Papa John's names Arby's President Rob Lynch as CEO, shares jump 7%

Key Points
  • Rob Lynch helped lead Arby's to 16 consecutive quarters of same-store sales growth.
  • Papa John's is in the middle of a turnaround plan, helped by an investment by activist hedge fund Starboard Value.
Rob Lynch
Source: Business Wire

Papa John's on Tuesday named Rob Lynch, previously president of Arby's, its chief executive officer.

The pizza chain's stock, valued at $1.5 billion, jumped 7.5% in morning trading.

The change is effectively immediately. Lynch replaces Steve Ritchie, who was handpicked by founder John Schnatter to succeed him in 2018.

Lynch helped lead Arby's to 16 consecutive quarters of same-store sales growth, as well as record sales and profits last year. Inspire Brands, which is privately held by Roark Capital Group, owns Arby's and does not publicly release financial results.

Prior to becoming president, Lynch served as Arby's chief marketing officer between 2013 and 2017. Under his leadership, Arby's moved from local marketing to national and embraced social media. He is also responsible for its "We have the meats" tagline. Before coming to Arby's, he held marketing positions at Taco Bell, H.J. Heinz and Procter & Gamble.

Lynch's appointment as Papa John's chief executive comes as the embattled pizza chain is trying to turn around its image and its business, helped by an investment by activist hedge fund Starboard Value in February. As part of the deal, Starboard's CEO Jeff Smith became chairman of the pizza chain's board.

"I am thrilled to welcome Rob to Papa John's at this pivotal moment in the company's history," Smith said in a statement. "His proven record transforming organizations and realizing the growth potential of differentiated brands is ideally suited for Papa John's as the company sets forth on its next chapter."

Papa John's saw its same-store sales plunge last summer after it was reported that Schnatter used the n-word on a conference call. The company ousted Schnatter as chairman in July, leading him to file several lawsuits against the company. He dismissed his claims as part of a settlement with Papa John's and has been selling of his stake in the chain. Schnatter currently retains a 16.7% stake in the company.

The incident and ensuing drama with Schnatter weighed on Papa John's stock. As of Monday's close, shares are down 13% since Forbes reported his use of the slur.

As sales tanked, the chain has been providing financial assistance through reduced royalties to franchisees in the hopes of mitigating store closures. Papa John's has also been investing in marketing. The chain struck a deal with former basketball star Shaquille O'Neal, making him the new face of the brand.

Sales at stores open at least a year have been improving over the last three quarters, although same-store sales growth remains negative.

Mark Kalinowski, CEO of Kalinowski Equity Research, upgraded shares of Papa John's from neutral to buy on the news.

"We are impressed with what Arby's has achieved over the last several years, and the challenges it faced early on this decade sound similar in some ways to those Papa John's faces today," he wrote in a note to clients.

Kalinowski said that over the last several years, Arby's was able to better understand what food consumers wanted from its brand and use more effective marketing.

A representative for Schnatter did not immediately comment on the news.

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