Ousted Papa John's founder blames company CEO for 'rot at the top' in accusation-filled letter

  • Papa John's founder John Schnatter claimed Chief Executive Officer Steve Ritchie is at fault for the company's poor performance.
  • Schnatter, in a letter addressed to franchisees, said "bad financial decisions, insufficient management skills to correct them, a toxic senior management culture, and serious misconduct at the top levels of our leadership" were behind his ouster as chairman.
  • Papa John's, in response, said Schnatter was "making untrue and disparaging statements in a self-serving attempt to distract from the damaging impact his own words and actions have had on the Company and our stakeholders."
Papa John's founder John Schnatter
Jeff Kravitz | Getty Images
Papa John's founder John Schnatter

In the latest development of the current crisis facing Papa John's, ousted founder John Schnatter on Monday made a slew of accusations against Chief Executive Officer Steve Ritchie for causing the company's poor performance.

Those allegations, which Schnatter detailed in a letter addressed to franchisees on the website "savepapajohns.com," blamed Ritchie for "bad financial decisions, insufficient management skills to correct them, a toxic senior management culture, and serious misconduct at the top levels of our leadership."

"The source of the company's poor performance is rot at the top," Schnatter wrote.

Schnatter claimed he had discussed Ritchie's poor performance with the company's board, which agreed and asked the founder to become executive chairman. Then, Schnatter drew up a list of senior management that he wanted to be replaced, including Ritchie.

However, the ousted chairman claimed that Ritchie — through a subordinate who "was having an affair with someone in our IT department" — got hold of that list and engineered Schnatter's departure instead.

The company founder also claimed that the Papa John's human resources department has "detailed evidence of sexual misconduct, harassment and intimidation by virtually everyone in (Ritchie's) inner circle." And, at the conclusion of his letter to franchisees, Schnatter slammed the company's CEO as someone "out of his depth" and looking to blame others.

"Right now, he's blaming me," the ousted pizza magnate said to the franchisees. "Tomorrow, it might be you. It will never, however, be (Ritchie's) responsibility."

A Papa John's spokeswoman said Schnatter's claims were unfounded.

"Once again, John Schnatter is making untrue and disparaging statements in a self-serving attempt to distract from the damaging impact his own words and actions have had on the Company and our stakeholders," the spokeswoman told CNBC in an emailed statement.

"At no time has the Board asked John Schnatter to become Executive Chairman. In fact, the company has taken multiple steps to separate itself from him. John Schnatter also publicly supported Steve Ritchie's appointment as CEO at the end of last year," she added.

Schnatter's downfall

Schnatter resigned as the company's chairman last month after he admitted and apologized for using the N-word during a May conference call. The incident came to light after Forbes magazine reported it in July.

Schnatter remains a board member.

Papa John's shares lost $96.2 million in market value after the Forbes article was published. Major League Baseball subsequently stopped its Papa Slam promotion — a campaign on which it had collaborated with Papa John's since 2016. The Miami Marlins also announced that the team was suspending its relationship and all promotions with the pizza chain.

Schnatter was closely tied with the brand's image and was featured prominently on the company's pizza boxes. But Papa John's has since said it would remove the founder from its promotions.

Schnatter has not gone down without a fight. He sued the pizza chain for documents relating to his ouster as chairman and accused the board of acting negligently or staging a possible "coup," according to a lawsuit filed in Delaware.

—CNBC's Sarah Whitten contributed reporting.

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