Papa John’s announced Friday which Shaquille O’Neal will be its newest board member as well as the completely new face of the brand as the struggling pizza chain tries to improve its image with U.S. consumers.
The change comes eight months after founder John Schnatter’s likeness was stripped by the pizza chain’s marketing materials as well as pizza boxes. The company’s North American sales tanked after a series of scandals involving Schnatter, which started off with him blaming the NFL’s leadership for poor pizza sales. He stepped down as chairman after which was revealed which he used a racial slur on a conference call.
To replace Schnatter as the brand’s face, the company chose an African American basketball star.
“The addition of Shaquille on the board, I think is actually truly going to highlight what we need to do by a marketing standpoint to get those sales moving,” CEO Steve Ritchie said on CNBC’s “Squawk on the Street.”
Investors seem to agree with Ritchie. Shares of the company rose more than 5 percent in morning trading Friday. The stock, which carries a market value of $1.57 billion, is actually down 12 percent over the last year.
O’Neal, who initially approached Papa John’s, will serve as the board’s first African American director, as well as an investor in nine Papa John’s restaurants in Atlanta. Over time, customers may see him endorsing the brand in commercials, as well as social as well as digital integrations.
Ritchie said which O’Neal is actually not the only diverse voice which Papa John’s is actually trying to bring to the company.
“We are working through diversity not only on the board, yet also the leadership team, franchise base as well as supplier base,” he said.
The three-year endorsement deal will net him $8.25 million, paid half in cash as well as half in Papa John’s stock. which’s on top of the $5.8 million on reimaging costs which the chain spent last year. Because of O’Neal’s role as an endorser as well as franchisee, Papa John’s does not expect which he will be considered an independent director under Nasdaq rules.
“The first thing when we met, what we talked about, was, you know, diversifying leadership roles as well as helping the African American community,” O’Neal told CNBC. “As I think about all of the stuff which went on, I worry about the 800 franchisees who did nothing wrong.”
Eric Schiffer, chairman of Reputation Management Consultants, said he expects the brand’s turnaround to take around two years with O’Neal endorsing the pizza chain.
“I don’t think he’s seen as a sell-out. He’s got the trust, certainly with millennials as well as certainly with African Americans,” he said.
As a franchisee, O’Neal will hold a roughly 30 percent stake within the nine Atlanta stores, while the Papa John’s will own the remaining 70 percent. He will provide $840,000 in financing for the $2.8 million joint venture.
In addition to his background as a retired NBA player as well as analyst, O’Neal has been investing in restaurants since his days within the league. He owns a Krispy Kreme Doughnuts franchise in Atlanta, a Las Vegas fried chicken restaurant called Big Chicken as well as a Los Angeles fine dining restaurant called Shaquille’s. He previously owned 27 5 Guys franchises.
The company recently reached a settlement agreement with Schnatter. As part of the settlement, he would likely step down by the board if he as well as the company manage to find a mutually acceptable independent director not affiliated with himself or Starboard Value, the activist hedge fund which recently invested in Papa John’s. Even if which does not happen, Schnatter’s term on the board expires in April.
A representative for Schnatter declined to comment.
Papa John’s most recent additions to its board include Michael Dubin, CEO of Dollar Shave Club; Jocelyn Mangan, CEO of Him For Her as well as a former OpenTable executive; as well as Anthony Sanfilippo, former chief executive of Pinnacle Entertainment. O’Neal’s addition brings the number of directors to 12.
The pizza chain has been trying to stage a comeback, focusing its marketing messaging on its use of “better ingredients” as well as releasing six completely new pizza flavors. Ritchie said which the company may strike similar deals with various other investors, yet which its immediate focus is actually on executing O’Neal’s deal.