MrBeast is suing himself... Kind of. You see, earlier this month,
the news came out that Jimmy Beast, everyone's favorite
AI generated thumbnail face, was filing suit against his fast
food brand, MrBeast Burger, or more accurately,
the company responsible for managing that brand: Virtual Dining
Concepts, VDC for short. Why would you do that? Well, as the lawsuit claims, it was the result of years of bad burgers
battering his beastly beef brand. The quality of the food
that was being produced by VDC’s army of restaurants was inconsistent
and in many cases dangerous, resulting in a rapid erosion
of MrBeast's food brand. So how did VDC respond? By pulling out the UNO reverse card, counter-suing MrBeast
for damage to their brand. Basically, they're saying that MrBeast's
public statements about VDC actually caused significant damage
to their bottom line. How much are we talking about here? You know,
just a cool hundred million dollars. How’s that for a thumbnail? “Last to Leave the Courtroom wins
NINE FIGURES!!”. So who's right and who's wrong? The answer to that, my friends, is so much bigger
than either of these two companies. Hello internet! Welcome to Food Theory,
the show that dishes out the truth behind all your favorite brands. So back in 2020, MrBeast, ever
the trend spotter, had this brilliant idea: partnering with ghost kitchens
to quickly scale up a food brand with his name on it. Now that right
there is already a lot to process, so let's just make sure
we're all on the same page. Basically, a ghost kitchen is not Casper
and his pals dishing up a load of baked ziti. It's a professional kitchen
that works to make food for another brand. You know how ghostwriters are people
whose job it is to write books in secret for someone else? Well, a ghost
kitchen is basically that for food. It's a group of chefs working in a kitchen to cook up food for a restaurant
that does not physically exist. The restaurant's name and menu
appear on food delivery apps like GrubHub and DoorDash. People place their orders
and then an existing kitchen somewhere out there in the world
decides to cook it up. Sometimes those kitchens are, you know, actual kitchens
in already established restaurants just looking to pick up a few extra tabs
for extra business on the side. But oftentimes those ghost kitchens
are working solely for the virtual brands in unusual places:
in shipping containers, in parking lots, in places where you wouldn't
expect your food to be coming from. It's weird, sure,
but hey, food trucks are a thing. And on the surface it seems to be
a perfectly acceptable business model. MrBeast uses his reach to spotlight a menu of items he's approved
and then local chefs make it. That allows him
to have hundreds of restaurant locations all over the country overnight
while giving extra work to chefs and other employees
struggling to stay afloat. Jimmy is the marketing. Virtual dining
concepts is the actual business making the food. On paper
it really should be a win win win. And financially,
it certainly seemed to be, with Jimmy tweeting out in July of 2022
that MrBeast Burger had earned a hundred million dollars in revenue. But in reality, things aren't nearly so
rosy. Ever since day one of MrBeast Burger’s
launch in 2020, there's been contention between Jimmy and Virtual Dining Concepts
about burger quality control: Burgers coming out underdone, overcooked,
under-seasoned, with hair in them. When you're relying
on over a thousand different kitchens with a vast range of ingredients and staff training at their disposal,
the product is never going to be the same. For example, compare Matt Stonie’s video: To what Eddy Burback got. I mean, the difference is obvious. This Burger Patty does not look like this
burger patty. And this is something
that's openly acknowledged by Jimmy's own team, as seen here
in a clip of his manager Reed reacting to the opening of MrBeast Burger’s physical location. But this year, the quality control issue
finally came to a head. In May of 2023, the original video promoting
the launch of the brand was made private, and when someone asked if this was a sign
that MrBeast Burger was done, Jimmy responded, saying that the problem was that he couldn't
guarantee the quality of the order. This is also something he repeated in
July in a now deleted tweet when responding to a fan's complaint
about their subpar Beast Burger, quote, “Sadly,
I can't get out of my deal with Beast Burger.”
He elaborated in a series of follow ups about how the original intent of Beast Burger was to help restaurants
make more money during the pandemic. But eventually, it just became impossible
to keep up quality working with restaurants
that he doesn't own. When asked if this meant
that he was retiring the brand, he said he would if he could,
if the company partnered with, VDC, wouldn't let him stop,
even though it was terrible for his brand. He acknowledged that a younger him
had just signed himself into a bad deal. Which leads us then to today. With Jimmy filing a lawsuit against VDC,
claiming his contract with them should be null and void because they failed
to uphold their part of the bargain. The kitchens under
their management were sending out food that was, according to some of the fans
who ordered it: Revolting, disgusting, inedible,
and likely the worst burger they ever had. Which, you know, is saying a lot when Burger King's
Barbie Burger is a product that exists. Looks like
it's been slathered in Pepto-Bismol. But here's where things really get spicy. VDC responded with a lawsuit of their own. According to them, yeah, Jimmy was right. MrBeast.
Burger's reputation was destroyed. But it wasn't by them delivering mistaken
orders, it was rather by Jimmy himself airing the dirty laundry publicly,
retweeting and elevating the relatively few instances of people's
dissatisfaction with the food, publicly complaining about not being able
to get out of his contract. They claim that he was engaging in a cash
grab, trying to bully the company
for his own monetary gain. And the damage done to their business,
not just MrBeast Burger, but Virtual Dining Concepts’ complete brand of ghost
kitchens, totaled over $100 million. So with lawsuits
flying around in both directions and potentially hundreds of millions
of dollars on the line, who's right here? Now, at first glance Jimmy's case
seems like it should be obvious. The biggest problem
hurting the image of MrBeast Burger was the huge amount of complaints
they got about their food. Any damage that Jimmy allegedly did to the brand by responding to
or bringing attention to negative reviews, all of that happened only because VDC
failed to uphold their end of the bargain. You know, actually making safe, high
quality food. If there was no bad food,
you would have no bad tweets, right? Except there's likely a number of angles
that VDC will attack that premise from. The first would be the relative scale
of the complaints. That in the food world there's always
going to be negative reviews of a product. And that MrBeast, in responding to a small
handful of them, made a mountain out of a molehill, overblowing
a quality control issue that relative to the volume of orders being placed,
wasn't nearly as bad as it seemed. The second angle they’ll likely be arguing was that it was never their job
to provide consistent food. It was only their job to provide food
that had the MrBeast name on it. That one's a little bit weird,
we'll get to it. So let's take a big ol bite and chew on
some of the issues that are brought forth by this legal battle,
shall we? And remember. I'm not a lawyer. This is not legal advice. This is just me nerding out about
the future of how food gets distributed. First, to address the idea that MrBeast
overly fixated on the few bad reviews that MrBeef Burger received versus
the mountain of orders that VDC fulfilled we need to understand the average number of complaints and health violations
a typical restaurant receives. A study by the National Restaurant
Association found that about 7% of restaurants
had critical violations, which are the most serious type
of infraction for a food service provider. Critical violations are things
that would include anything causing an immediate health problem
for customers or employees, stuff like cross-contamination of bacteria, raw meat being stored
at improper temperatures, sewage backups, and a lack of running water
to wash your hands. So how does MrBeef Burger compare? Well, we can't really know,
but we can estimate and compare with other very similar service providers. We know for a fact that Virtual Dining
Concepts has delivered 6 million orders based on the header on their site. And while not all of those are going to be coming from Jimmy's brand,
we can assume that most of them are. Let's just say that Mariah Carey’s
cookies and Mario Lopez’s tortas... Yeah,
they're probably not flying off the shelf as quickly as the burgers
produced by the guy actively promoting his sandwiches
to his hundreds of millions of followers and then regularly giving away
wads of cash to random orders. There might be a little bit
more enthusiasm to buy one of those versus the others. We also know, thanks to this quote
from march of 2021 from Robert Earl, founder of VDC, that a million burgers
at that point had been sold, quote, “We've done 1 million entrees already
and it got so much attention... He's a wonderful partner, he's intent on building with us
a big permanent brand.” Whoops. Yeah,
that one didn't age too well, did it? Anyway, for the sake of argument,
let's just do a real lowball here and say only 1 million orders
have been placed for Beast Burger. So what's the relative volume
that we're dealing with here? Well, according to the MrBeast complaint, the brand has received
thousands of negative reviews. So let's take a high number of complaints, say 10,000, versus a low number of orders,
say 1 million. That then gives us only 1% complaining
about the quality of the MrBeast Burger, well below the 7% of restaurants
with critical violations. Now obviously, this isn't a perfect comparison,
getting a bad review online is very different
from having a health code violation. But it does show
that there may be something to Jimmy looking a bit too closely at all
the negative tweets. 1% negative reviews
across a million or more orders? That's a great hit rate. Or maybe not. Let's look at the question another way. While we don't have specific numbers
about Virtual Dining Concepts themselves, there has been a bunch of data released
about other similar ghost kitchens service providers. Reef Kitchens is a company
with a similar concept, a ghost kitchen company that operates
delivery only-virtual restaurants. And in 2021,
an investigation into the company found that out of the 61 Reef Kitchens
operating and inspected in Florida, 58 violated
at least one health and safety concern. Of those, 21 separate kitchens
had themselves a high level safety violation, ranging from a lack of soap
for proper handwashing of the chefs to storing meat
at dangerously high temperatures. Two units even had sewage
leaking into the kitchen. So overall, a third of Reef’s operations
in Florida had a high level violation, 33%, way higher than the national average
that we talked about before of 7%. Now, to be fair, Reef only works out of nontraditional spaces
like parking lots and shipping containers. Compare that to VDC,
which has a mix of both nontraditional spaces
and pre-established restaurant kitchens. So maybe VDC's
handling of other brands is better? Nope, doesn't seem like it. I looked across the other
brands and Virtual Dining Concepts’ roster and found a similar trend
to MrBeast Burger. Negative reviews on account of incorrect orders, late deliveries
and the food just being bad. D.J. Khaled's Another Wing boasts
a three star average on GrubHub. Steve Aoki’s Pizzaoki reviews don't fare
much better: Food was late, cold, gross. Even actual chef Guy
Fieri decided to partner with VDC to bring his Flavortown
kitchen to the virtual world. Within a few months,
the brand expanded to 160 locations. Guy Fieri was a jewel in the VDC crown because he was a real chef,
giving real legitimacy to the business. But look at the VDC website now. The brand is gone. Searching The Flavortown Kitchen across
food delivery apps, completely vanished. The only remnants are its various
one star reviews on Yelp with a very similar refrain.
I trusted the brand big mistake. The Chicken Guy sandwich
I ate was not edible. Even Guy Fieri, experienced restaurateur,
is struggling to find critical success with virtual kitchens. He bounced
before his brand really suffered, just like Jimmy is looking to do now but doesn't really seem able
to do contractually. So really,
it seems like Jimmy is in the right. He and many others have had their brands
actively co-opted and weakened by these ghost kitchens
operating irresponsibly. But unlike many other celebrities, doesn't seem like he's able
to extract himself from the contract. So let's just talk about those contracts
for a second, shall we? Because that actually brings up
the second major issue with the case. Obviously, quality
control is a huge problem, not just with VDC,
but for the entire ghost kitchen industry. When you have a decentralized model
and don't actively own any of the restaurants yourself,
there's no real accountability there. If you're working in a Buca di Beppo but you occasionally get a delivery order
to Guy Fieri's Flavortown Kitchen, if that order sucks, it’s
not really coming back to you. There is no true way to hold you,
the worker at Buca di Beppo, accountable. It’s not your primary job
after all, the health of the actual main business
is always going to have to come first. And let's be honest, it's not like you were trained to do the menu
items correctly anyway. Heck, you probably didn't even have
the right ingredients to make that item. You're just doing your best to replicate
that one dish from that one fake menu amongst the hundreds of restaurants
that may be operating out of your kitchen. So overall, there's not really a high
likelihood of you getting that item right, nor is there much incentive
to put in any extra effort. That is why these orders
keep failing so hard. But then why isn't VDC themselves
holding these restaurants accountable? Well contractually,
they might not have to. Now, while I wasn't able to get a hold
of a contract for Virtual Dining Concepts. I was able to find one for
a similar company, Virtual Dining Brands. And let me just say the services
they promised to provide are pretty simple to say the least. Here's the contract language
they have in there, quote, “Virtual Dining is a business engaged in the development,
promotion, advertisement and sale of restaurant prepared food
through delivery application.” “For the purposes set forth... Licensed Products shall [include] mutually approved menu
items for app based delivery.” That’s it. No quality control,
no minimum standard, no consistent recipe. Just ‘did we get food items
branded with your name onto some Uber Eats menus.’ And if VDCs contract
reads anything like that one, technically by the letter of the contract,
they've done their job for MrBeast. Now that seems insane, but that's also one
potential danger of licensing out your brand. When a public figure licenses out their name or their likeness,
you're basically giving permission to another company
to represent you out in the marketplace. They're using your intellectual property
to produce or sell something. The nice thing about that
is it's a quick way to scale up. Classic example of this in the YouTube
space is with merch. Very few YouTubers are actively
doing their own merch in-house. Instead, they're licensing their logos and catchphrases out to third parties
in order to do that for them. That allows YouTubers to offer
merch quickly without having to buy a bunch of equipment
for themselves. It also lowers
the overall financial risk for them because they're not having to hire a bunch of new employees
to manage those workflows. And hey, you'll probably wind up
with a better product than if you did it yourself anyway,
because presumably you're working with people
who know that space. Case in point, our new Theorywear
which just launched. There's some amazing products in the mix,
like this incredible waterproof jacket with adjustable Velcro sleeves,
this awesome vegan leather purple jacket, or this crisp white button down with
subtle circuit patterns around the neck. I couldn't have done any of that
on my own. Instead, we partnered with people
who know how to make quality clothing. Their background is, believe it or not,
in cutting edge street fashion. And their expertise, plus our ideas
led to a really awesome collaboration and a slate of new products
that you can buy right now while supplies last via
the link that you see on screen. However, the downside if you enter into a relationship like this
is that if that provider winds up being shady, you're
the one having to clean up the mess. If your licensing contract isn't strict
or specific enough and you're not keeping a close eye
on the people who are using your brand, it's not them
who are suffering; it's ultimately you that's left holding the bag. And I'm not talking about a cool bag like our new radioactive backpack
available at Theorywear.com. That's why restaurants like In and Out
and McDonald's retain a ton of oversight over who's allowed to open up
new establishments under their name. For one thing, they don't take all comers. It takes a rigorous application process. And once you clear the bar,
you're still not done. You're committing a minimum of 20 hours
a week to a franchise training program that lasts anywhere
between 6 to 18 months. And after you've completed
your basic training, then it's off to Hamburger University,
which is a very real thing where franchise owners take classes on everything from management
and strategy to company culture. And what do you get out of all of that
training? You get yourself a consistent experience. A Big Mac is going to taste the same
no matter what city or neighborhood you order it in. But with VDC, that attention to detail
just doesn't seem to be there and there doesn't really seem to be
the necessary penalties in place to keep them incentivized
to doing a good job for their clients. And you see that right there is the issue
with the entire ghost kitchen model. When everything's decentralized,
not only do the mistakes pile up, but it becomes really easy
to avoid responsibility. There's always someone else
in the pipeline to blame, always a layer of separation
between you and the customer. VDC, in operating MrBeast Burger
got all the benefits of being a big brand, like a huge number of customers
signing up to buy food items from a name that they recognize. But apparently they weren't willing or equipped to bear the costs
actually associated with delivering a consistent experience
that would please the customer. And, based on all their actions throughout this process,
it doesn't really look like they're contractually obligated to do it
either. They just have to provide some food. Does
any of this mean that the ghost kitchen model
is inherently unworkable? No. At least I'm not willing to say that
just yet. There may just come a company
that has their own Hamburger University that will provide actual training
to standardize practices and quality, as well as give a clear
line of accountability. It may just wind up being
that the companies that manage
and run the logistics of virtual kitchens also have to supply their own ingredients. So what does all of this mean for MrBeast now? Honestly, if I were to guess,
I expect VDC to actually be able to keep the Beast brand
for at least one more year. That ghost kitchen contract I mentioned
earlier was for a three year license, and I expect the VDC
one to look pretty darn similar. I also suspect that they'll try
really hard to hold on to Jimmy. Looking at the roster
of their current clients, Jimmy is one of the only ones
still on the site making me think that the options
there are limited and without Guy Fieri, Jimmy is really
the only jewel still left in their crown. To be honest though,
I hope I'm wrong about this theory. I normally try to stay neutral
with these sorts of episodes, but in this case, I've got to admit, I really feel bad
for Jimmy in this sort of situation because I know how it sucks to have
someone do a poor job with your brand, to trust someone to do their job,
and then them to just utterly botch it and how one bad contract can ultimately have ripple effects
that affect your business for years. It sucks. But whatever
the solution, one thing is clear: right now the food for VDC
seems to be secondary to the business, and even though business may be booming, when the food gets neglected,
everything implodes. I guess that's what happens
when you're on the bleeding edge. The bleeding, unsanitary,
probably shouldn't be eating that edge. But hey! Next time you do order
from a virtual restaurant or a real restaurant, make sure you keep
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right off the bat. I'm MatPat, that's a theory. And I'll see you next week.
