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Papa John’s taps Arby’s head as CEO

Papa John’s International Inc. has hired Arby’s President Rob Lynch as its chief executive, the pizza chain’s second change at the top in less than two years amid falling sales and controversies.

Lynch will take over immediately from current head Steve Richie, the  company said Tuesday. 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.

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

Ritchie, a longtime Papa John’s franchisee, became CEO 18 months ago in a shake-up orchestrated by activist investor Starboard Value LP. During an interview earlier this month, Ritchie said that such overhauls typically take around 18 months and that Papa John’s had made progress this year.

Papa John’s made the switch now because sales are improving and Lynch was open to coming on, board President Jeff Smith said.

Papa John’s has faced controversies with its founder as well as tough competition for takeout pizza sales. Schnatter left Papa John’s board in March after making racially charged statements. He has steadily sold company stock since departing, including 250,000 shares last week, according to a filing. Schnatter’s holdings are down to 16% from 31% of the company’s holdings in April.

Papa John’s sales slumped after the controversies. Sales have started to stabilize since Ritchie has pumped money into a restaurant marketing fund for franchisees and brought on retired basketball star Shaquille O’Neal as a board member and brand ambassador. The company plans to spend $20 million this year on a marketing campaign featuring O’Neal.

“I’m not going to say that we are out of the woods,”  Ritchie said after the company reported its first quarterly profit since last year. “But the franchisees do have confidence that we have a strong brand and new leadership.”

U.S. fast-food chains are fighting for executive talent as they struggle to lure diners. Legacy brands in particular are fighting to remain relevant as consumer tastes change. Inspire Brands Inc., parent company to Arby’s Restaurant Group as well as Buffalo Wild Wings, had viewed Mr. Lynch as central to turning around Arby’s. He came to Inspire from Taco Bell in 2013 and focused on building up the roast-beef sandwich purveyor’s image as a meat-lover’s restaurant. He avoided adding plant-based meats to Arby’s menu as many rivals have done recently.

“We’ve turned this business around over five years after being clear on who we are. It’s been a large part of our success,” Lynch said in an earlier interview.

Inspire said it had named chief marketing officer Jim Taylor to succeed Lynch as president of Arby’s.

Lynch said he intends to keep Papa John’s leadership team in place and that he expects O’Neal to act as a prominent advocate for the chain.

Papa John’s also reaffirmed its financial guidance Tuesday. It expects adjusted diluted earnings of $1 to $1.20 a share for its current fiscal year and a same-store sales drop of between 1% and 4% in North America. Internationally, the chain expects sales to be between flat and up 3%.

Legacy brands like Papa John’s are trying to remain relevant as consumer tastes change. PHOTO: LUKE SHARRETT/BLOOMBERG NEWS

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