Team 6

Case 5: Pizza, Politics, and Papa

25 June 2015

Case Context
In 2012, the third largest pizza chain in the world, Papa Johns, became the subject of
criticisms in the US due to the quoted responses made by its founder and CEO, John
Schnatter. It is concerning the Patient Protection and Affordable Care Act, popularly known
as the ObamaCare1. Schnatters comments on the issue of cutting down employee hours to
reduce healthcare coverage under ObamaCare resulted in a string of negative articles and
campaigns against Papa Johns. Uproar in social media and other platforms denouncing Papa
Johns had gone out of control. These were clear symptoms that Papa Johns was under a
public relations crisis. Despite the published comments being factually incorrect they were
only misconstrued and taken out of context the companys reputation was damaged.
Eventually, Schnatter corrected the record through the release of a rebuttal piece presenting
the full context of the incidents.
Problem Statement
How should the hired public relations (PR) specialist handle the bad publicity that Papa
Johns is currently facing and how should Papa Johns corporate leaders publicly
communicate to better represent the company and protect its brand?
Analysis
A companys CEO represents his company. Thus, a corporate leader is accountable for
his public messages and communications as these become a representation of the companys
opinions. Effective and ethical communication is imperative for all corporate leaders so as to
maintain the confidence and trust of their customers. In the Papa Johns case, there were two
main communication exchanges that occurred: (1) between Schnatter and a reporter, and (2)
between reporters and the mass audience. The story that built up to that report involved Papa
John previously citing that the ObamaCare will cost them 10 to 15 cents per pizza.
First, Schnatters answer to the reporters question on the truth behind cutting
employee hours to minimize employees covered by the ObamaCare was direct to the point. A
transcript of the actual communication exchange is seen in Exhibit 2. The encoding of the
message delivered by the CEO is affected by his extensive knowledge as an entrepreneur that
the most likely action for franchise owners is to cut employee hours to avoid hurting profits.
In addition, regardless of whether franchise owners will do that or not, Schnatters answer
was affected by his personal political stance against ObamaCare, which implicitly
communicates that if he were a franchise owner, then that would be the most sensible course
of action. However, coming from the reporters point of view, the decoding of the message
was influenced by his media reporter attitude, which is typically associated with a tendency
1 See Exhibit 1 for summary of the significant reforms being implemented through ObamaCare.

to sensationalize to increase readership. Given that the reporter is not knowledgeable of Papa
Johns actual plans, the reporter might have interpreted that the actions of franchise owners is
a directive from corporate Papa Johns. It could also be that the reporters perception was
selective to ultimately create politically insinuated headlines about Schnatters position since
he is known as a supporter of Romney, Obamas contender for presidency. Note that this
communication exchange occurred in the wake of the presidential elections won by Obama
when there was a heated and politically charged debate on the proposed legislation and the
high likelihood of it being passed into a law.
The communication framework for the exchange between Schnatter and the reporter
is illustrated in Exhibit 3. It can be inferred that the communication exchange was
unsuccessful because of the selective perception applied by the receiver to Schnatters
answer, which is conversely potentially filtered because there is a hint of some concealment
of relevant facts in his statement. Schnatter might have used the reporters phrasing of the
question as an opportunity to evade directly answering the issue from a corporate stand and
placed the burden on the franchise owners account instead. However, this backfired and it
might only be after the incident that Schnatter tried to set the record straight. Ethical
communication is required of corporate leaders to maintain transparency and gain the
confidence of its stakeholders, especially given that Papa Johns is a publicly listed company.
Second, the reporter, in encoding his message news article was affected by his
aforementioned attitude and his writing skills to create a story from an angle without
complete facts. The article released did not contain the frame of questioning used by the
reporter, which pertained to the actions of franchise owners of Papa Johns rather than the
corporation. It also omitted snippets about Schnatters remarks that they are cool with the
health care reform insuring 100% of their employees. Due to the filtering of information
presented to the viewers, Schnatters statement was more prone to biased interpretation. This
article was released at a time when the issue of ObamaCare is known to be unsupported by
most restaurant chains. Thus, it was easy to lead people into interpreting the story in a way
that validates and fuels their hatred and anger for Papa Johns and similar restaurants. These
are the exact responses that the reporter wanted to elicit from creating a buzz-worthy news
article that filtered the actual communication exchange. Because the mass audience is
generally undiscerning of news headlines and take journalistic reports at face value, they are
quick to react without confirming the facts or seeking the other partys side. The
communication exchange, illustrated in Exhibit 4, between reporter and audience multiplied
many times due to ease of transfer and spread of information as an effect of use of technology
and social media. In this exchange, even though the information being passed on was
fundamentally incorrect, the intended message of the reporter was successfully transmitted by

the sender. Due to the exponential increase in news articles about Schnatters statement, Papa
Johns reputation was extremely damaged as seen in Exhibit 5.
Alternatives
The professional PR specialist was hired to help resolve the tainted reputation of Papa
Johns. An article was posted on Huffington Post to counter and clarify the misguided
information written by journalists. Taking off from this action to manage the bad publicity
that Papa Johns is currently facing, the following short-term alternatives are recommended
for the external PR specialist to implement. The summary of the advantages and
disadvantages can be seen in Exhibit 6.
(1) Maintain status quo. The PR specialist as well as the company will not do any
additional effort apart from correcting their record posted on Huffington Post online and hope
that bad publicity will eventually die down. Any additional materials released to the media
may be perceived as defensive to protect the communication error of Schnatter. As a
disadvantage, this alternative will not guarantee a change in attitude of the mass audience
given that the action will only appeal to their logic rather the feelings of the people. Schnatter
would seem to act as self-righteous that he did not extend additional efforts to clean his name
and his company, which would be deemed as insincere in addressing the issue.
(2) Hold press conference. Papa Johns will hold a press conference where all major
television and radio companies and other news outlets are present to hear, record, and show
the response of the company to the mass audience on this issue. The speech to be provided by
Schnatter will contain more details as compared to what was posted on Huffington Post. This
option will give the company with wider media coverage to complement the effort provided
by posting the rebuttal piece online. However, there will be no guarantee that Schnatter will
be well prepared in answering all questions appropriately during the Q&A given the ability of
journalists to ask the right questions in order to get the real answers.
(3) Issue uniform communication across all employees and franchises. It would be
better to correct the record first internally before reaching the mass audience. Scripted
answers to potential Q&A regarding the ObamaCare issue will be distributed by the PR
specialist through the HR department to the employees and franchises. Updates on the issue
will also be included in town hall meetings and franchise cascades. With these actions,
employees of the company will be made aware and will be less prone to further
miscommunication. However, it may not be possible to get the buy-in of all employees to
abide by this uniform communication. It will be harder to ensure and monitor that franchises
will follow the stand of the company as they act independently from the corporate office and
may possibly disagree on putting the burden of health insurance to the business owners.

(4) Engage in social media. An associate from the corporate marketing department
who handles ad and media will be given a task of being the social media champion. Social
media is a channel where businesses market, sell, and increase brand loyalty of customers. It
could also be used to protect reputation and integrity of the company if done the right way.
Engagement is critical because one-way messaging is not as effective as inviting customers in
a conversation. People need transparency and businesses need to be consistently attentive,
sincere, and timely in listening and responding to their comments and replies. Social media
listening methods such as hashtags can be used to keep track of what is being said about the
company. This alternative gives Papa Johns a venue to reach a wider audience where all
people can read the posts and replies, which could eventually increase awareness of the
majority. Conversely, it is time consuming to keep track and respond to comments of people
online and the use of hashtags may backfire if people would want to worsen the publicity of
Papa Johns.
(5) Implement corporate social responsibility (CSR) programs. Rather than being
defensive about the issue, Papa Johns will create a positive spin by making public the good
angle of the company. The HR department will be in charge of managing CSR programs.
Papa Johns can show a positive PR by means of community developments through feeding
programs and offering scholarships to employees and employees dependents. This can help
repair and rebuild the brand image by neutralizing the negative publicity and bad press of the
company in the hopes of people will remember the good ones rather than the bad ones. As a
disadvantage, this will be too costly and will entail a lot of resources especially if the
company has no CSR projects budgeted and lined up.
Social media engagement and CSR activities are alternatives that can also be
implemented in a long term basis to be able to sustain their positive impact. But more
importantly, it is also crucial for Papa Johns to take action in improving the way their
corporate leaders communicate in public to avoid any misinterpretation. This can be
accomplished through the following alternatives pros and cons summarized in Exhibit 7.
(1) Extend the term of the external PR specialist. In this alternative, the management
will extend the contract of the PR specialist. He will spearhead confrontation trainings with
the CEO and other corporate leaders to enhance their skills in handling public speaking
encounters. This will include a series of real-life simulations that focuses on appropriate and
politically-correct responses and how to control emotions in situations with provocative
reporters. The PR staff will also be tasked to write standard procedures on how the corporate
leaders, managers, and employees should handle public issues similar to ObamaCare. Since
the PR specialist is employed contractually, his employment costs less than regular

employees and his services can be terminated once his contract expires. However, once gone,
public relations efforts might be neglected or not prioritized.
(2) Hire a permanent PR specialist. This is the same as the previous alternative except
that the PR specialist will be permanent. He will be directly in charge of corporate
communication and public relations. With this, Papa John's will be more ready in handling
any PR-related issue even something beyond the SOPs. He may speak on behalf of the
company during media engagements and tag along with the CEO and corporate leaders in
public speeches. The main advantage of having a permanent PR specialist is that Papa Johns
will have a focused PR strategy for the company. However, the cost implications would be its
main disadvantage.
Decision/Recommendation
The main criteria used by the group in deciding to select alternatives that address the
short-term problem are: (1) effectiveness in improving and sustaining the companys
reputation; (2) incurring the least cost for acquisition/use of resource; and (3) effectiveness in
facilitating and providing the company a channel or platform for effective communication.
These said decision criteria were also used in evaluating and selecting alternatives to address
the long-term problem but with an addition of another criterion effectiveness in minimizing
the occurrence of a similar problem in the future. The computation in selection of the best
alternatives is shown in Exhibit 8.
Based on the results, Papa Johns should hold a press conference to be attended by
media reporters and stakeholders, followed by the creation and distribution of a standardized
communication brief for employees and franchises that would contain answers to questions
regarding the ObamaCare issue. These will be done within the first month. Assigning a social
media champion would also be done during the first month. From then on, he would be
tasked to be proactive in social media sites since this is where the people are.
The contract of the PR specialist would be extended for six more months. By the end
of the contract, the PR specialists renewal would be contingent on the need of the company.
He would be in charge of conducting confrontation training with Papa Johns corporate
leaders and of creating standard procedures on public communication. The implementation
plan is shown in Exhibit 9.
During trainings, corporate leaders should be reminded that ethical communication is
imperative. However, this cannot be imposed since it is a function of the value system of the
corporation and its leaders. Nevertheless, it should serve as the guiding principle in public
communication. They should keep in mind that even if they hide some facts from the public,
the truth will be revealed through the actions they take and if these are inconsistent with what
they have communicated, it will cause public uproar.

Exhibit 1. Information on the Patient Protection and Affordable Care Act

The Patient Protection and Affordable Care Act, commonly referred to as Obamacare,
was signed into law on March 23, 2010. It aims to introduce reforms in the American health
care system in order to provide a higher quality, more affordable, and accessible health care
services for families, seniors, businesses, and taxpayers.
Below is a summary of the significant reforms being implemented through
Obamacare.

Source: www.hhs.gov

For this case analysis, the reform concerning the health insurance coverage would be
focused on. The said reform dictates that full-time employees working in companies with
more than 50 workers are entitled to health insurance benefits. Full-time employees are
defined as those who work 30 hours or more per week.

Exhibit 2. Excerpt from Schnatters Rebuttal Article in Huffington Post

Here is the part of the interchange that was the genesis of the news:
Reporter: "Do you think your -- you know -- franchise owners... are going to cut people
hours back to make them part time instead of full time?"
Me: "Well, in Hawaii there is a form of the same kind of health insurance and that's what you
do, you find loopholes to get around it. That's what they're going to do."
Reporter: "My understanding is that if you're a full time employee, which is 35 hours or over,
you'd be covered. Or if you're part time then you wouldn't be. So wouldn't some business
owners just cut people down like 34 hours a week so they wouldn't have to pay for health
insurance?"
Me: "It's common sense. It's what I call lose-lose."
The reporter asked what I believed Papa John's franchisees would do in response to
Obamacare, not what Papa John's would do. In fact, her question was "wouldn't some
business owners just cut people down like 34 hours a week so they wouldn't have to pay for
health insurance?"
My answer: "It's common sense."
Companies like Papa John's are largely a collection of small independent businesses. The
average Papa John's franchisee owns three to four stores. Since our franchisees own the
restaurants they operate, who they hire, how many hours they give each employee and what
they pay each employee is up to them, not me or Papa John's. Like any small business in
these economic times, our franchisees are under a tremendous amount of pressure on costs.
During that same interview, talking about Obamacare I said, though it wasn't widely reported:

"The good news is 100% of the population (full-time workers) is going to get health
insurance. I'm cool with that."
"We're all going to pay for it. There's nothing for free."
"And this way I get to provide health insurance and I'm not at a competitive
disadvantage ... our competitors are going to have to do the same thing."

Papa John's, like most businesses, is still researching what the Affordable Care Act means to
our operations. Regardless of the conclusion of our analysis, we will honor this law, as we do
all laws, and continue to offer 100% of Papa John's corporate employees and workers in
company-owned stores health insurance as we have since the company was founded in 1984.

Source: Huffington Post, The Real Scoop on Papa Johns ObamaCare, December 2012.
http://www.huffingtonpost.com/john-h-schnatter/papa-johns-obamacare_b_2166209.html

Exhibit 5. Buzz scores of popular fast-food chains plummeting; pizza-eating public

disapprove corporate plans in response to ObamaCare

Source: Forbes, Papa Johns, Applebees, others pay huge price for Anti-ObamaCare Politicking, 4
December 2012. http://www.forbes.com/sites/rickungar/2012/12/04/papa-johns-applebees-and-otherspay-huge-price-for-anti-obamacare-politicking/

Exhibit 6. Pros and Cons of Short-Term Alternative Courses of Actions

Alternatives
1. Maintain status quo

Will be perceived as not

defensive

Cons
Does not ensure refreezing of change in
attitude toward Papa Johns because it
appealed mainly to logic and did nothing to
appease the anger by the mass audience

2. Press conference

Wide media coverage

May not seem sincere in addressing the

issue
Open to Q&A and public scrutiny

3. Uniform
communication
across all employees
and franchises
4. Social media
engagement

Less prone to
miscommunication

Possible that employees and franchises

might not abide by the uniform
communication

Personal conversation
with real-time response

Time consuming in responding to each

person

Wide reach to mass

audience

Use of hashtags for bad publicity

campaigns

Increased awareness
Rebuilds positive
reputation

Costly
Costly

5. Corporate Social
Responsibility (CSR)

Pros
Requires no effort

Involves resources
Weakens bad press and
replace it with good news

Exhibit 7. Pros and Cons of Long-Term Alternative Courses of Actions (Focusing on

Unique Pros and Cons of each)
Alternatives
1 Extend the term of PR
specialist (contractual basis)

Hire a permanent PR
specialist

Pros
Not as costly as hiring a permanent
PR staff

Cons
PR might not be prioritized once
the contract is terminated

Able to restore the positive image of

the company when needed

Approach is simply always

after-the-fact

Prevention strategy helps minimizing

occurrence of PR crises

Costly compared to extending

the contract of PR specialist
because it requires providing
benefits to full time employees

Exhibit 8. Evaluation and Selection of Alternatives

Alternatives
Will it improve and
sustain reputation?
(25%)
Maintain status quo
Short-Term
Conduct of press conference
Issuance of uniform
communication (e.g., scripts)
across all employees and
franchises
Social media engagement
Implementation of CSR activities
Long-Term
Social media engagement
Implementation of CSR activities
Hiring of PR staff on a contingent
basis
Hiring of permanent PR staff

Decision Criteria
Will it incur the least
Will it facilitate
cost for acquisition/use
effective commuof resources?
nication?
(25%)
(25%)

10

7
8

8
9

9
9

n
n

8
9

8
6

9
5

n
n

8
9
10

8
6
8

9
5
9

10

Each alternative was rated on a scale of 1 (lowest) to 10 (highest) based on the degree
by which it fulfills every decision criterion. Since all criteria have equal importance, each was
weighted equally. An alternative with a weighted score of 8 to 10 reflected the groups
opinion that it adequately fulfills the decision criteria as a whole, 5 to 7 may or may not fulfill
the decision criteria while 1 to 4 will not adequately fulfill the decision criteria. Scoring is not
absolute but rather comparative or relative to other alternatives perceived degree of effect.
The minimum weighted score for accepting an alternative is 8 so as to adequately resolve the
problem.

Will it mi
occurrenc
issue in th
(25%)

Exhibit 9. Implementation Plan

Action Plan

Owner

1) Hold a press conference to be

attended by media reporters and
stakeholders
2) Create and distribute a standardized
communication brief for employees
and franchises that contains answers to
questions regarding the ObamaCare
issue
3) Provide updates on town hall
meetings and franchise cascades

PR specialist

4) Assign a social media champion

who will be tasked to be proactive in
social sites like Facebook, Twitter, and
Youtube
5) Monitor and address significant
customer complaints, feedback, and
issue, and post good news and positive
corporate efforts being undertaken by
the company
6) Extend the contract of the PR
specialist and task him to do the
following:
a. Conduct confrontation training
with Mr. Schnatter and other corporate
leaders
b. Create SOPs on
communicating or commenting about
public issues

Method of
Implementation
Press conference

Deliverables
Press briefing,
official press
statement
Policies and
process in HR
management

PR specialist

Email and
intranet upload,
team cascades,
town hall meeting

PR specialist

Meeting

Updates (hard /
soft copies)

Marketing
department

Appointment
memo

Job description
and specification

Social media
champion

Online post in
social media

Posts

HR department

Issuance of
contract

PR specialist

Training, mock
questioning

Training,

PR specialist

Writing and
publishing

Manuals

Timeline (Month)
3
4
5
6
7