Papa John's founder John Schnatter has stepped down as chairman of the company's board after apologising for using the N-word in a conference call.
The pizza chain founder used the racial slur in a media training session in May.
Mr Schnatter quit as chief executive last year after criticising the NFL over players' national anthem protests.
In a statement on Wednesday, the company said it condemned "racism and any insensitive language".
It later said it had accepted Mr Schnatter's resignation and that a new chairman would be appointed in the coming weeks.
Papa John's is the world's third-largest pizza chain, with nearly 4,900 outlets worldwide.
The incident happened during a conference call in May between executives at Papa John's and a marketing agency called Laundry Service.
According to Forbes, the call involved a role-playing exercise that was supposed to give Mr Schnatter experience in dealing with difficult issues.
When discussing how he would distance himself from racist groups, Mr Schnatter said that Colonel Sanders, the founder of KFC, had never faced criticism for using the N-word, Forbes reported.
Trump donor Mr Schnatter stepped down as chief executive of the company in 2017 after he criticised the National Football League (NFL) for not containing national anthem protests at American football games, which he said were hurting his firm's sales.
Players had been protesting against the treatment of black people in the US by kneeling during the national anthem.
President Donald Trump had also criticised the players for the protests and pressed the NFL to ban them.