Schnatter's comments were made during a May conference call with a marketing agency and were revealed Wednesday by Forbes, which reported that he was engaged in "a role-playing exercise" created to help him avoid damaging public-relations gaffes. The 56-year-old heavily criticized NFL for allowing players to take a knee during National Anthem protests and even blamed them for causing a slump in his pizza sales. During the conference call, Schnatter brushed off his National Football League remarks and complained that KFC owner Colonel Sanders had never received backlash for using the n-word.
Schnatter had apologized earlier in the day after Forbes reported that he used the racial slur while participating in a role-playing exercise created to prevent public relations crises. He apparently intended for the remarks to convey his antipathy to racism, but multiple individuals on the call found them to be offensive, the source said.
In a statement on Wednesday, the company said it condemned "racism and any insensitive language".
"We've got to own up and take the hit for our missteps and refocus on the constant pursuit of better that is the DNA of our brand", Ritchie said. As of March, Schnatter was its largest shareholder by a wide margin, holding more than 9.45 million shares of Papa John's, or roughly 29.4 percent of its outstanding shares.
The racist incident that spurred this was brought to light by Forbes, which reported on a May PR training session involving Schnatter.
Papa John's is the third largest pizza chain in the United States by sales, trailing Domino's and Pizza Hut.
Shares of Papa John's fell by as much as 5.9 percent to a new 12-month low of $47.80 a share in intraday trading Wednesday - erasing $96.2 million in market value. Papa John's later apologised for the "divisive" comments.
Yum Brands Inc's Pizza Hut replaced Papa John's as NFL's sponsor in February, ending Papa John's eight-year relationship with the top USA football league.