You may have heard that Jimmy “MrBeast” Donaldson is tired of flippin’ patties and wants out of the burger business. Okay, it’s a little more complicated, and, of course, MrBeast himself wasn’t actually serving up every burger. Still today, there remain many unanswered questions about what happened to MrBeast Burger, why the lawsuit was recently dismissed and then re-filed, and how creators can avoid similar pitfalls when exploring branded experience deals.
Let’s dive in!
Contract Dispute: Served Hot and Fresh
Following months of speculation and public postings alluding to quality control problems in the kitchen, Beast Investments, LLC, officially filed a lawsuit against dining partner Celebrity Virtual Dining (CVD), and a group of related companies, on July 31 in federal court. The lawsuit alleged numerous breaches of their contract terms and asked the court to end the MrBeast Burger business entirely.
In a separate counter-lawsuit filed on August 7, CVD fired back at Donaldson, who, in their words, “believes his fame means that his word does not matter, that the facts do not matter, and that he can renege and breach his contractual obligations without consequence.”
The item central to the dispute is the endorsement and services agreement that was signed in September 2020 to start the branded burger business.
An endorsement and services agreement is a step above a standalone endorsement deal. In a typical endorsement deal, an influencer takes an already-branded product and promotes it in exchange for a payment — upfront fees and/or backend sales revenue split.
On the other hand, an endorsement and services agreement is typically used when a product or service is going to be “white labeled,” a term that is used to describe the process by which a non-branded product or service (such as a food item) is branded on demand and provided to consumers. There is usually more risk for a creator or influencer under these deals because they are allowing a third party to use their name on a label, directly linking their brand and reputation to the performance of the product or service.
Outsiders observing the social media blowback from MrBeast Burger’s quality control issues say a controversy like this can have a major impact on someone’s image. “For a digital creator their brand is their entire livelihood which makes protecting that brand crucial,” Tobin Jaramillo, an executive with Creative Artists Agency (CAA), told Passionfruit.
Takeaway One: Retaining Control
Thus, one of the first key takeaways from the lawsuit creators can have is to retain control. Under an endorsement and services agreement, control largely takes shape through intellectual property rights and quality control measures.
“If a brand partner is bringing intellectual property to the table,” Reece Clark, an attorney with Polsinelli who frequently works with sponsorship deals, shared with Passionfruit, “clear protections need to be in place to ensure each party’s intellectual property (existing and to be created) is defined and protected.”
A creator’s brand power is often supported by one or more registered trademarks and their name, image, and likeness (NIL) rights. Additionally, creators’ valuable assets — such as physical or digital branded products and marketing content — are often created under a partnership and may be protectable under copyright law. These forms of intellectual property (IP) are a key negotiation point in creator agreements.
For example, sell-off periods and design ownership became critical issues for Adidas following their termination of a partnership with rapper Ye (formerly known as Kanye West) Yeezy after he made antisemitic remarks. Adidas, despite retaining ownership of the designs, was forced to make difficult decisions given the distinct designs of the Yeezy shoes, stockholder pressure to avoid massive loss, and backlash for the waste if the product was simply destroyed.
“Clear usage restrictions, proper controls and approvals for our clients, and real quality standards,” CAA’s Jaramillo explained, “are always threshold issues for us when we are negotiating on behalf of our clients.”
In the lawsuit, MrBeast Investments claims the agreement explicitly prevented CVD from registering any trademarks to protect the MrBeast Burger brand, but it happened anyway. It’s a reminder that alleged contract restrictions weren’t enough to prevent CVD from pursuing registrations. Similarly, Beast Investments claims that CVD wasn’t authorized to release marketing materials without approvals, but did so anyway using Donaldson’s image.
So, what can creators do in this situation? Seek an injunction.
Takeaway Two: Look for Injunctive Relief
For creators, injunctive relief can offer a way to quickly and swiftly protect their reputation and brand in situations like what Beast Investments currently faces. A judge can grant injunctive relief, which basically means they can force one party to act a certain way or prohibit them from acting in another way if it will prevent irreversible damage or harm to the creator.
The lawsuit notes that CVD is continuing to market and advertise using the MrBeast and MrBeast Burger assets. Beast Investments asks the court to force CVD to stop the use of Donaldson’s likeness and brand. Due to confidentiality restrictions, it’s unclear whether or not an injunctive relief clause was included in the contract at issue with this MrBeast Burger dispute, or to what degree it specified anything useful when triggered.
The ability of a creator to negotiate injunctive relief in their favor could pay off if the deal does go south. For example, in 2019 basketball legend Shaquille O’Neal and pizza restaurant Papa John’s entered into an endorsement agreement that contained an injunctive relief clause favorable to O’Neal. The agreement also contains obligations that Papa John’s ensure its’ products are “safe for human consumption” and made following food safety guidelines.
Takeaway Three: ‘I’m Out’ Termination Rights
Every contract should have a termination provision that details not just when, but also how, a contract is terminated. This is usually a set number of years and then covers winding down obligations, such as a product sell-off period.
“No one wants to be in a situation where a brand partner is causing reputational damage but, for contractual reasons, the other party can’t make a clean break,” Clark explains. “A commonsense thing we want to see is the ability for a party to quickly cut ties if needed.”
In some instances, a creator or influencer with major power at the negotiation table may be able to negotiate for a one-sided (referred to as unilateral) termination provision. For example, in a public filing from 2012, former professional football player and sports commentator Joe Theismann appears to have successfully negotiated for a termination right that only required 30 days’ notice. It’s not known what specific triggers, if any, were included in the contract that would allow Beast Investments a right to terminate its contract with CVD.
If the creator is working with an unestablished partner, especially a startup or new venture, it might be worth pushing for an “I’m out!” button in the form of either a termination for convenience or a termination for cause with the reasons spelled out in the contract (such as poor food quality). Usually, termination for convenience allows someone to end a contract whenever they tell the other party.
CVD claims in its filing that Beast Investments “bullied” their company on social media in an effort to terminate the agreement and achieve better terms as the business began to take off. In what appears to be a since-deleted tweet referenced in the counter-lawsuit, Donaldson admits, “Young beast signed a bad deal.” (But, as CVD claims in its counter-lawsuit, Donaldson’s mother was actually the one who signed the contract.)
Disparaging a business partner is one method of trying to get out of a contract, but not one that comes highly recommended.
Wrapping It All Up To-Go
Most importantly, creators and brands should consider working with reputable talent and marketing agencies as well as legal and management teams experienced in the industry, such as retail or food and beverage.
“While contractual language is important, it can only get you so far,” Jaramillo warned. “Properly vetting a third party to ensure they are trustworthy and a partner that the client is comfortable being associated with is imperative because as they say … The internet never forgets.”
In their lawsuit, Beast Investments alleges that CVD had yet to work with a creator or celebrity at the size of Donaldson. (On its website, though, CVD lists current partnerships with celebrities such as Mariah Carey and entertainment brands including BRAVO and Nascar).
Donaldson’s legal team is taking a second bite at the lawsuit after the judge originally assigned to the case said they should have filed this in state court, according to recent filings. This is likely the anticlimactic “why” behind the federal lawsuit being dismissed by Beast Investments on August 14 — just a mere two weeks after it was filed — and then re-filed in a state-level court in New York the same day. Basically, there are procedural reasons that the contract dispute will play out at the state level for now. There hasn’t been any additional activity in the lawsuit since the complaints were filed.
Legal representatives for Beast Investments said they did not have any comment at this time. Virtual Dining Concepts did not return a request for comment.
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