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Neo-Nazis hijacked Papa John’s brand. Can Shaq take it back?

Former basketball star Shaquille O'Neal, speaks during an interview on CNBC about joining the board of Papa John's International Inc., on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 22, 2019. REUTERS/Brendan McDermid (Brendan Mcdermid/Reuters)

Papa John’s, briefly hijacked by neo-Nazis as their pizza of choice after its former chief executive blamed disappointing sales on NFL protests against police brutality and later used a racist epithet during a marketing call, has been on a year-long quest to rehab its corporate image.

It forced out John Schnatter, the chain’s founder and longtime public face. It appointed its first executive focused on diversity and inclusion. It established a foundation that gave a $500,000 grant to help a historically black women’s college hold onto its accreditation.

And on Friday, in perhaps its most high-profile move, Papa John’s announced a new brand “ambassador”: basketball Hall of Famer Shaquille O’Neal.

O’Neal will join the company’s board of directors and invest in nine Papa John’s restaurants in his hometown of Atlanta, in addition to his marketing agreement with the company.

“Papa John’s is building a better culture, and I want to be a part of improving the company from the inside out,” O’Neal said in a statement.

The partnership with O’Neal could significantly boost the company’s quest to win back customers, especially among minorities, marketing experts say. But they caution against relying on “Shaq” alone, as a “shiny marketing object," to accomplish that objective.

“[O’Neal] is well-liked, without controversy and known as an entrepreneur. His involvement may help them to feel okay about patronizing the brand, especially in Atlanta,” said Sonya Grier, an American University marketing professor who focuses on race. “His engagement may also help to create perceptions of the brand as community-focused and help to overcome the destroyed trust in the brand.”

What happens when neo-Nazis hijack your brand?

Grier said featuring O’Neal in Papa John’s advertising builds on its last campaign to showcase diversity among its franchisees and employees as a way of publicly distancing the company from Schnatter. The company spent $5.8 million last year on re-branding costs, removing Schnatter’s face from its marketing materials and pizza boxes.

Schnatter, who resigned as chairman last summer, recently settled two lawsuits filed to regain control of the company he founded after he was pushed out as chief executive in December 2017 for his racially charged remarks.

After Schnatter criticized NFL leadership for not ending the player protests in a November 2017 call with investors, a neo-Nazi website hailed Papa John’s as “Sieg Heil Pizza” with a photo of a pie whose pepperonis were arranged into a swastika.

The company then moved quickly to condemn racism and all hate groups, tweeting an emoji of a raised middle finger to neo-Nazi ideas, and affirming its support for the NFL players’ protest. (Papa John’s ended its sponsorship of the NFL last February.)

Papa John’s sales in North America fell 7.3 percent in 2018 compared to the previous year, dropping 8.1 percent in the fourth quarter, according to a company call with investors in February.

After the O’Neal partnership was announced Friday morning, shares of the company immediately rose by more than 5 percent.

“There will likely be a segment of consumers who see it as a marketing ploy to increase the company’s brand favorability given their past misstep,” said Grier.

Steve Ritchie, chief executive of Papa John’s, said the company is hoping to attract more diversity throughout its operations.

“We are working through diversity not only on the board, but also the leadership team, franchise base and supplier base,” Ritchie said on CNBC’s “Squawk on the Street” Friday morning.

O’Neal told CNBC that he had initially approached the pizza chain about the three-year endorsement deal, which will net him $8.25 million in cash and stocks.

“The first thing when we met, what we talked about, was, you know, diversifying leadership roles and helping the African American community,” said O’Neal, who will be the company’s first black board member. “As I think about all of the stuff that went on, I worry about the 800 franchisees who did nothing wrong.”

In addition to his years in the NBA, O’Neal is a sports analyst with extensive business experience as a restaurateur and franchise owner. He is the founder and owner of a fast casual fried chicken restaurant in Las Vegas, and a fine dining restaurant in Los Angeles.

“This is not one of those shiny new things,” said Heide Gardner, chief diversity and inclusion officer at IPG, one of the world’s largest advertising and marketing conglomerates whose firm Powell Tate is advising Papa John’s. “Shaquille O’Neal has a lot to offer Papa John’s in terms of their business and their growth. He is a brilliant scholar, a successful business person. This is not a matter of just engaging someone who might be this cultural icon.”

But as far as rehabilitating its relationships with the black community, Gardner said that Papa John’s must find a way -- beyond Shaq -- to communicate that the company is “working to be a part of the neighborhood and not just a merchant in the neighborhood.”

“The other hard work that might not be as visible is going to carry the day,” she said.