This follows controversial statements he made last month criticizing the NFL leadership's handling of players' kneeling during the national anthem in protest of racism and police brutality.
"Leadership starts a the top, and this is an example of poor leadership," Schnatter said during a call with investors, according to Business Insider.
Steve Ritchie, the company's president, will replace Schnatter, the company said.
Papa John's shares closed down less than 1% to $59.23 on Thursday. They were trading in the $86 range at the beginning of the year.
Schnatter, 56, owns about a quarter of Papa John's and will remain as chairman after he steps down as CEO. He founded the pizza chain in 1984.
The company said Schnatter will "continue to champion the core principles that led to recognition as the industry leader in product quality and customer satisfaction." It also said he will "pursue his personal passion for entrepreneurship, leadership development and education."
Ritchie, 43, started with the world's third-largest pizza delivery company in 1996 as a customer service representative earning $6 an hour, the company said.
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