Papa John's future was bleak in 2018—here's how the company is coming back from the brink

How Papa John's is coming back from the brink

With a new CEO, refreshed products and a growth strategy in place, Papa John's expects its sales to rebound this year.

On Wednesday, the company said same-store sales in the U.S. and Canada are expected to rise between 2.5% and 5% in 2020.

In 2019, sales at its North American restaurants that were open at least 12 months fell 2.2% as the company continued to recover from the fallout from a string of high-profile public relations crises involving its founder, John Schnatter.

In November 2017, Schnatter blamed weak sales at the pizza chain on low NFL viewership. And in July 2018, Forbes reported that Schnatter used the N-word in a conference call. 

Papa John's and Schnatter declined CNBC's request for an interview.

Although Schnatter stepped down, same-store sales turned negative, and customer loyalty at Papa John's slipped, according to the Brand Keys Customer Loyalty Engagement Index.

"The brand's perception went negative quickly among a lot of consumers on social media, which was a good proxy for overall demand for the brand because their sales trends fell off a cliff right after those comments," said Chris O'Cull, managing director at Stifel.

Wall Street seemed uncertain whether Papa John's could recover. From November 2017, when Schnatter made the NFL comments, to July 2018 when he resigned as chairman, shares of Papa John's slumped 13.8%, according to FactSet.

In August 2019, experienced restaurant executive Rob Lynch took over as CEO of Papa John's. Under his leadership, the pizza chain has introduced new products and hired executives.

"We think that the turnaround is really just kicking into gear," said Peter Saleh, managing director and restaurants analyst at BTIG.

How is Papa John's repairing its image with consumers? Watch the video above to see what changes the chain is making.

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