Papa John's new CEO Rob Lynch plans bigger role for Shaq, looks to move beyond the chain's woes

Key Points
  • Papa John's appointment of Arby's President Rob Lynch as CEO is the latest in a series of management changes in the wake of a fallout with founder John Schnatter.
  • Lynch says he wants to listen and engage with workers, franchisees and shareholders.
  • He says he's a fan of the work the company is doing with Shaquille O'Neal, who joined the board in March, and plans to give the retired NBA superstar an even bigger role.
A Papa John's location in Denver
Hyoung Chang | Denver Post | Getty Images

At the helm of Papa John's, newly minted CEO Rob Lynch said he plans on doing a lot of listening as he leads the pizza chain forward after a series of executive changes, branding challenges and legal woes in the wake of a fallout with founder John Schnatter.

The former president of Arby's, who helped the sandwich chain through a turnaround of its own, is taking over effective immediately, replacing former CEO Steve Ritchie.

Papa John's shares were trading up nearly 7% on the news Tuesday.

"Priority number one is, frankly for me, is doing a lot of listening and really engaging with key stakeholders and franchisees, as well as employees and the management team, to understand where they think the biggest opportunities and challenges are," Lynch told CNBC in an interview.

This is the latest in a series of management changes at Papa John's post-Schnatter. Ritchie took over nearly 1½ years ago, handpicked by Schnatter as his successor, in the wake of critical comments the founder made of NFL leadership in November 2017. Last July, Schnatter resigned as chairman of the board after he admitted to using a racial slur on a conference call.

In February, activist investor Starboard Value made a $200 million investment in the company and Jeff Smith, CEO of Starboard, became Papa John's chairman. Weeks later, Schnatter dismissed his lawsuits as part of a settlement with the company, left the board and has been selling his shares. He remains its largest shareholder with a 16.7% stake.

Smith said that while Ritchie helped to make Papa John's stronger and more stable, the board's responsibility is to "evaluate the CEO and determine if we have the right leader going forward."

He added that the change in leadership is not a reflection of current company results. Papa John's reported North American same-store sales declines of 5.7% for the second quarter and reaffirmed its full year guidance with the news of Lynch's appointment.

"We found someone who we felt was in the best interest of the company and stakeholders, who is uniquely qualified to go where we want to go with Papa John's," Smith said. "Things have been improving inside Papa John's and we are going in the right direction — this is a decision that is in the long-term best interest of the company … and a function of finding Rob as a terrific leader."

The company recently signed Shaquille O'Neal as a brand ambassador, new board member and investor. Lynch said he's a fan of the work the company is doing with O'Neal and plans to help guide the company from a strategic standpoint to use the retired basketball superstar even further. Lynch is known for his marketing prowess and created the Arby's campaign slogan "We Have the Meats," which is now synonymous with the brand.

As this change was announced, Lynch said he has not been in touch with Schnatter.

"Where I will be focusing is on moving forward," he said. "That is really important for this company, that we are focused on the future and future opportunities."

Smith added that the decision to appoint Lynch was made by the company and board, and that Schnatter is no longer involved in the company's operations.

"There's an unbelievable opportunity for Papa John's to be better than it's ever been," Lynch said.

He added that he had no intention of leaving his post at Arby's, but the opportunity enticed him. "It gave me a lot of excitement about where the company is going and how I can contribute to it going forward. My experience building and transforming brands can add a lot of value here. It's a combination of the work they are currently doing and the contributions I know I can make."

Schnatter said he was pleased with Lynch's appointment.

"As I have told the Papa John's board on many occasions for the past 15 months, a new CEO was needed to get the Company moving in the right direction," Schnatter said in a statement. "Rob Lynch has proven to be an effective marketing leader in previous roles."

Watch CNBC's full interview with Papa John's new board member Shaquille O'Neal
Watch CNBC's full interview with Papa John's new board member Shaquille O'Neal