Former NBA star Shaquille O’Neal has joined the Papa John’s board of directors and plans to sign a three-year deal to appear in advertisements for the Louisville-based pizza chain for $8.25 million.
The four-time NBA champion also has agreed to form a $2.8 million joint venture with Papa John’s that would see O’Neal take a minority stake in nine Atlanta-area pizza restaurants.
O’Neal, known informally as “Shaq,” has used his fame and affable personality during and after his basketball career to endorse products as varied as automobiles, pain relief creams and food products such as burgers, tacos and Shaq-A-Roni ’n Meatballs soup.
The alliance with Shaq, who is African-American and one of the planet’s most recognizable faces, comes after Papa John’s has endured 17 tumultuous months filled with acrimony, poison pills, slumping sales and racial controversies involving its founder, John H. Schnatter.
In a filing with the Securities and Exchange Commission Friday, Papa John’s said that with O’Neal’s appointment, it increased the size of its board by one to 12.
According to the company’s most recent proxy filing, Papa John’s directors get an annual retainer of $50,000, an equity grant of at least $125,000, restricted stock, stock options and additional compensation depending on their roles. Directors running for re-election last year received between $266,007 and $660,018. O’Neal will stand for election at the Papa John’s annual shareholder meeting this year.
The joint venture between the company and O’Neal calls for the former NBA center to provide $840,000 to acquire a 30 percent stake in the nine Atlanta-area restaurants that are currently company-owned. Papa John’s will own the remaining stake.
The proposed promotional agreement calls for the company to be allowed to use O’Neal’s “name, nickname, autograph, voice, video or film portrayals, facsimile signature, photograph, likeness and image or facsimile image to market and promote … the Company in any and all media.”
In return, the company will pay O’Neal $8.25 million over three years, half in cash and half in stock.
In a news release, Papa John’s said O’Neal “has established a strong business track record as an investor, restaurateur and franchise owner. He currently owns a Krispy Kreme Doughnuts franchise in Atlanta and previously owned 27 Five Guys Burgers and Fries franchises. In addition, he is the founder and owner of Big Chicken, a fast casual fried chicken restaurant in Las Vegas, Nevada, and Shaquille’s, a fine dining restaurant in Los Angeles, California.”
Papa John’s CEO Steve Ritchie said in the release: “Shaquille understands how to build lasting connections with consumers and energize employees. I look forward to working with him as a board member and brand partner to advance the many initiatives we are pursuing across the organization to create even greater success for Papa John’s and our stakeholders.”
O’Neal said, “Papa John’s is building a better culture, and I want to be part of improving the company from the inside out.”
Early this month, the company had agreed to a settlement with its founder to resign from the board after he and the company find a mutually acceptable independent director.
The downfall of Schnatter, who founded the business and for much of its existence also served as the company’s face in advertising campaigns, began in late 2017, when he suggested that the NFL’s failure to stop players from kneeling during the national anthem had hurt the company’s sales. The company apologized for the comments and announced in December 2017 that Schnatter would step down as CEO.
In July, while he was fighting to regain control of the company, Schnatter made headlines again after Forbes reported that he had used a racial slur on a conference call with a consultant. Late that month, the company’s board adopted a so-called poison pill to prevent its embattled founder from retaking control of the company.
Throughout the controversies, Papa John’s shares and sales have continued to suffer, while the company has incurred significant costs.
The company this month also launched a foundation focused on “equality, fairness, respect and opportunity for all.” It made the announcement at Bennett College, one of the nation’s historically black colleges and universities.
The company’s shares spiked more than 4 percent in early trading on Friday. The S&P 500 was down about 1 percent.