Shaquille O’Neal Joins Papa John’s Board, Invests in Restaurants

(Bloomberg) -- Papa John's International Inc. has added its first black board member as it tries to undo the damage caused by its founder's use of a racist slur.

Shaquille O'Neal, the hall of fame NBA center, is joining the board of the struggling pizza chain and investing in nine restaurants in the Atlanta area, according to a statement on Friday. The former NBA star has also entered into a marketing agreement with the company and has agreed to pitch the brand.

Papa John's will own about 70 percent of the Atlanta joint venture, with O'Neal holding the rest. He is expected to invest about $840,000 of the $2.8 million anticipated acquisition costs for the restaurants, Papa John's said in a filing. O'Neal will get about $8.25 million over three years for the endorsement agreement.

The pizza chain, which recently got an investment from activist fund Starboard Value, is trying to mount a comeback after a sales slump and scandal that tarnished its brand.

Founder John Schnatter, the company's biggest shareholder whose image had once been deeply ingrained in the pizza chain's marketing, agreed earlier this month to resign from the board and dismiss a lawsuit related to his departure last year as chairman. The company, already facing slowing sales, saw its woes grow last summer after the controversial executive used a racist slur on a conference call, which he said was taken out of context.

O'Neal said in an interview on CNBC Friday that Schnatter's use of the slur hurt the brand with African-American customers. Chairman Jeff Smith, Starboard's CEO, added that the company still needs to move past a “marketing and image challenge,” noting that the turnaround won't be a “quick fix.”

Papa John's shares jumped as much as much as 6.3 percent in New York Friday. They had already climbed 18 percent this year through Thursday's close.

O'Neal will be paid half of the endorsement fees in cash and half in stock over the three-year term. The company is still developing its plan for how to use O'Neal in a marketing push it hopes will help boost sales and bring in younger customers, Chief Executive Officer Steve Ritchie said in an interview.

“We've had a difficult year, but this is a step in the right direction to change the perception of who we are,” Ritchie said.

--With assistance from Janet Paskin and Lisa Wolfson.

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder

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