from the previous year, dropping 8.1% in the fourth quarter, according to a company call with investors in February.
After the O’Neal partnership was announced Friday morning, shares of the company climbed. They closed with a gain of 6.2%.
“There will likely be a segment of consumers who see it as a marketing ploy to increase the company’s brand favorability given their past misstep,” Grier said.
Steve Ritchie, chief executive of Papa John’s, said the company is hoping to attract more diversity throughout its operations.
“We are working through diversity, not only on the board, but also the leadership team, franchise base and supplier base,” Ritchie told CNBC’s “Squawk on the Street.”
O’Neal told CNBC that he had initially approached the pizza chain about the endorsement deal.
“The first thing when we met, what we talked about, was, you know, diversifying leadership roles and helping the African American community,” O’Neal told CNBC. “As I think about all of the stuff that went on, I worry about the 800 franchisees who did nothing wrong.”
O’Neal, who won four championships during his 19-year NBA career, is now a sports analyst with extensive business experience as a restaurateur, franchise owner and advertising spokesman. He is the founder and owner of a fast-casual fried chicken restaurant in Las Vegas, as well as the Los Angeles restaurant Shaquille’s, whose menu is a mash-up of Southern and steakhouse.
