Papa Johns Founder Won an Arbitration Denial Against an Ad Firm. Here’s What Happened.

Papa Johns founder, John Schnatter, has won a preliminary arbitration denial against an ad firm, Laundry Service. According to Schnatter, Laundry Service’s appeals came “too late,” and the two parties are now going to a bench trial. Here are the details of this latest development.

Papa Johns: ‘Almost Half a Decade Came & Went’

In a press release announcement, Schnatter — Papa Johns founder and former CEO — claimed that Laundry Service, an ad agency founded by Casey Wasserman whose clientele includes Nike and Adobe, set him up.

“Judge Beaton looked at the facts and affirmed that my agreement with Laundry Service is valid and binding, and that after four long years of litigation the ad firm is too late to push the case to arbitration,” he said in a statement accompanying the press release. “We look forward to the jury trial to achieve a complete victory in this case, [demonstrating] that Casey Wasserman’s ad firm set me up, as I’ve been saying all along.”

The Papa Johns founder also claimed that Wasserman’s “Hollywood” connections played a role in this alleged setup, pointing out in the press release that “Laundry Service leaked a partial, deceptively edited excerpt from a private coaching session to Forbes, intentionally distorting comments Schnatter made against racism and reversing their meaning to harm the Papa Johns founder and the iconic brand he built over 34 years. Laundry Service subsequently provided a doctored tape of the conference call to Papa John’s International with several crucial minutes deleted.”

The “deceptively edited excerpt” refers to a slur he made in 2018, which prompted his resignation from the company. Then, as now, Schnatter claimed his comments were “taken out of context” and were made during a “role-playing exercise.” Wasserman made headlines back in 2020 for petitioning the International Olympic Committee to allow athlete protests.

Bloomberg Law points out that all these claims are a matter for trial, not arbitration, which is exactly what Judge Benjamin Beaton in the U.S. District Court in the Western District of Kentucky determined as of Oct. 4.

A Company Mired in Controversy

The CEO post was left vacant by the company’s founder, John Schnatter, in the midst of intense controversy.

In 2012, he declared that the Affordable Care Act would negatively impact franchisees and customers, which caused a public uproar. Following his comments, Papa Johns’ stock price experienced a huge decline.

In November 2017, Schnatter publicly criticized the NFL’s handling of national anthem protests, citing a correlation between the protests and declining NFL viewership as well as Papa Johns sales. The comments triggered a sales downturn, and competitors benefited from the negative publicity that created a PR storm. After making remarks that are being challenged in court, Schnatter resigned as CEO the following month, but he continued to serve as board chairman.

Papa Johns, however, has moved on from Schnatter. In August 2024, the company named a new CEO, Todd Penegor, who came to the pizza chain from Wendy’s.

“Todd has an outstanding record of leading winning teams and scaling franchised operations globally through trusted partnerships, product innovation and digital transformation. He has also demonstrated his ability to effectively allocate capital, drive value and enhance profitability,” said Christopher Coleman, chair of the Papa Johns Board of Directors, in a statement. “We are excited to welcome Todd to Papa Johns and look forward to his contributions as we work to create significant, sustainable value for our shareholders and franchisees.”

In an interview with Nation’s Restaurant News, Penegor explained that he was excited to return to the corporate world. “I love the restaurant business. I’m hardwired for it,” he said. “I started to think about what I missed in the space, the communities we’re in, supporting a franchisee community, opportunities for our employee base. I missed it.”