A Recipe for Success – Papa John Schnatter
A Recipe for Success – Papa John Schnatter
A small business in a broom-closet transformed into a national chain … John Schnatter’s entrepreneurial journey with Papa John’s Pizza shows that with passion, spirit and a solid idea, anyone can live out the American dream. Schnatter discusses the business’ early days, franchising and his formula for success with host Charles Mizrahi.
- An Introduction to Papa John (00:00:00)
- The Early Days (00:02:51)
- Quality and Competition (00:11:05)
- The Entrepreneurial Journey (00:16:34)
- Overcoming Fear and Failure (00:25:06)
- A Hyper-Competitive Market (00:31:05)
- Tailwinds in Business (00:37:46)
- Franchising Papa John’s (00:39:23)
- Industry Experience (00:48:56)
- COVID Pizza Sales (00:51:54)
- The Next Adventure (00:59:31)
John Schnatter — also known as “Papa John” — has pizza in his soul. He made his first pizza when he was just 15 years old. By age 30, Schnatter founded Papa John’s Pizza and ran several stores across the Midwest. But like many successful entrepreneurs, he didn’t stop there. Schnatter decided to walk the talk by transforming his business with better ingredients and service. Despite taking a step back from the company, those same principles still guide him today as he maps out his next adventure.
Before You Leave:
JOHN SCHNATTER: We were a big chain, and we were public. But we always tried to act like an independent pizzeria. We always referred to ourselves as America’s largest independent pizzeria because we hit the numbers and made money. We did all that. But the No.1 goal was taking care of the product and people. We were a public company, but we ran it like a private company.
CHARLES MIZRAHI: My guest today is John Schnatter. John is better known as Papa John — founder and former CEO of Papa John’s Pizza. John’s story reads like a Horatio Alger novel. He started off by purchasing U.S. pizza equipment with the $600 he received from selling his car — a Z28 Chevy Camaro. He then converted a broom closet in the back of his father’s pub, Mick’s Lounge, in Jeffersonville, Indiana.
CHARLES MIZRAHI: He opened his first Papa John’s restaurant in 1985 — two years after graduating from Ball State University, where he delivered pizza on the side. He took the company public in 1993.
CHARLES MIZRAHI: Today, Papa John’s is the fourth largest pizza company in the United States. It has close to 3,300 locations in North America and another 2,000 locations in 49 countries — a total of 5,300 restaurants worldwide.
CHARLES MIZRAHI: I recently sat down with John to talk about the opportunities he had when he first opened his business. Papa John’s is still around today, just waiting for the next entrepreneur to take advantage of it.
CHARLES MIZRAHI: John, thanks so much for being on the show. I greatly appreciate you being here.
JOHN SCHNATTER: Thank you, Charles.
CHARLES MIZRAHI: Let’s get right to it. There’s been a lot of talk about you, but I want to get to something that I don’t think people really focus on. You started a business that has over 5,000 restaurants throughout the world. How many people do you employ?
JOHN SCHNATTER: [I employ] 120,000.
CHARLES MIZRAHI: You give 120,000 people jobs, dignity and rooves over their heads and help send their kids to school, make their car payments and make the most of life — all from selling a Camaro around 40 years ago. Tell me that story, brother.
JOHN SCHNATTER: Well, we had two fundamental beliefs from the beginning. We said, “If you make a better pizza and take care of your team members, that’s a winning formula for success.
JOHN SCHNATTER: It was a great 32-year run to 5,000 stores. But I have to give all the credit to our team members, franchisees, suppliers, communities and, most importantly, our employees. They are key to our success.
CHARLES MIZRAHI: How did you start this business? Take me back to the beginning — to Mick’s Lounge, selling your car and buying pizza equipment.
JOHN SCHNATTER: When I was 15, I was washing dishes at the Rocky’s Sub Pub for Joe, John and Frank Fondrisi — the Fondrisi brothers. I was a dishwasher for $2.35 an hour. Joe Fondrisi would make pizzas right across the street from where I washed dishes. I hated washing dishes.
JOHN SCHNATTER: They got busy one weekend with the write-up in the local newspaper. It blew the doors off the place. I was the first in line, and I got promoted from washing dishes to making pizza, which was a real honor in that family.
JOHN SCHNATTER: And I fell in love with making pizzas. I made pizzas with Chris Karamesines — the great— in Muncie, Indiana and Ball State to get through college. From a very young age, I knew that was what I wanted to do. I had the formula, recipes, layout of the store and everything. I even had a logo that a dorm-mate came up with at La Follette dorm in 1982.
JOHN SCHNATTER: I helped daddy get out of bankruptcy with his little $0.50 beer joint called Mick’s Lounge. We sold the car, got solvent, took a sledgehammer, broke down the broom closet, put a kitchen in and started selling $5 pizzas in the back and $0.50 beers in the front. That was our beginning. We did grow that into 5,000 stores and made just shy of $4 billion a year in sales.
CHARLES MIZRAHI: So, you were 15 years old when you started making pizza?
JOHN SCHNATTER: I was 15 when I learned to make pizza from the Fondrisi’s. Joe Fondrisi taught me how to make pizza.
CHARLES MIZRAHI: All right. So, you’re sitting there making pizza, and it’s a better life than washing dishes. You’re a high school kid with an after-school job, right? You’re making some pocket change, and you fall in love with making pizzas.
CHARLES MIZRAHI: Here’s my question for you: At that point, when you started making pizzas, did you think that one day you were going to have chain throughout the world? Or, were you just happy to make the next pizza?
JOHN SCHNATTER: No, I just loved stretching the dough, making it, kneading it, spreading out the sauce and topping the pizzas. I was dating a girl in high school, and when she came in, I wrote little notes on the pizza with pepperonis. It was just sheer enjoyment. I learned so much from Chris Karamesini about doing big volume up at Ball State University — my alma mater. With the first Papa John’s, the goal was making $50,000 a year, so I could get a date. I thought, “If I could make $50,000 a year, I could take a young lady shopping or out to dinner. I could get a date.” So, that was the whole goal — not 5,000 stores and billions of dollars. I had no idea it would turn into that.
CHARLES MIZRAHI: So, it was the love of women and pizza that worked perfectly together and made you who you are.
CHARLES MIZRAHI: Now, here’s my question to you: You’re 17 years old, and your father has Mick’s Lounge, right? Is it a tavern or a pub?
JOHN SCHNATTER: It’s a $0.50 beer joint. There were bikers and fights every night.
CHARLES MIZRAHI: Really?
JOHN SCHNATTER: It’s a smoky and rough place to start. But that’s how I got the school of hard knocks.
CHARLES MIZRAHI: So, you had a high-level clientele, and you convinced your dad to let you sell pizza out of a spare room. Is that how that worked?
JOHN SCHNATTER: I came up with a concept at Ball State University in ’82, put it in a box and hid it in my closet at home — the recipe’s, the logo, lighters, hats and everything. I had my dream in a box. Once I got the bar solvents, I decided that I wanted to sell pizzas. And so, I took a sledgehammer, knocked down a broom closet, left one hell of a mess and left a note on the cash register the next day for my operating partner Bob. It said, “Bob, I got a great idea.”
JOHN SCHNATTER: So, he walked into Mick’s Lounge the next day — which was a train wreck because I tore it up with a sledgehammer — looked at the note and said, “What the hell is this all about?” We pulled that old box out of the closet and started building the broom closet. We borrowed $1,600 worth of used restaurant equipment from Tony Mantily at a supply company down on Main Street in Louisville and started selling $5 pizzas out the back and $0.50 beers in the front. We were doing $1,000 a week and pool revenue. So, we were sitting there at 21 years old and…
CHARLES MIZRAHI: Hang on, John. You were making $1,000 a week from $5 pizzas and $0.50 beers? That’s a lot of pizzas. You were making those all by yourself?
JOHN SCHNATTER: Believe it or not, in the first six or seven months, I wouldn’t let anybody else make a pizza because I thought I was the only one who could make one right. That got to be a lot of long hours. But we did $300 a week in the broom closet.
JOHN SCHNATTER: One Tuesday night, my brother and I were working a shift, and we made $200. We made $200 — on a Tuesday — in a broom closet, and we were jumping up and down. We thought we were rich. How could we make $200 in a broom closet? Then, we made $1000 for a week, and then two. We finally made $3,000 a week, blew the doors off the thing and moved next door.
JOHN SCHNATTER: Once we moved next door, we put a sign on the front because the broom closet didn’t have a sign. And the business went to $9,000 a week! I thought, “Wow. If you put a sign on the front door, it really helps business.” I didn’t know! I thought that if you had the best pizza, it didn’t matter whether or not you had a sign on the door.
CHARLES MIZRAHI: Hang on a second. I’m in New York. We have a pizza place every 6.5 feet and the best pizza in the world.
CHARLES MIZRAHI: You opened a store in Indiana. Were there no pizza places in the place? Were you the only pizza shop in the whole state?
JOHN SCHNATTER: Well, I’ll give you the good and the bad. The bad is Jeffersonville was probably the worst place in the world to start a pizzeria. I remember doing that $9,000 week and marching down to the Domino’s four miles down the road.
JOHN SCHNATTER: I went in, and I was just full of energy. I said, “We’re doing $9,000 a week. What are you doing?” They said, “We’re doing $6,000 a week.” And I looked at him and said, “We’re going to beat you in the whole world. If you’re doing $6000 as a national chain and we’re doing $9,000, we have the better pizza.”
JOHN SCHNATTER: The good news in the story is that the Louisville, Lexington and Columbus, Ohio corridor is the genesis. It’s the pool of fast food. There’s Denny’s, Chi-Chi’s Long John Silvers, Jerry’s White Castle, Domino’s, Bob Evans, Papa John’s and KFC.
JOHN SCHNATTER: So, if you can be successful in Louisville, Lexington and Columbus, you can easily have something that’s franchise-able. I was at the right place but not exactly the right place.
CHARLES MIZRAHI: But did you know that? Did you know that was the corridor? Or, did you just happen to stumble upon it because you saw Domino’s down the block?
JOHN SCHNATTER: No. I did it because I loved business. I loved learning how to make money at Mick’s Lounge, and I loved making pizza.
JOHN SCHNATTER: No, hell no. I didn’t have that kind of data. Remember, I was trying to make $50,000 a year and get a date. We weren’t really sophisticated. I didn’t have a sign on the front door because I didn’t think I needed a sign! We put a sign on the door, and the business tripled.
CHARLES MIZRAHI: How did people know about your pizza? Did they come in for the beer?
JOHN SCHNATTER: Well, we did these leaflets or flyers. We put them out, gave [people] the address and we were in the back. People would walk into the bar because they had to go into the bar to get to the back of the broom-closet pizzeria. They would look in there and be mesmerized. Where was the pizzeria? They couldn’t figure it out. We said it was in the back of the broom closet. Everything was kind of clumsy because we weren’t very sophisticated, and we’d never been in business before outside of Mick’s Lounge.
CHARLES MIZRAHI: You had the passion. You said, “I love pizza. I love not only eating it but making it.” You enjoyed the whole process. You started the business. Success found you because you never had a major plan out there. There weren’t Wharton students coming up with spreadsheets and all sorts of business plans. You basically got out there, and people ate the pizza.
CHARLES MIZRAHI: Pizza is a pretty commoditized item. There are a zillion pizza places. And the barrier to entry to start a pizza business not really hard. You’d agree with me on that. What made your pizza — back in 1982 — so much better that it made $9,000 a week?
JOHN SCHNATTER: We were doing $9,000, and Domino’s was doing $6,000. But now you’re starting to talk to my belly wit — which is food quality, authenticity and superior products. That’s the part I dig. I have passion for that.
JOHN SCHNATTER: We learned about fresh-packed sauce at Rocky’s. We learned [about] an even handset with fresh tomatoes at Greek’s pizzeria. We understood the monster blend that Chris Karamesines used with the mozzarella blend at Rocky’s.
JOHN SCHNATTER: We did a little work with Krall’s bakery. They had a real good éclair-donut kind of thing. So, we learned a little bit about baking. We had a short stint at Domino’s and Mr. Gatti’s Pizza. We just went around everywhere and stole everybody’s best ideas in order to make a better pizza.
CHARLES MIZRAHI: I find that to be so amazing because I see that in the investment business. Cloning is really what you’re doing — you’re going out there and finding the best. For instance, it’s Sam Walton with Walmart. He said, “I didn’t have an original idea.” He went and shopped the marketplace. He went to Price Club and saw what Sol Price was doing. Costco followed what Sol Price was doing. They figured out what other people were doing and said, “We can do this. Let’s find what we can innovate on.”
CHARLES MIZRAHI: I find that people like to create the wheel from scratch. And it’s really all out there. It’s just taking the best from the best and putting it all together, no?
JOHN SCHNATTER: Well, if you talk to the folks that are really smart with marketing — demographics, segmentation and all that — Little Caesars is cheap. [It has] pizza, a salad bar and all the different crusts. There’s variety. Domino’s has speed.
JOHN SCHNATTER: So, quality was a great way to flank the category. If you spoke to somebody at Harvard or with an MBA, they’d say, “It’s obvious. You flank them with quality.”
JOHN SCHNATTER: To me, it was intuitive. It was what I liked. It just happened to be what the market wanted. I looked at Domino’s and Tom Monaghan. With all the success they were having, I thought, “What if you did what Tom was doing and you had a better pizza?”
CHARLES MIZRAHI: So, the reason your pizza was so much better back in ’82 was because you were going out, getting quality ingredients, learning what others were doing and incorporating it?
JOHN SCHNATTER: Yes, and no. We never cut corners until I left in 2016.
JOHN SCHNATTER: They’ve cut corners since I left, but that’s what big companies do. But we never intentionally cut a corner on an ingredient or quality.
JOHN SCHNATTER: We didn’t know in ’84 what we knew in 2004. In other words: When you get bigger, you get more insight and innovations. For example, our sausage used to be made out of things like nitrates and parts of cows that I didn’t think were desirable. We went to the tenderloin and got rid of the nitrates. We always tried to do the right thing. Sometimes, we just didn’t know what it was. But as soon as we found out, we went right to it.
CHARLES MIZRAHI: So, you were fanatical about quality?
JOHN SCHNATTER: Fanatical is an understatement. I don’t think you can fool people. I think you’re not putting your best foot forward. If you say, “Better ingredients. Better pizza. Papa John’s,” you’ve got to live up to that. And not only with how the pizza is made, but how your store looks, how you treat your employees and how you put it together. How we put our product together — which is very difficult to do well — is as much about the quality as it is the ingredients. If you’re going to say “better,” you have to be better everywhere. If you’re Mercedes Benz, you have to have better tires and brakes. If you’re Papa John’s, you have to walk the talk.
JOHN SCHNATTER: Otherwise, you’re trying to fool the consumer. Maybe once or twice you can fool somebody. But after the second or third time, they catch on to the nonsense. So, if you’re not living up to those standards and level of superiority — it’s a hyper competitive category — you lose that customer.
CHARLES MIZRAHI: When did you open your first Papa John’s store — a real store with the name on the front? What year was that?
JOHN SCHNATTER: The broom closet was in April of ’84. For the first store, it was in April of ’85.
CHARLES MIZRAHI: If I walked into a store in 1985, I would have fantastic pizza because of the quality of the ingredients. You would be on top of it. You would be making it. You would make sure it was perfect. I would be greeted properly, the floor would be clean, the ingredients would be nicely displayed and I would have a great experience. Is that what you’re telling me?
JOHN SCHNATTER: Yes, 100%. We made every pizza. We were there night and day. The only time we took off was half the night on Sunday night. By that time, we trained people to do a pretty good job. When we had the first three stores, we could physically run all three with me, my partner and a few supervisors.
JOHN SCHNATTER: But yes, it would have been a damn good experience.
CHARLES MIZRAHI: Today, a lot of entrepreneurs like yourself — who have that commonality with you because they focus on the details that big corporations just gloss over… Do you see that as an issue?
JOHN SCHNATTER: I think the thing you get with big corporations is stock price. If you look at 80% of the Fortune 500 companies from 30 years ago, they’re no longer there. The numbers are staggering. When you lose the founder, you lose the entrepreneur. Usually, you lose the heart and soul of the company. There are a few examples where that’s not the case. But that’s the norm.
JOHN SCHNATTER: I think the reason Papa John’s is struggling the way it is —but it’s doing well during COVID because it has a monopoly — is because the product quality is really bad. The service has slipped. The cleanliness of the stores is not what it used to be. And they’ve really lost their value system —their principles. I think entrepreneurs are principle-centered in kindness and mutual respect. They act so that everybody wins — otherwise, they’re not going to be successful. So, they understand the mutual benefits of being an entrepreneur in that everybody wins.
JOHN SCHNATTER: That’s probably the thing I’m most proud of. As we went to 5,000 stores, we brought everybody up. The best things that I’ve ever done in the history of the business are promoting people, giving people raises and watching them succeed. That’s the fun part. And that’s what breaks my heart about this situation in St. Louis. That is antithetical to what we did for 34 years.
CHARLES MIZRAHI: Let me get back to when you started your first store. How long did it take you to get three of them?
JOHN SCHNATTER: We had four by the end of 1986. There was one store in ’85 and three in ’86.
CHARLES MIZRAHI: So, it wasn’t an overnight success. It did take time. You didn’t have 1,000 stores the next day.
CHARLES MIZRAHI: I want my listeners to understand — because we have them of all ages. Entrepreneurs out there: You don’t start a business and make a zillion dollars overnight. It just doesn’t happen outside of fairy tales. It’s a lot of blocking, tackling, mopping the floors and making sure you do the simple things — like getting the best ingredients — which people don’t think is important. And you’re basically telling us that that’s what made Papa John’s.
JOHN SCHNATTER: Yeah, the analogy I like to make is that it’s like building a building. You just lay a brick, and then lay another brick. It doesn’t look like you’ve done much, but if you do it day in and day out, before you know it, you’ve got a skyscraper. We built one store at a time. We hustled every day.
JOHN SCHNATTER: All of the sudden, we had 10, 20 and then 100 [stores]. And then, we had 200. Then, we had 1,000. But it’s one brick at a time — those small wins on the way to a grand victory.
CHARLES MIZRAHI: OK, so now you have three or five stores. Any time in those early years — did you ever just wake up and say, “I don’t think so. There are too many obstacles here. I’ve got to give up”?
JOHN SCHNATTER: One time — in the broom closet [when] we were struggling. We were two, three or four months into this, and we were doing $800 or $900 a week. The bar was still doing $7,000 or $8,000 a week, so we were making money on the bar.
JOHN SCHNATTER: I thought about throwing in the towel, but we said, “No. People really like the product. The return business is really high. Let’s just keep at it for another two or three months.”
JOHN SCHNATTER: All of the sudden — click — it just happened. And she took off. All of the sudden, we were doing $3,000 a week — and there was not enough room in the broom closet to do $3,000 a week in pizza sales. And we built the first door.
JOHN SCHNATTER: But one time, I did feel like quitting — and I’m not a quitter. Those long days and nights — not having any social life and putting your blood, sweat and tears into something — can discourage you. But as Jimmy V. says, “Never give up.” Never give up.
CHARLES MIZRAHI: You’ve mentored a lot of entrepreneurs over 40-some odd years of business. Do you find that that’s one trait great entrepreneurs have — they’re too stupid to realize they could ever give up?
JOHN SCHNATTER: In my case, I was definitely too stupid. I don’t know about anybody else. I’d say tenacity and resilience. My definition of an entrepreneur that loses is he hears “no” 400 times and says, “The answer is no.” I define a successful entrepreneur as somebody who hears “no” 400 times and says, “The answer is yes.” I think tenacity and persistence beat talent and genius just about every time.
CHARLES MIZRAHI: I totally agree with you. Ace Greenberg of Bear Stearns — the chairman for many years — wanted a Ph.D.: poor, hard-working and driven people. That was his Ph.D. If you were good at working hard, you were going to make it. He wasn’t looking for degrees. He was looking for grit.
CHARLES MIZRAHI: That’s really what separates people. We all have more or less the same [amount of intelligence]. Some are a little smarter, and some are not. But you don’t need intelligence. You don’t need connections.
CHARLES MIZRAHI: You didn’t have any connections. You basically had a broom closet, a sledgehammer and the car that you sold. So, you financed a business by yourself. You put your blood and sweat into it. And the thing started growing. When did you hit the point where you said, “Wow, this is a success. I think we’ve got something here”?
JOHN SCHNATTER: We had an insatiable appetite for quality. If I found a better mixer, awning or manager, I didn’t really care. I just wanted the best. So, our checking account was always overdrawn.
JOHN SCHNATTER: We started in ’87 or ’88. We started making up to $500,000 a year. But I was still spending the money faster than I could make it. In 1990, we closed around 30 or 35 stores. I still could not make it as fast as I spent it. I kept waiting for that inflection point where I’d be big enough that I could meet where I was spending.
JOHN SCHNATTER: Finally, at about 180 or 190 stores, I couldn’t spend it as fast as I was making it. When you’re overdrawn in the checking account, you’ve got to get that inflection point because your bank will call you every day and say, “By the way, you’re overdrawn.”
JOHN SCHNATTER: We took it public in June of 1993 with 232 stores. That’s when we went from [not having] $5,000 to take the family on vacation to the company being worth $200,000,000.
JOHN SCHNATTER: When you’re 31 years old, they don’t teach you how to make $200,000,000 in one day. So, you can imagine the peripheral tangibles that came along with that kind of wealth.
JOHN SCHNATTER: But I really didn’t enjoy the ride until 2000 because of my fear of failure. I was operating because I didn’t want to fail. And then I said, “This is crazy. I’ve got 2800 restaurants, we’re making all this money and I’m still scared of going broke. I’m still scared of being in the broom closet. I’m still scared of Vietnam.” It was Vietnam in my head — my form of Vietnam. And I flipped it to Jack Nicholson or Kobe Bryant — who played for the love of the game. They played out of the best of themselves.
JOHN SCHNATTER: From ’01 to ’05, we straightened out our quality. The stock was $10 a share, and we took it to $44. I started enjoying the success. That was a huge shift, mentally. Going from the fear of failure — where you’re afraid you’re going to miss — to Michael Jordan, where you want to take the shot because you know you’re going to make it. But I really didn’t enjoy the wealth until the turn of the century.
CHARLES MIZRAHI: I’m just trying to get this. From ’82 to ’93 — 11 years — you went from a broom closet to a public company?
JOHN SCHNATTER: Right.
CHARLES MIZRAHI: What was this fear failure? What would you fail at? You had hundreds of stores, and the company just became public. You were 31 years old. Did you think the clock would strike midnight, and it would turn back into a pumpkin?
JOHN SCHNATTER: I was broke. When you’re broke, you don’t ever want to go back to being broke. I think the key to higher powers is being humble, gracious and grateful. That’s the keys to the vault. If you want to live a higher level of spirituality, just be humble. And if you don’t, sooner or later you’re going to be humbled anyways. So, pick your poison. You do it, or just wait for the train to come around the tracks and knock you upside the head because you have a little bit of arrogance in your personality.
JOHN SCHNATTER: With arrogance, you stop taking care of people and lose your values. Then, you’re really going down a bad rabbit hole. I just didn’t want to go broke. At store three, my mom said, “Don’t open another store.” She said, “That’s the stupidest thing I’ve ever heard. You’ve got three stores. You’re making $200,000 a year. Just stop.” My mom was always very frugal and cautious. My dad was the other side of the coin. He was kind of a spendthrift. He liked to gamble.
JOHN SCHNATTER: So, I had one side of the family that was accountable, liked to save their money and get ahead. I had another side of the family that liked to live for the moment. The dichotomy of those personalities was extremely beneficial. But one’s a losing hand, long term. And the other — you preserve your wealth and get on with it. I think my fear of failure came from watching my dad self-destruct.
CHARLES MIZRAHI: During those years — the early years — who was your main competitor at the time? There was Domino’s and Pizza Hut.
JOHN SCHNATTER: Yeah, Pizza Hut was the Carney brothers, I think. Ilitch, Monahan and the Carney brothers were all around in the 1960s. So, the big three players were there. When I was coming up, they owned about 35% or 40% of the market share. And the independents had 60% to 65%.
JOHN SCHNATTER: Today, the major chains have about 50% to 55%. Local/regional chains have 4% or 5%, and the independents have about 40%. So, it was basically the same competitive set.
CHARLES MIZRAHI: I’m in New York, and growing up, we used to laugh at chain pizza chains. They couldn’t make it as good as the Italian guy down the block — who we knew since we were kids.
CHARLES MIZRAHI: Faros, in Brooklyn — he grows his own spices and does everything from scratch himself. You wait in line for hours and hours to eat a pizza.
CHARLES MIZRAHI: It just amazed me that pizza was the one business where a franchise or big chain could go up against an independent and not win.
JOHN SCHNATTER: A couple things — to your point. Fresh-packed sauce — versus paste or concentrate — is twice the money. You buy a bag in the box. It’s $9 or $10 a case. You buy a fresh-packed sauce out of the valley — that’s packed within six hours of the bind of the can and used — and that’s more like $19 or $20 dollars. It’s double. And 90% of the fresh-packed pizza sauce in the country is used in either New York or Chicago. So, the independent pizzerias in New York can tell the difference between mediocracy and superiority — which is fresh-packed.
JOHN SCHNATTER: We’ve always believed that people could tell the difference. If you’re going to say “better,” you’ve got to walk the talk.
CHARLES MIZRAHI: How about your profit margins? Now that you’re buying more expensive ingredients, how are you competing against Pizza Hut or Domino’s?
JOHN SCHNATTER: Well, [that’s] another great question. Remember: The category is now 60% chains — regional chains and the big four — and 40% independents. Domino’s, Pizza Hut and Little Caesars are very good at what they do. The regional chains are good at what they do. You also have $40,000 John Schnatters’ out there who are hungry. I’m not the only one. So, you have this tremendous, powerful force called independent pizzerias — which is guerilla warfare. And by the way, [you can] go to the supermarket and get a $4 to $5 frozen pizzas.
CHARLES MIZRAHI: Before you go on, how good are those? You’ve tasted them. How close are they? Don’t name a brand. I don’t want you to advertise for anybody. How good is the best frozen pizza in the supermarket compared to a store-bought pizza?
JOHN SCHNATTER: I think it’s completely different. But for $4, $5 or $6, I think it’s very good. It’s definitely a great value. Little Caesars for $5 a pie — and they use fresh-packed sauce. The value proposition on that is incredible. But there is a difference between a $5 frozen pizza and an $11 or $12 Papa John’s pizza. However, if you’re going to charge $11 or $12 — where the other guy’s charging $5 — it better be twice as good.
JOHN SCHNATTER: I think it’s just a question of what you’re in the mood for. If you are going to spend up, you’ve got to deliver on that value proposition with the quality. That’s how you get there.
JOHN SCHNATTER: If you make the slightest error in the pizza or pizza delivery business … It’s so hyper-competitive that there’s no room for margin. You also hit on another thing that very interesting.
JOHN SCHNATTER: With COVID, a lot of independents have shut down. But the barrier to get in the category — $150,000 to $200,000 — any John Schnatter can buy a pizza oven and broom closet and go back in business. I’ve made this prediction loud and clear: The product of Papa John’s — the service, cleanliness, transparency, principles and the integrity that the company operates on in this hyper-competitive market … When that starts to go down, I think it’s going to be a pretty quick fall.
CHARLES MIZRAHI: Let me ask you a question then.
CHARLES MIZRAHI: You come to New York. We become partners. We want to open up a pizza shop. I’m going to look at you and say, “John, there’s no way I’m putting up a dollar. It’s just hyper-competitive. There’s no real secret here. Anyone could come in and taste our product.” We could clean the floors. And now, with COVID, you can’t even go into a store. Put that all aside. How are we going to differentiate? How could we do the magic you did in ’82? You’re going to tell me to do what?
JOHN SCHNATTER: First of all, we don’t go to New York. You go to Orlando, Florida or somewhere where there’s less regulation. People are flooding into that part of the country. Maybe the East Coast. Maybe hit Gainesville, Georgia Tech or a few army bases. You hit a few of the big ones that are really, really good.
JOHN SCHNATTER: And if you want to get in a hurry — like me — I like things that are scalable. You take a hard look at a Jet’s pizza — which I’m very good friends with John Jet and Jimmy Galloway. They’ve got 400 stores. They use fresh-packed sauce. They make their dough in the stores. They have a product differentiation point of view, and they rock in the areas I just mentioned. So, go get involved with the Jet’s pizza.
CHARLES MIZRAHI: The first thing you mentioned, which is really insightful, is I’m in the wrong marketplace. I’m in a marketplace that will cut me to pieces. So, don’t even try to compete there. My rent is going to be enormous. My pricing is going to be higher. There are a zillion guys down the block that are probably just as good — if not better — than me, and I’m never going to be able to get a toehold.
JOHN SCHNATTER: And you don’t know what de Blasio is going to do — which is even worse. That’s a problem.
CHARLES MIZRAHI: Yes, 100%.
JOHN SCHNATTER: He’s not exactly pro-business. He’s not exactly good for New York City.
CHARLES MIZRAHI: So, my first mistake was calling you to New York to open up a pizza place. Right there, you don’t want me as a partner.
JOHN SCHNATTER: Ha, I didn’t say that!
CHARLES MIZRAHI: But that’s insightful. You first say: Here’s the markets we want to play in. Let’s get a toehold in them because we have a much greater opportunity. Then, once we find the right marketplace, you’re telling me we could scale it because of all those advantages you bring up — such as cleanliness. How are we going to compete with Jet’s?
JOHN SCHNATTER: I don’t think you compete with Jet’s. I think you get involved with Jet’s.
CHARLES MIZRAHI: But they don’t want me. I want to start my own thing. I don’t want to be partners with anybody — except you.
JOHN SCHNATTER: I can help you out there. I would still like to buy a small chain that believes in quality. We could start with one. Just know it’s going to take a lot of time to get to two.
CHARLES MIZRAHI: OK, you answered my question. So, the magic never disappeared in this country. It can still be done. There could be the next John out there who will have 5,000 stores in another 10 or 20 years. The only things that have changed are a couple of small nuances. But the conditions are still ripe. Is that correct?
JOHN SCHNATTER: Absolutely! If I’m 22, then we’ve got a whole different John Schnatter. I’m 59 years old. To start back with one and wait three years to get to six … I don’t think I have the patience for that. But absolutely. America is still the best place in the world to be.
JOHN SCHNATTER: You can do everything we just talked about. I actually think the independents — as the chains get bigger, focus on stock price and getting away from mutually-beneficial relationships — will have a competitive advantage.
JOHN SCHNATTER: I had great fortune. I started in 1984. That was at the pinnacle of Reaganomics. So, it helps when you have a pro-business president, mayor or governor. If you have a jurisdiction or community that wants you to be there and wants you to be successful … We went to Lexington Kentucky, and it took six months to get the fire marshal to give me a permit.
JOHN SCHNATTER: I can remember being up in the Northeast. They’d hold us up for two years for a permit. That’s not pro-business. That’s overregulating. I do like Lexington, Kentucky. I like Orlando, Florida. I like Atlanta, Georgia. I definitely like Dallas and Austin, Texas. [I like] the Carolinas — Charlotte, Greenville, Raleigh. There are plenty of places we can go because capital is no longer a limitation. I didn’t have capital, and now we have capital.
JOHN SCHNATTER: There are plenty of opportunities with COVID. If we come out of this — assuming we don’t get ourselves in a negative headwind with regards to fuel price … Let’s pick on fuel price. The Keystone pipeline — that’s 4% of the take. It’s 20,000,000 barrels a day, and that pipeline produces 800,000. So, you just lost 4% of your supply.
JOHN SCHNATTER: You combine that with the economy opening up, and all of a sudden, you don’t have a supply issue. You’ve got that going down, and the demand issue going up. You’re going to see fuel prices rocket to $3 or $4 a gallon. That’s just one thing. Throw in regulations and all this other nonsense — like $15 an hour. That puts a lot of pressure and headwinds into the faces of entrepreneurs — the independent pizzerias.
CHARLES MIZRAHI: When you’re starting a business, Warren Buffett says it’s much easier to swim with the tide than perfect your stroke. Right?
CHARLES MIZRAHI: So, you happened to have a great tailwind pushing you. Everything was lining up to keep you moving forward. I think is great for our listeners and those who want to start a business to know that. I think their No.1 mistake is they face a headwind and say, “I’m going to beat this headwind.” Instead of turning sales around and going with a tailwind, they basically go right up a headwind, and boom. They’re out of business in a heartbeat.
JOHN SCHNATTER: I wouldn’t say they’re out of business in a heartbeat. I would say that, even on the darkest night, there are always a few shining stars.
JOHN SCHNATTER: There are going to be a lot of people who come out of this environment as winners. I love entrepreneurs. I have a lot of friends that are on both sides of the aisle. I don’t get emotional with it because that provokes anger, and it’s not good for friendships. I just simply say, “If you do this, you’re going to get that result. It’s cause-and-effect.” If you want a New York City, you ordered de Blasio. You’re going to get a New York City. If you want a Louisville, Kentucky — which has been a complete train wreck [since] the new mayor Greg Fisher took over. But if that’s what you want, order a Greg Fisher.
JOHN SCHNATTER: I can’t quite do that — emotionally — with the small business owner because I was a small business owner, and I get pissed. I hear them taking fuel to $3 or $4 a gallon. I hear them taking minimum wage to $15. I hear about all these regulations. I hear about the printing of money. That hurts the small business owner. I get infuriated with that.
CHARLES MIZRAHI: When did you start franchising?
JOHN SCHNATTER: [That’s] a great question.
JOHN SCHNATTER: Remember the corridor: Louisville, Lexington and Columbus, Ohio? That was the franchise capital of the world. My brother was in law school, and we had an agreement. I’d put him through law school, if he did my legal work.
JOHN SCHNATTER: He worked for the biggest firm in Kentucky, which was Greenebaum Doll & McDonald. They were experts in franchising. At store four, in 1986, we had what they called a uniform franchise offering circular (UFOC) already drawn up. So, we franchised in ’87. We franchised stores five to seven. Again, all the stars lined up. Nothing had happened that was remarkable. Domino’s, Pizza Hut and Little Caesars said, “That not our guy. He’s never going to do anything.” And they let me through that window of opportunity. They should have smashed me.
CHARLES MIZRAHI: How could they have smashed you? If you were them, what would you have done?
JOHN SCHNATTER: Price, marketing and keeping me contained.
JOHN SCHNATTER: They wouldn’t have smashed me. They were never going to put me out of business. But they could have kept those 200 to 300 stores under wraps. They ignored me because they didn’t think I was going to go anywhere. We fought like heck to get through that window of opportunity and get to store 2000.
JOHN SCHNATTER: We had an Air Force. What was the Air Force? National marketing.
JOHN SCHNATTER: So, they shouldn’t have let me get through that window of opportunity. They should have contained me at store 200 to 300. We had Reaganomics, favorable economic conditions and the competition ignored us — all the stars aligned for me to get this thing to 5,000 stores. Plus, I had the best people.
CHARLES MIZRAHI: Let me understand this. When you’re out there franchising and public about it — you want you want to bring franchisees in — Domino’s is watching you and sitting on the sidelines saying, “Let this guy get these people. They’re not even a speck on our radar.”
JOHN SCHNATTER: They didn’t wake up to store 2000. Monaghan got off the Domino’s bus between ’84 and ’88. That was right when we started. I think Bain Capital bought them. They were pretty arrogant at the time. They had a guy running the company who was extremely arrogant. He kind of ignored us, and then we got through.
JOHN SCHNATTER: Since then, Domino’s is one of the few companies where, if you look at Patrick Doyle, he did a nice job with that business. Most companies that take over after entrepreneurs usually fail pretty quickly. There’s some family in it or somebody there to coach the value system and core competencies. But Patrick Doyle — with Domino’s — is the one guy that took the company from $3 a share and ran it up to $270 or whatever — and they’ve even taken it up from there. Domino’s is a case study on taking over an entrepreneur’s business and succeeding in a big way.
CHARLES MIZRAHI: What do they do so much better than everyone else?
JOHN SCHNATTER: I think it stuck to its netting on service and speed. For every three Papa John’s in an area, Domino’s probably had four or five. So, it’s much quicker to the door. We beat the entire category to the punch with regards to technology because we were the ones that came up with the Internet around 2001. So, we were ahead.
JOHN SCHNATTER: Then, I left the company in ’05 or ’06. We brought in outside management — a guy named Nigel Travis. And then we lost our competitive advantage on technology. We lost our quality advantage, and that kind of thing deteriorated.
JOHN SCHNATTER: Then, I came back in ’09 or ’10 at $6 a share. We fixed the technology. We fixed the quality. We fixed the service. We took it up to about $88 or $89 a share. Then, I got off the bus at the end of ’16.
CHARLES MIZRAHI: So, with that first franchisee, you had all the passion and belief. What about your first franchisee? That must have been an amazing day — where you had someone take your dream and buy into it.
JOHN SCHNATTER: Yeah. I remember it like it was yesterday. My uncle John, John Ackerson, went to church with Roger and Scott Rohloff in St Mary’s. Scott Rowland was a manager for Domino’s. They said, “Hey, we want to come over and potentially look at a Papa John’s franchisee. So, we sold Scott and Roger a franchise in ’86 or ’87.
JOHN SCHNATTER: To this day, they’re still there.
CHARLES MIZRAHI: That’s the first one.
JOHN SCHNATTER: And Karen Rohloff — Scott’s sister — runs two stores to this day. They do tremendous volume. They’re very good operators. In fact, they have two stores in our hometown of Louisville, Kentucky.
JOHN SCHNATTER: Everybody always asks, “Why don’t you take the Rohloff’s out? Why don’t you just sell them the whole market?” My answer is because they’re entrepreneurs. They’re great operators. If somebody is a great operator, and they work the business every day, why would you want to lose that? That’s the goal.
CHARLES MIZRAHI: Were you concerned — as fanatical as you are with the details, superior quality and cleanliness — when you took these franchisees on? Not No.1, but maybe seven or eight? “How am I going to maintain my control over this by having people who are not family or connected to me?”
JOHN SCHNATTER: It’s a worse problem than that. If you have a franchisee that’s making less than $500,000 a year, he knows that I’m smarter than he is. If you get a franchisee that makes over $600,000 a year, he thinks he’s smarter than me. You not only have the part of measuring standards, but you also have a little bit of arrogance. I’m the franchiser.
JOHN SCHNATTER: All in all, our top franchisee is pretty difficult. He’s not really high on quality, cleanliness or service. Our second largest franchisee is very astute with quality and service. There’s a sifting mechanism you have to put in place.
JOHN SCHNATTER: When I left, we had eight levels of sifting before you could get that store. If you didn’t screen diligence, you let anybody have a store.
JOHN SCHNATTER: Sooner or later, it’s going to come back to bite you. That’s a losing hand long term. You have to be really good when you screen the franchisees, and then you have to hope and pray you did the right thing.
CHARLES MIZRAHI: So, at 25 or 26 — when you were doing this — you had the foresight to say, “I’m going to be really sharp with screening”?
JOHN SCHNATTER: No. If you had to peg a wall with a thousand dots — and each dot was a mistake — I hated every dot. So, no. We didn’t start out with the right screening process. That was the problem. We got too many franchisees.
JOHN SCHNATTER: In fact, one of the mistakes I made was thinking I could change — or live with — some of the really bad apples. We had a guy in Orlando and a guy in San Antonio, Texas. We had some guys that were bad apples, and we should have taken them out.
JOHN SCHNATTER: Eventually, they will probably take this brand down.
JOHN SCHNATTER: But no. In the beginning, we didn’t have a good screening process. At the end, we had a really good screening process. We should have had a better process to get the bad apples out, but we didn’t. That’s one of the reasons we lost the —
CHARLES MIZRAHI: Looking back on it, do you think you franchised too early? Should you have perfected it better and got all the mistakes earlier? Or, if you had to do it again, would you do the same thing?
JOHN SCHNATTER: If you looked at Papa John’s when I left, we made $40 million on distribution, $60 million on corporate stores and we took in $100 million on franchise rolling — $200 million total. So, $50 million was GNA. So, the company was making $150 million pre-tax. That was the income.
JOHN SCHNATTER: The good news is the franchisees pay you $100 million to $110 million a year. The bad news is they are a lot of work. And they are a lot to deal with. It’s very political. They’re all marketing geniuses. They all know more than you know. But again, the good news is that when somebody is paying you $110 million a year, you kind of put up with it.
CHARLES MIZRAHI: But you’re not that type of guy.
JOHN SCHNATTER: You have to be — a little bit. Otherwise, you don’t want to be in the franchise business.
CHARLES MIZRAHI: I’m just trying to get it. This is your baby. I know the money’s fantastic. For an entrepreneur who is so focused on quality, where’s the line drawn between giving your brand up and knowing you’re doing the right thing?
JOHN SCHNATTER: Believe it or not, you can pretty well measure the franchisee’s quality if you have the right systems in place.
JOHN SCHNATTER: We had a fantastic matrix for measuring quality service, cleanliness and uniforms. The first thing that Jeff Smith and his team did when I left was taking out the measurement system.
JOHN SCHNATTER: Over the last three or four months, I probably had 600 Papa John’s pizzas.
JOHN SCHNATTER: I know what they’re serving. The product is deteriorating, and they’re getting away with it because they’ve got a captive audience during COVID. The service — you can ask any franchisee — is probably the worst [it’s been] in history. MC is how we measure cleanliness. They’ve gotten rid of that. We had people that were with the company 15, 20, 25 or 30 years who they just got rid of.
JOHN SCHNATTER: Rob Lynch doesn’t have pizza experience. The board of directors has no pizza experience. Now, you have a company that is not walking the talk with “better ingredients, better pizza” because they don’t measure or enforce it. They’re focused on short-term stock price in a hyper-competitive market.
To me, that’s a recipe for failure. But as long as COVID sticks around — and they keep that captive audience — they’re going to get away with things that we could never get away with when I was there.
JOHN SCHNATTER: So, to answer your question, we had a measurement system, so we could hold their feet to the fire with the quality and service. Do they want to take shortcuts and cut corners? Of course. That’s human nature. But as the founder of the company — the CEO and chairman — you just have to say, “Standards are nonnegotiable, and this is how we’re going to do it.”
JOHN SCHNATTER: We had a lot of success with that recipe. When I left, I was kind of confused at first. Why weren’t the franchisees up in arms? The whole false narrative on the race thing — everybody knew that was a false narrative — the franchisees kind of went along with it. And I found out later from some of the more astute, bigger franchisees who said, “John, they know if you’re back in that saddle, you’re going to hold us accountable.”
JOHN SCHNATTER: It’s like when you’re trying to get someone fit. They don’t like it. They don’t like having to make the product better or give them better service — even though it’s in their best interest.
JOHN SCHNATTER: Things slipped, sales started to crash. Papa John’s — before Jeff Smith came in February of ’19 — was in default on its loans. It was in default on its covenants — on its loans. That’s how close the company was to going under. Jeff Smith came in and saved them. He got ready to have financial problems in February or March of 2020, and then COVID came along.
JOHN SCHNATTER: So, these guys had a really lucky … God bless them. I say that sincerely. Right now, the franchisees — the Papa John’s — are making more money than they’ve ever made because they can get away with some of the things we talked about when sales go up — which sooner or later that will come to a halt.
JOHN SCHNATTER: I love the franchisees. I’ve made a lot of money. I want them to make a lot of money. On one hand, it’s like, “Wow, I wish I could have gotten away with that,” which I don’t really wish I could have gotten away with because you don’t get away with things like that for very long. On the other hand, I’m really happy that the franchises are doing well.
CHARLES MIZRAHI: Why is pizza such a great business for COVID?
JOHN SCHNATTER: You’re trapped at home. You can only have five people at your Thanksgiving dinner in Kentucky. You’re basically trapped at home. It’s delivery. It’s convenient. It’s got great value. And remember, they’ve advertised it as touchless. So, it goes right from the peel — out of a 480-degree oven — right into the box, and you never touch it.
JOHN SCHNATTER: All the businesses that have gone under in food [service] — a lot of that went straight to pizza. So, everybody that you heard got a bad deal during COVID, all that went to pizza delivery — not all of it, but a majority of it. Good for them.
CHARLES MIZRAHI: Wow. I never thought about pizza being the ideal business for COVID — in terms of the way it’s transferred from your kitchen to my kitchen. It’s economical. It could feed a lot of people. It’s enjoyable. You don’t see people eat pizza and not smile. It’s one of those foods that makes you happy.
JOHN SCHNATTER: It’s delicious. It’s fun. And it brings friends and family together. I love the business. I love everything about the pizza business. I wish a slice of pizza wasn’t so heavy calories. It’s 400 calories a slice. You and I can eat three or four slices before we stop.
CHARLES MIZRAHI: I could eat a pie. There’s no question, man.
CHARLES MIZRAHI: In high school, I tried to eat a Sicilian pie. I don’t know if you guys have them, but they’re the square, thick pizzas, the Sicilians. It’s a nine-slice, and it has a big crust. I got through six. It was way too much.
JOHN SCHNATTER: That’s Jet’s Pizza. That’s the style of pizza it makes. Jet’s Pizza makes the best Sicilian pizza in the market by far. Try Jet’s Pizza. It’s unbelievable.
CHARLES MIZRAHI: I love the crust. I’ve never liked thin pizzas. I like the crust. My wife, on the other hand, likes them thin and with a lot more cheese. I hate it. I’ve never liked cheese. I just love the bread and the whole thing about it. Sicilian slices were huge.
JOHN SCHNATTER: That’s one thing we tried to do all along with Papa John’s. We were a big chain, and we were public. But we always tried to act like an independent pizzeria. We always referred to ourselves as America’s largest independent pizzeria because we hit the numbers and made money. We did all that. But the No.1 goal was taking care of the product and people. We were a public company, but we ran it like a private company.
JOHN SCHNATTER: I think that’s what makes Jet’s Pizza so powerful. You’ve got a family. The Jet family has seven or eight kids involved. It’s a family business. They run it like a family business — which is going to be authentic Sicilian — and have superior quality food.
CHARLES MIZRAHI: If you had to invest in one public company — one pizza company — which one would you pick?
JOHN SCHNATTER: If you don’t think Papa John’s is going to be sold, I’d short Papa John’s. If they get sold to Inspire, they could get $110 to $120 a share. But if they don’t sell that company, that’s a $50 stock on a good day. So, if I was going to invest in pizzerias, any publicly-held company, such as Yum, Domino’s or Papa John’s — I would short Papa John’s.
CHARLES MIZRAHI: Tell me what you’d buy, not what you’d short.
JOHN SCHNATTER: The best horse in the race right now — on a public company basis — is Domino’s. But the PE astronomical, and I don’t know what’s going to happen to its sales after COVID subsides. You can’t go with Brams. You can’t go with Papa John’s — unless you think you’ve got it sold. So, you’ve got to go with Domino’s.
CHARLES MIZRAHI: It’s amazing. That’s a great example of a company that, after its founder passed away, gave up the reins and was still [going].
CHARLES MIZRAHI: There are very few companies — like McDonald’s and Walmart — that are able to do that after the owner leaves. It’s such a rarity. And you’re right. There’s a book I read several years ago that said the average S&P 500 company has a lifespan of around 50 years. I think the life span is much shorter now.
JOHN SCHNATTER: I think half of the S&P or Fortune 500 are gone. I’ll look that number up and get back to you. But wow. You don’t hear about that. It’s not like it’s Kodak. It’s actually mismanagement. Our argument is, if you want to be successful as a public company, you’ve got to be abnormal.
JOHN SCHNATTER: We’re convinced that normal public companies with normal, brilliant company boards — who follow all Delaware corporate governance — are in line for failure. We think, if you’re going to be successful as a public company — like Musk or some of these other mavericks — you’ve got to do things a little differently. You’ve got to be abnormal. That’s what we think.
CHARLES MIZRAHI: You’ve got to be a Zuckerberg. You’ve got to be Google. You’ve got to do something outrageous and get a lot of crap thrown at you. And you have to have Congress breathing down your neck to be great. If you’re like everyone else, you’re not going to be anything.
JOHN SCHNATTER: That’s one of the problems with PC. It teaches you not to have diversity of thought. All the great ideas are diversity of thought. New ideas and innovations [come from] thinking a different way. And that’s what I don’t like about the stifling of the creative mind — independent, critical judgment — with all this PC correctness. NASCAR — when Dale Earnhardt, Petty, Yarborough and Gordon were there — was fun. You never knew what those guys were going to do. I’m not saying that you need to be too much of a gunslinger, but live a little bit. Make it interesting for God’s sake. Don’t be so stiff. That’s crazy.
CHARLES MIZRAHI: I’m with you. I see a lot of businesses in this environment — with this kind of political correctness. [They’re] playing to not lose instead of playing to win.
JOHN SCHNATTER: Yeah. Amen.
CHARLES MIZRAHI: You can’t win by playing to not lose. You will definitely lose.
JOHN SCHNATTER: If you’re going to run on being scared and chasing that quarterly stock price, that’s not sustainable. I agree with that 100%.
CHARLES MIZRAHI: Chasing the quarterly stock price, or wondering what analysts, the marketplace, somebody on Twitter or the cancel culture think of you — you can’t operate in that environment and be successful. It’s inherently impossible to do so.
JOHN SCHNATTER: Yeah. That’s the problem with boards. They’re put under so much pressure with the media — or social media — which tend to lean left. If you have a conservative point of view, are principle-oriented or don’t agree with a certain ideology, you get attacked.
JOHN SCHNATTER: Well, I don’t particularly like it, but it’s not going to change my thoughts, principles or the way I go about my day. If you’ve got a weak corporate board, and they’re scared of the oncoming missiles of social media, the company can get away from itself pretty quickly. I think there are a lot of companies that have folded tent and caved in to the PC — and some of the other crazy things that are going on in our society right now.
CHARLES MIZRAHI: What’s act II for you, John?
JOHN SCHNATTER: I think the first thing is you get yourself ready for war. You get your fitness in line. You get your friends.
JOHN SCHNATTER: The nice thing about the incident with Papa John’s was we had a lot of friends who we thought were friends but weren’t really friends.
JOHN SCHNATTER: Thank God they’re gone. You attract a whole new level of friends, and you fortify yourself with the right people. You catch your breath. You take care of yourself mentally, spiritually, emotionally and physically.
JOHN SCHNATTER: Then, when it’s time to go back into the arena — Peyton was ready for Super Bowl 50. He was ready to go back in. He wasn’t ready to quit in Annapolis.
JOHN SCHNATTER: I’m 59, and the fire in my belly is burning like a boiler on the Titanic. It’s warm. It’s ready to go. But you have to be patient and opportunistic.
JOHN SCHNATTER: Right now, the world is kind of crazy. This whole PC — and these crazy things going on politically — have got to subside. I want minimum wage to go up because I want people to make more money. I’ve never paid mine minimum wage. Maybe when they start out, but if they’re good, you’ve got to take them up. Otherwise, you’ll lose them. Over-regulations — we’ve talked about that. Fuel — we’ve talked about that. But you’ve got to let this subside and hope the pendulum swings back towards something that’s a little more rational and opportunistic.
JOHN SCHNATTER: I’m not in a hurry, but I’m in a hurry. I’m going as fast and slow as I can.
CHARLES MIZRAHI: So, you’re picking your spots.
JOHN SCHNATTER: Yeah. You have to because the whole world is going to watch the next adventure. And there’s a lot of people out there that don’t want you to succeed. You can either run a business, or you can’t. When I left Papa John’s in ’16 or ’17, there were 5,300 stores. Today, there are still 5300 stores. The company hasn’t grown.
CHARLES MIZRAHI: It boggles my mind that, with everything this country offers, a guy in a back room could start a business and create 5,300 restaurants throughout the world from a single idea. Where else could that take place? I know there are mornings where you look in the mirror and think lousy things about yourself — we all do. But there have got to be some mornings where you look and say, “Wow.”
JOHN SCHNATTER: Yeah. Why me? Why me? That happens several times every day. And you have to share that wealth. To be honest, I’m concerned about humanity. I’m concerned about where we’re headed. I do think America is still the greatest place in the world, but our liberties, freedoms and property rights — those are things that people lost their lives for. It took tens of thousands of years to come up with this thing called the Declaration of Independence — and the Constitution and three branches.
JOHN SCHNATTER: One thing I would like listeners to think about: We can become Cuba or Venezuela. I talk to many people and they say, “Well, we’re not Spain or France yet.” I’m like, “Why even head that way? That’s the argument.
JOHN SCHNATTER: Be really careful with respect to your freedom, liberties, freedom of speech, property rights and the dollar. Arithmetic is not an opinion. Think about your spending, save and be appreciative that we live in a country where you do have freedom of speech. You can have different opinions. That’s a healthy thing.
JOHN SCHNATTER: The one message I would send to our youth is: be careful. A lot of people died for these liberties, and they’re precious. Once you lose them, they’re awfully hard to get back.
CHARLES MIZRAHI: Do you think politics is in your future?
JOHN SCHNATTER: I don’t see that. I have four criteria for my next adventure. One, is it has to be in my soul. Pizza is in my soul. I love pizza. Two, is it has to benefit humanity. It has to make other people’s lives better. It’s got to have mutually beneficial characteristics and attributes. Otherwise, I don’t want anything to do with it. Three, is it has to be scalable. I like big stuff. And four, it has to be sustainable. I don’t want to be feeding this thing every month. That stupid.
JOHN SCHNATTER: Those are my four criteria. But politics … I don’t think so. Unless, I’m forced to do it. If things get so bad, where we’ve got civil wars and there’s an overthrowing of things — somebody has got to step up and grab the bull by the horns. But it would have to be a last resort.
CHARLES MIZRAHI: At the time you left Papa John’s, how many millionaires were created in the franchise system?
JOHN SCHNATTER: Well, we started with $1,600. One time, it was worth $3.5 billion.
CHARLES MIZRAHI: I’m talking about franchisees. How many people bought a franchise and became millionaires?
JOHN SCHNATTER: There are probably thousands. Thousands for sure. There are 600 or 700 people in the system right now, and they’re all millionaires. When those folks turn over — and that doesn’t include the 20,000 folks who are on my payroll. So, thousands.
CHARLES MIZRAHI: But all the suppliers also…
JOHN SCHNATTER: Yeah. My tomato sauce supplier has two helicopters. Two. My chief supplier has three jets. Three. I think it’s great. It’s America. Everybody wins.
CHARLES MIZRAHI: Wow. That’s really amazing. All right. John Schnatter, you’re an American success story made. You took it from zero to hero. We’re waiting for act II. I think what people forget — put all the bad press aside, and don’t judge it on that. Bottom line: A 15-year-old kid with a dream, an idea and passion can create billions in our capitalistic society and give back so much.
CHARLES MIZRAHI: Regardless of whether or not people agree with the type of person you are, you’ve put food on the table for so many and gave them the opportunity to have the American dream — just by buying a franchise. Anyone could have done it.
JOHN SCHNATTER: Thank you, Charles. Thanks for having me.
CHARLES MIZRAHI: My pleasure, brother. Thanks so much, John.
CHARLES MIZRAHI: Thanks for listening to this episode of The Charles Mizrahi Show. If you’re a new listener, welcome! If you’ve been listening for a while, we’re glad to have you back. Either way, we’d love to know what you think of the show! Please leave a review if you listen on Apple Podcasts. Reviews make it easier for others to find the show. You can also see the video of the interview on The Charles Mizrahi Show channel on YouTube.
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