Papa John's is still struggling to bring customers back

Papa John's efforts to distance itself from its controversial founder aren't bringing back customers.

Posted Updated

Danielle Wiener-Bronner
, CNN Business
(CNN) — Papa John's efforts to distance itself from its controversial founder aren't bringing back customers.

The beleaguered pizza company said on Tuesday that same-store sales in North America fell by 9.8% in the three months ending in September. Total revenue dropped 15.7% from a year earlier to about $364 million.

Founder John Schnatter resigned his role as chairman in July after news broke that he had used the N-word on a conference call.

"The negative publicity surrounding the company's brand that began in July 2018 has continued to impact the North America system-wide sales," Papa John's (PZZA) noted in its earnings release on Tuesday.

Schnatter stepped down as CEO months earlier after he caused a controversy by blaming the NFL for poor pizza sales.

Papa John's has tried to make over its image with a new ad campaign and took several steps to distance itself from the controversies.

The company is conducting an internal audit on diversity and inclusion practices, launching a program to support minority-owned franchises and starting a foundation focused on local communities. In August, it promised to help out struggling restaurant owners by cutting some royalties, food prices and online fees for the remainder of the year. The company also vowed to roll out mandatory bias training for its workers.

CEO Steve Ritchie said on Tuesday the results were actually better than expected.

"During the quarter, we took important actions resulting in improved consumer sentiment and North America comp sales that were slightly ahead of expectations," he said. "While the operating environment remains challenging, these early indicators combined with our strong cash flow give us confidence in the consumer initiatives underway across the company."

While it tries to revamp its image, Papa John's has been fending off fierce attacks from Schnatter.

Schnatter accused the current leadership of allowing his comments to be misrepresented in the media. He has called Ritchie the wrong man for the CEO job, and said that he helped create a toxic culture rife with harassment and intimidation.

A special committee of the Papa John's board responded to Schnatter's many claims in a scorching letter, accusing him of "promoting his self-interest at the expense of all others in an attempt to regain control." Schnatter has said he regrets resigning as chairman, but that he doesn't want to regain his role as CEO.

Meanwhile, rumors have been swirling that the pizza chain is looking for a buyer.

Other pizza sellers have had a difficult quarter. Pizza Hut's sales were flat, and though Domino's (DMZ) reported domestic and international same store growth, it missed analyst expectations.

Papa John's shares were up nearly 1% after the report.

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