Yahoo Finance Papa John, Weinstein, Wynn: The danger of brands named after people
John Schnatter, the “papa” of Papa John’s Pizza (PZZA), has resigned as chairman of the company he founded in 1984. He will remain a member of the board.
According to a Forbes story on Wednesday that Schnatter did not deny, he used the n-word on a conference call in May. Ironically, the purpose of the call, with a marketing agency called Laundry Service, was to train Schnatter to prevent additional PR gaffes. Schnatter reportedly complained on the call that, “Colonel Sanders called blacks n*****s” and was not publicly criticized, while Schnatter took major heat for his comments about NFL players.
Schnatter’s debacle started last November when, on an earnings call, he blamed Papa John’s flat sales on the NFL player protests. “The NFL has hurt us by not resolving the current debacle to the players’ and owners’ satisfaction,” Schnatter said. “NFL leadership has hurt Papa John’s shareholders.” He added that the player protests “should have been nipped in the bud” by the NFL when Colin Kaepernick first started kneeling during the anthem.
The comments sparked a backlash and led many consumers to say they were done ordering from Papa John’s. Soon, the website The Daily Stormer was christening Papa John’s “the official pizza of the alt-right.” Competitors piled on: Yum Brands said Pizza Hut was not seeing any sales impact from the NFL protests; DiGiorno mocked Papa John’s in a viral tweet.
Schnatter’s public downfall is yet another example of the danger for brands that are named after their founders.
When an athlete or celebrity suffers a public scandal, like an arrest or racist rant, sponsors can simply cut ties. When it happens to a high-ranking executive, the employer can simply fire them.
But what’s a brand to do when the wrongdoer is the name and face of the company?
Papa John’s is named for John Schnatter. Its logo is an image of his face. Now onlookers wonder whether the brand will change its name. Papa John’s did not respond to a request for comment on Thursday.
To be sure, it is not so obvious that naming a company after its founder is a bad idea. As the Harvard Business Review noted last year, two different academic papers on the subject had opposite findings: one found that eponymous companies generate 3% higher returns than other companies, while the other paper found that eponymous companies are 8% less valuable than other companies.
Harvey Weinstein
The Weinstein Company faces the same issue. Last October, just one week after the first New York Times story published reports of Weinstein’s decades of harassment, the company said it was considering a name change.
The company filed for bankruptcy protection in March, but an eleventh-hour $500 million sale in May will keep it alive. But a name change does not guarantee success post-scandal. As Greg Balla, president of branding agency Zenmark, told AdAge at the time, “Almost all name changes today are met with scathing criticism.” It’s difficult for people to forget that a company was deeply tied to someone who has been publicly shamed.
Steve Wynn
Another recent example of the founder name problem is Wynn Resorts (WYNN) founder Steve Wynn. As with Weinstein, Wynn’s public scandal was part of the #MeToo movement, after multiple massage therapists accused him of sexual assault. Within one month, Wynn stepped down as CEO of the company that bears his name.
But the company, which has a market cap of more than $17 billion, must wrestle with the fact that all of its five properties have Wynn’s name on them. The company has not said whether it will change its official name, but for now, it has publicly said it will change the name of its next hotel, the Wynn Boston Harbor, opening in 2019, to Encore Boston Harbor.
Paula Deen
Television chef Paula Deen provides yet another example of the name problem. In 2013, after admitting to using the n-word, a torrent of former Deen restaurant employees accused her of racist behavior. Deen lost her Food Network contract.
Harrah’s Cherokee Hotel and Casino in North Carolina changed the name of its Paula Deen’s Kitchen restaurant. Walmart also announced it would no longer order any Paula Deen food products.
Today, the parent company of her various businesses is still called Paula Deen Enterprises.
Do u think Papa John’s will change its name?
— Daniel Roberts (@readDanwrite) July 12, 2018
Donna Karan, Martha Stewart, and more
Of course, there are myriad other examples of founders experiencing public scandal, though not as many cases where the company changed its name.
Donna Karan is still apologizing for defending Harvey Weinstein last year, though she had left her day-to-day role at Donna Karan International in 2015. Martha Stewart spent five months in prison in 2004 for her involvement in an insider trading case, but today her company Martha Stewart Living Omnimedia still bears her name. The city of Boston renamed Yawkey Way, the iconic street that ran alongside Fenway Park, in light of new information about racist behavior by Tom Yawkey.
Even the president of the United States is an example of the branding risk: many Trump hotels and golf properties have taken a hit amidst Donald’s Trump’s presidency.
Over the next few weeks, Papa John’s will surely be weighing a name change. On the other hand, the stock soared 11% in the immediate aftermath of Schnatter’s resignation, so perhaps it won’t need to ditch the “Papa.” At the very least, you can bet the logo will change.
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Daniel Roberts is a senior writer at Yahoo Finance, covering media, sports and tech. Follow him on Twitter at @readDanwrite.
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