In the meantime, Olivia Kirtley will act as the company's lead independent director, the company said.
In a statement, the pizza mogul admitted to using the slur saying "regardless of the context, I apologize. Simply stated, racism has no place in our society", Schnatter's statement said.
According to NBC News, Mr. Schnatter also resigned Wednesday from his vice chairman post on the University of Louisville Board of Trustees. He added that the members of the board don't condone racism or "insensitive" language. Laundry Service owner Casey Wasserman apparently terminated his company's contract with Papa John's following the comments.
Schnatter reportedly told those on the phone that Colonel Sanders - the founder of KFC - used to called black people the n-word and he didn't get public backlash.
Just after U of L announced Schnatter's resignation, Jeffersonville Mayor Mike Moore oversaw Schnatter's name being removed from the entrance of Nachand Fieldhouse.
It's been a tumultuous time at Papa John's.
Schnatter, 56, stepped down as Papa John's CEO in January. The publication reported the alleged objectionable behavior took place on a call intended as a role-playing exercise for Schnatter on avoiding racially charged mishaps in the future.
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Speaking to BeIN SPORTS , he said: "I heard people saying I had a hard season but I don't agree with that". It's something historical for us", the Liverpool defender said. "This is something we will never forget".
Schnatter also reportedly recalled his IN childhood, where Forbes reported Schnatter said "people used to drag African-Americans from trucks until they died" IN an attempt to portray an opposition to racism. In February, his pizza was no longer the official pizza of the National Football League - and Pizza Hut swooped in.
After Forbes' story ran, Schnatter, through Papa John's, issued a statement confirming he used the slur.
Shares in the pizza company dropped 5.9 percent following the announcement of the news, knocking $96.2million (£73million) off the company's market value.
Laundry Service chose to cut ties after Schnatter's behaviour on the call, according to Forbes. "We also instructed the client that during this transition, the executive who made the offensive remarks must not communicate directly with any Laundry Service employee", according to the letter.
Papa John's and Laundry Service did not immediately respond to Newsweek's request for comment. However, Schnatter remained the chairman of the company's board.