Olson Engage, the public relations agency that was hired by Papa John's in February, cut ties with the pizza chain after racially charged comments made by the company's founder were made public Wednesday.
The PR agency was hired earlier this year to help the brand, franchisees and employees recover from founder John Schnatter's critical statements about the NFL last November. Those remarks ultimately caused the league to end its sponsorship deal with Papa John's.
"We were hired to help their brand, franchisees and employees recover from recent controversies and connect with consumers in new and exciting ways," Olson Engage said in a statement. "On the consumer front, we did precisely that through several programs that delivered very positive results. But we had significant recurring differences with their founder regarding the best way to address the controversies and restore and advance the brand's corporate reputation for the good of their workforce and franchisees."
Olson Engage said none of its employees were on the media training when Schnatter used the N-word and no one from Papa John's has ever used that type of language around any of its team members.
"If they had, we would have addressed the issue immediately and directly," Olson Engage said. "Our day-to-day clients were dedicated professionals and we wish them success moving forward."
Shares of Papa John's continued to climb on Thursday, jumping more than 13 percent, after Schnatter said that he was stepping down from his position as chairman of the company's board.
Papa John's said in a statement late Wednesday night that it will appoint a new chairman in the coming weeks. Olivia Kirtley, the board's lead independent director, will run the board until a permanent replacement is found, it added.
News of Schnatter's resignation came shortly after Major League Baseball indefinitely suspended its Papa Slam promotion — a campaign that both sides have collaborated on since 2016. In addition, the Miami Marlins announced Thursday that the team was suspending its relationship and all promotions with the brand.
Schnatter's name was also removed from a signpost of a gymnasium in his hometown of Jeffersonville, according to the Louisville Courier-Journal.
On Wednesday, Schnatter also stepped down from the University of Louisville board of trustees. However, the university's stadium is still called Papa John's Cardinal Stadium.
Schnatter's conference call in May came to light after Forbes magazine detailed the incident in an article on Wednesday. The report said Schnatter was on a call with marketing agency Laundry Service when he tried to downplay comments he made about the National Football League last fall and allegedly said, “Colonel Sanders called blacks n-----s."
Schnatter complained that the KFC founder never faced public backlash. The call was intended as media training for Schnatter to prevent future public relations fumbles.
“News reports attributing the use of inappropriate and hurtful language to me during a media training session regarding race are true," Schnatter said Wednesday in a statement released by Papa John's. "Regardless of the context, I apologize. Simply stated, racism has no place in our society.”
“This is the danger when organizations are too tied to a personality,” Hill told CNBC. “We saw it with Subway and Jared ... when things are going well and those people are popular, and they are doing smart things, it works. But then you have a single point of failure and it’s that person’s actions that reflect on the entire organization.”
While Schnatter is no longer the CEO or chairman of Papa John's, he is still tied with the brand's image and is featured prominently on the company's pizza boxes. Schnatter, who owns a 24 percent stake in the company, also remains on the company's board.
“I think the big thing for them going forward is how do they distance themselves entirely from John?" Hill said.