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Corner Office: Papa John’s John Schnatter is Building a Better Pizza Empire

When John Schnatter first fell in love with pizza (and first obsessed over fresh dough and cheese-to-sauce ratios), he was a 15-year-old kid promoted from dishwasher at Rocky’s Sub Pub. Anything is better than washing dishes, right? But Schnatter took to pizza making right away, not just to get away from dish duty but to prove he deserved the promotion.

“If you didn’t do it right… then it would come back about half-eaten because [customers] wouldn't want to take it with them,” says Schnatter, Papa John's founder and chairman. “I had an intuitive grasp on what the consumer wanted at a very young age, which ended up being a tremendous advantage."

Whether it was putting a smile on customer's faces with a well-made pie or writing notes to his girlfriend using pepperonis, Schnatter says the experience was so fun that he knew he wanted to be in the pizza business.

That intuition and love of pizza led Schnatter to create Papa John’s, inception in 1984—when Schnatter tore down the wall in a broom closet at his father’s tavern in Jeffersonville, Ind., and installed a pizza oven. Today, with more than 3,000 stores worldwide, Papa John’s is a booming enterprise that brought in around $1.1 billion in total revenue in 2008.

Even with steady early growth and increases in sales yearly, Schnatter didn’t really feel Papa John’s success until his Louisville, Ky., store was voted “best pizza” in town in 1989. Then, as he saw his Jeffersonville store beating the nearby Domino’s by leaps and bounds, he realized the potential of his little back-room pizza company. “

I thought, ‘If we can beat them in Jeffersonville in Indiana, with one store, then why shouldn’t we be able to beat them in the rest of the world?’ ” Schnatter says. “We just believed early on that if we take care of our people and take care of our product and we do the right thing and run a good, clean business, where it's a win-win [for everyone], we could build a successful enterprise.”

That enterprise continues to deliver the promised "better ingredients,better pizza." Its commitment to quality has earned Papa John's the highest customer satisfaction rating among national pizza chains in the American Customer Satisfaction Index for nine of the last 10 years.

"Everything we do, we try to do it just a little bit better, and that costs money. We're willing to pay up,” Schnatter says. "I bet, on average, our competitors can make a pizza for 2 bucks. That same pizza will cost us $3-plus. But that extra dollar is the thing that makes Papa John’s different, and we think the consumer can tell the difference.”

"We just believed early on that if we take care of our people and take care of our product and we do the right thing and we run a good, clean business, where it's a win-win [for everyone], we could build a successful enterprise."

In addition to perfecting pizzas and seeking ingredients without artificial flavors, the Papa John’s team is always researching new ideas to improve on the existing product without drastically changing the pizza consumers have come to love—from ideas as simple as strengthening the boxes holding the pizzas and making sauce measurements more precise to more complex oven calibrating processes that ensure even heating in the front and back of the oven.

Schnatter calls these improvements a process of refinement rather than radical change. He has worked to instill the habit of constant advancement into their companywide culture, modeling a consistent desire to get better.

Thanks to this vision, business growth is definitely on the horizon, but that’s not the only kind of growth in which Schnatter is interested. He says watching the growth of Papa John’s employees is one of the best parts of his job and believes relationships within the Papa John’s system could be as big a competitive advantage as a solid product. He places a heavy focus on attracting and keeping talent. “We want to get to the point where everyone wants to be on the Papa John’s team,” he says.

Grooming the next generation of leadership at Papa John’s is part of this team building. Schnatter is still very much involved in guiding executives through the process, but he realizes that teaching autonomy is vital to the company’s future. “We’re giving them a nice little test run here on how to run this [company] in case John gets hit by a bus,” Schnatter says with a smile.

“If I’m doing my job right and you’re doing your job right, Papa John’s should be a people-growing machine,” he says. “We’re seeing people that two or three years ago did not think they could run a department and now think they can run a division. That is very fulfilling to watch people grow.”

Always looking ahead to the next task, challenge or goal is another one of Schnatter’s strengths. Papa John’s is already the third-largest pizza franchisor in the world, but Schnatter still has his sights on reaching the No. 2 slot and, eventually, becoming the No. 1 pizza chain in the world.

And why not? Schnatter is not the quitting type. Rather than quit college to start Papa John’s early, he took summer and night classes to finish his degree in business administration at Ball State University in three years. When his father’s bar was failing, he sold his car (a ’71 Z28 Camaro) and jumped in to help pay off the debt. When everyone said that car was lost for good, he kept the search up and was recently reunited with it.

Schnatter’s drive isn’t the only thing propelling the company in the direction of the No. 1 slot. It seems more and more franchisees are choosing Papa John’s. In 2009, it celebrated 25 years of business, and in all that time it hasn’t lost momentum. The company was recently ranked as one of the fastest-growing franchises and was given the No. 10 slot in Entrepreneur magazine’s 2009 “Franchise 500”—just three places behind Pizza Hut, ranked No. 7.

“I never give up hope. Sometimes I go to bed and I’m a little beat up, but when I wake up in the morning, I just always have a lot of hope,” he says.

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