Papa John's Gets New CEO, But Can He Restore The Pizza Chain's Image?

Papa John's announced Tuesday that former Arby's president Rob Lynch will serve as CEO of the pizza chain.

"I am thrilled to welcome Rob to Papa John's at this pivotal moment in the company's history," Jeff Smith, the Chairman of the Papa John's board of directors, said. "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 the next chapter."

Lynch's past successes as a corporate leader include 16 months of same-store growth while at Arby's, a quick-service sandwich chain with over 3,000 locations.

Lynch, who had served as Arby's chief marketing officer, is credited with the company's tagline: "Arby's: We have the meats!" He also spent seven years at Procter and Gamble as a brand manager, as well as five years as a marketing director at Kraft Heinz and one year as a vice-president of marketing at Taco Bell, according to his LinkedIn profile.

“There’s an unbelievable opportunity for Papa John’s to be better than it’s ever been,” Lynch said.

Papa John's business operations have struggled, as it recorded -6.8% same-store sales in the second quarter of 2019. The company has closed locations in recent years to improve its balance sheet.

Activist hedge fund Starboard Value put a $200 million stake in Papa John's in February to revitalize the company amid weak sales and public controversies. The investment was made through a convertible stock purchase of 11% to 15%.

The company faced image problems after former CEO John Schnatter made multiple controversial comments.

Schnatter, who appeared in television advertisements, resigned weeks after he used a racial slur in a conference call in May 2018. The incident came months after he blamed the NFL for slowing sales amid the Colin Kaepernick controversy, which involved NFL players kneeling during the national anthem.

Schnatter reportedly remains the company's largest shareholder.

Papa John's in March turned to former NBA star Shaquille O'Neal, who joined the board of directors and is the company's spokesman. In February 2018, former NFL star Peyton Manning sold his stake in 31 franchises after also serving as a spokesman.

Papa John's top U.S. competitor, Domino's, is the top pizza retailer in the world. Pizza Hut, another one of Papa John's rivals, is also still trying to find solid footing in the market, as it closes down dine-in locations and attempts to streamline its delivery services.

Perhaps the biggest challenge for pizza delivery retailers such as Papa John's and Domino's is the introduction of companies such as UberEats and Grubhub, which enable local restaurants to have delivery services.

Third-party services provide consumers with more options, according to Morgan Stanley, which says market-leader Domino's could be hurt 1% to 2% in same-store sales due to the new competition.