An endorsement agreement is executed between someone who has an audience and the ability to influence consumer behavior and a company looking to promote its products. Platforms such as TikTok, Snapchat, and Instagram have allowed influencers to emerge and use their following to promote products.
It’s important to draw a distinction between an endorsement agreement and a sponsor agreement. In a sponsor arrangement, you provide services to someone to support something, but in an endorsement agreement, you promote a product.
Attorneys advise these influencers on how to handle contracts and what to expect when starting out or when dealing with a large company. Giselle Ayala, an entrepreneur, and an immigrant knows precisely how to counsel clients and serve them with excellence. She founded her love, Law Fees two years ago and works with entrepreneurs and influencers to help them navigate contracts. She shares how drafters can use language to balance the interest of the parties and digs into the nuances of an endorsement agreement.
Questions in this Episode
- How can drafters structure definitions to balance the interest of both parties?
- What are the important provisions drafters must include in an endorsement agreement?
- How can influencers communicate their power in an agreement?
- What language should drafters use to balance the deliverable expectations and the genuineness that people expect from an influencer?
- How can drafters leverage the power of contracts for influencers?
Shaquille O’Neal And Papa John’s Relationship
Papa John’s engaged in this partnership with Shaquille O’Neal, who would endorse and promote their many products. This contract is often broad, mentioning all products such as Pixar, restaurants, and entertainment spaces. He was picked since he is a basketball player with a long history in the sports industry. He clearly has a lot to offer in terms of commercially boosting the image of Papa John’s and attracting new customers to keep the product youthful and interesting. As a result, the definitions will be the first item we see.
A. “Celebrity Endorsement” shall mean the right to use, subject to the provisions hereof, CELEBRITY’s name (including variations and derivations of the same), nickname, initials, autograph, voice, video or film portrayals, facsimile signature, photograph, trade name, likeness and image or facsimile image, or means of endorsement (not including video) (individually and collectively, the “Personality Rights”), in each case, solely as Approved (as hereinafter defined) by ABG, in connection with the advertising, promotion and sale of Products.
One of the most essential definitions is that of celebrity endorsement. Endorsement agreements are entered into owing to the distinctive personal characteristics of the celebrity who will endorse the product. The definition precisely covers the items available for use by the company, the individual receiving the endorsement, trademarks, likeness, copyright, and personality rights.
The other important concept is competitive products or products sponsored by that celebrity that are in competition. The celebrity should not be permitted to advertise or endorse other items that compete with those of the company.
C. “Competitive Products” shall mean pizza intended primarily for carry-out or home delivery and prepared on the premises of a pizza carry-out/delivery restaurant, including but not limited to, pizza “take and bake” outlets, dine-in restaurants in which pizza is the principal food offering, and/or frozen pizza sold in grocery or mass merchandiser stores for in-home preparation.
Both sides also agree to generate new media promotional content, with Shaquille O’Neal at the forefront. Since his publicity rights will be used, he will be shot next to Papa John’s logos, Pixar, and restaurants advertising the company. When it comes to media and relationship opinions, Papa John will develop material based on Shaquille O’Neal’s approval since he has a certain position he wants to take care of in terms of how he’s perceived by the public.
1) Work for Hire
Work for hire is an important concept since it is connected to the copyright protection of works, authorship, and creative works. If you do not include the work for hire provision or definition, you may have a legal issue determining who owns the copyright and who has the economic right to exploit it to create derivative works.
They incorporate these work-for-hire provisions to ensure that Papa John’s owns all copyright-protected advertising content. The company can exploit it, produce new work from it, and utilize it for commercial purposes.
This agreement includes a provision that prohibits you from promoting or endorsing competing items while yet allowing for co-branded products in the future. The problem is that we expect everything to go smoothly. If something goes wrong, the court may have to find out what the purpose of the agreement is.
D. New Co-Branded Products. ABG will permit CELEBRITY and PAPA JOHN’S to collaborate in good faith to develop one (1) or more co-branded Products using the Personality Rights. Any such co-branded Products shall be subject to the separate mutual written agreement of the Parties.
When you have an agreement that references another agreement, you need to undertake your due diligence as an attorney to ensure that all agreements are coherent with one another. You will need to exercise much more caution because the various sections of the agreements must be coordinated. That includes dates, deadlines, and the like.
3) Taking Responsibility
It’s a good idea for Papa John to be in charge of publicly disclosing the engagement because it’s important to have someone who can deal with advertising regulations. They can be very broad and involve not only state law, but also the Federal Trade Commission which is very serious about protecting consumers.
They are capable of initiating any type of investigation on their own. They are not required to be contacted by a customer. And once they start digging, they will ask a lot of questions and make someone pay if they believe consumers have been deceived. If you have a contract in which Papa John, for example, is completely responsible, you may be able to demonstrate that you did your part.
4) Additional Services
Shaquille is taking on greater risk with the franchise clause. It’s a different story if the celebrity becomes a part of the company by gaining ownership rights. Since the celebrity will ultimately sit on the board and make crucial decisions, they will not be able to avoid responsibilities.
I. Additional Services. Personality’s rendition of additional services beyond the scope of the Services set forth herein shall at all times be subject to the mutual agreement of the Parties (including, without limitation, the negotiation of appropriate remuneration in connection therewith). PAPA JOHN’S acknowledges and agrees that (i) it is contemplated that PAPA JOHN’S and CELEBRITY will enter into one or more ‘Franchise Agreement’ pursuant to which, among other things, CELEBRITY (and/or CELEBRITY’S designee) will acquire a thirty percent (30%) ownership in nine (9) Atlanta-area Papa John’s Pizza restaurants, and (ii) PAPA JOHN’S shall not, directly or indirectly, request, cause, or require CELEBRITY, under or in connection with any such ‘Franchise Agreement’ or otherwise (except as expressly set forth in this Agreement), (a) to provide to PAPA JOHN’S (including its designees) any services that are the same as or similar to the Services hereunder, or (b) to grant to PAPA JOHN’S (including its designees) any right or license to use any of the Personality Rights. PAPA JOHN’S further acknowledges that ABG, as successor in interest to CELEBRITY, is the sole and exclusive owner of a worldwide portfolio of Personality Rights, as well as other copyrights, trademarks and other intellectual property rights related to CELEBRITY, and the rights of publicity, and other rights in and to the name, image, likeness, persona, personality, voice, signature, and other indicia of, and rights of association and endorsement related to, CELEBRITY including, without limitation, pursuant to Section 43(a) of the United States Lanham Act (collectively, the “Shaq Rights”). PAPA JOHN’S further acknowledges and agrees that: (a) any and all use of the Shaq Rights and/or any intellectual property rights related to CELEBRITY (e.g. exploitation of a copyrighted photograph of CELEBRITY), whether in connection with the Products or otherwise, requires the consent and authorization of ABG in each instance, (b) ABG is the only person or entity that can authorize the use of Shaq Rights on or in connection with any products or services throughout the world, and (C) should PAPA JOHN’s or any third party desire to manufacture, advertise, sell, offer or otherwise exploit any products or services related to CELEBRITY, any and all such acts would be a use of the Shaq Rights and would therefore require the prior written consent of ABG in each instance.
When it comes to the consumer or third-party responsibility, this has nothing to do with a contract, and this clause may not always protect you. When it comes to minimizing your risk, it’s better to have an endorsement agreement on one hand and a franchise agreement on the other.
Influencer Approvals and Maintaining a Public Image
In this arrangement, Papa John is going to set dates and a schedule to work with Shaquille O’Neal. Papa John’s is going to create the content, but they have to send it to Shaquille O’Neal for approval.
Shaquille has the power to approve the advertising concept as well as the channels of communication. If they send this item for approval the first time and do not receive a response from Shaquille O’Neal, the advertising will be declared unapproved. This is done as a security measure since these celebrities have strict schedules and distinct compromises.
1. General. ABG shall respond to each initial request for Approval from PAPA JOHN’S (“First Request”) within three (3) days of ABG’s receipt of such request (“Approval Window”); provided, however that ABG’s silence or failure to respond to the First Request prior to the expiration of the Approval Window shall be deemed ABG’s disapproval of the Materials contained in the First Request for Approval. In the event that ABG is silent with respect to, or fails to reply to, the First Request prior to the expiration of the Approval Window, then PAPA JOHN’S shall be entitled to submit a second (2nd) request for Approval of the same Materials included in the First Request (“Second Request”), with a copy of the Materials and the request to ABG’s Legal Department (using the contact information set forth in Section 12.F. of this Agreement). In the event that ABG is silent with respect to, or fails to reply to, the Second Request within three (3) days of ABG’s receipt thereof, then ABG’s silence with respect to, or failure to respond to, the Second Request shall be deemed ABG’s Approval of the Materials included in the Second Request. PAPA JOHN’S hereby acknowledges that ABG’s Approval of any particular Materials for a specific purpose shall only be deemed an Approval for said purpose. PAPA JOHN’S shall be required to re-submit any previously Approved Materials to the extent PAPA JOHN’S wishes to use the same for other purposes. PAPA JOHN’S hereby acknowledges that, in the event PAPA JOHN’S fails to obtain ABG’s consent or approval for any act or omission requiring such consent or approval (e.g., use of Celebrity Endorsement or Personality Rights, etc.), the same shall be deemed a non-curable breach of this Agreement entitling, but not requiring, ABG to immediately terminate this Agreement. In the event that ABG expressly disapproves any Materials that are submitted by PAPA JOHN’S for ABG’s Approval hereunder, ABG shall provide PAPA JOHN’S with a reason for such disapproval.
But there must be some form of equilibrium between the parties. When the company sends it a second time and receives no response, they might presume the celebrity has approved it. They would have mentioned something if there was a red flag. That is how you manage these situations and establish a reasonable contract.
Shaquille’s team must also approve a related press release. When it comes to a press release, the press and other legal problems such as free speech are involved. If something goes wrong or someone portrays Shaquille O’Neal unfairly or in a way that he does not want to be depicted, it might be difficult to keep the risk minimal.
4. PAPA JOHN’S shall not itself or through its agents or representatives or otherwise indirectly, make, issue, distribute or disseminate any information or statements to the press regarding ABG, CELEBRITY, Celebrity’s Endorsement of PAPA JOHN’S Products and/or matters pertaining to or arising out of this Agreement (each a “Press Release”). In the event that PAPA JOHN’S desires to issue a Press Release, PAPA JOHN’S shall submit the same to ABG for Approval. If ABG has not responded in writing prior to the expiration of an Approval Window, then the submission shall be deemed disapproved. ABG shall have the right, but not the obligation, to include PAPA JOHN’S, Celebrity’s Endorsement of PAPA JOHN’S Products, and the existence of a partnership between ABG and PAPA JOHN’S in connection with CELEBRITY in Press Releases, subject to PAPA JOHN’S approval, such approval not to be unreasonably withheld.
This clause may not be found in all contracts since different celebrities value different things. The reason might be that they are not well-known enough for the press to become involved or control the narrative. People normally want more control over the press, especially when it includes third parties and you may not always be able to limit what is said or how it is said.
Social Media Obligations
In this arrangement, Papa John’s is in charge of advertising compliance, which is concerned about having information that is false or misleading to customers.
B. Social media posts. ABG shall require CELEBRITY to post on each of CELEBRITY’s Instagram (the page located at www.instagram.com/shaq and Personality’s Instagram account (@shaq)), Twitter (the page located at www.twitter.com/shaq and Celebrity’s Twitter account (@shaq)), and Facebook (the page located at www.facebook.com/shaq) at least one post (1) per month promoting Papa John’s Products. Each post shall be created by PAPA JOHN’S, but subject to ABG’s Approval in each instance. PAPA JOHN’S shall provide ABG and CELEBRITY with all suitable and necessary language, compliant with all Federal Trade Commission (“FTC”) standards and requirements to include in each post (each a or the, “Required Disclosure”) which shall clearly and conspicuously disclose to the public that ABG and/or CELEBRITY has been paid by PAPA JOHN’S in connection with such posts. Notwithstanding anything to the contrary contained in this Agreement, PAPA JOHN’S shall be solely responsible for ensuring that any and all Required Disclosures comply with all applicable laws, rules, regulations, and guidelines, including, without limitation, the FTC’s “Guides Concerning the Use of Endorsements and Testimonials in Advertising” and PAPA JOHN’S shall indemnify, defend, and hold harmless the ABG Indemnified Parties (as hereinafter defined) from any and all liability arising out of the same, unless ABG or CELEBRITY materially modifies the Required Disclosure provided by PAPA JOHN’S (i.e. if the Required Disclosure provided by PAPA JOHN’S complied with all applicable laws, rules, regulations, and guidelines, and ABG or CELEBRITY’s modification of the Required Disclosure causes such Required Disclosure to not comply all applicable laws, rules, regulations, and guidelines).
This is a well-written clause. It could also include disclosures. If the influencer intends to share this on Instagram or any other site, they must follow the FTC requirements. They should incorporate a tagline or capital letters that read “advertising-sponsored content” so that the audience understands that the celebrity is getting compensated for being represented next to Papa John’s trademarks, logos, or products.
The Power of Contracts
Influencers may become famous quickly, and their fame may go as quickly as it came. On the other hand, if you become renowned and influential enough to have millions of followers, you will catch the eye of enforcement agencies.
The Federal Trade Commission has traditionally enforced severe rules. Even if your agreement isn’t as complicated as this one, having it in writing can protect you since you’ll have a document to present to a judge.
If you don’t have anything, you’re stuck with US common law and a shaky interpretation of the facts. It will be more difficult to defend yourself if you simply used a few terms over WhatsApp chats.
If you are receiving products from big companies and are in litigation, you cannot defend yourself because litigation is very expensive. The big companies won’t have a problem as they can get a lot of attorneys to defend themselves. But you’re just starting. You should prefer to have an agreement and an attorney to understand what you want so it’s not gonna be in the way of your career.
Celebrity influencer agreements are a special breed of product endorsement contracts. Watch as attorney Giselle Ayala tears down Shaq’s agreement with Papa John’s, in which the famous basketball player-turned-pizza-guru agrees that the company can use his image to create unique advertising content. There’s a lot to learn about how contracts can protect influencers and make big companies happy with their endorsement deals, so let’s tear it down!
THE CONTRACT: PAPA JOHN’S ENDORSEMENT AGREEMENT
THE GUEST: As an entrepreneur herself and an immigrant, Giselle knows precisely how to counsel clients and serve them with excellence. Giselle Ayala Mateus was born in 1991 in Bogotá – Colombia. Her mother is a district attorney in Colombia. Her father is a retired Colombian attorney and community health worker with Planned Parenthood in New York City.
After finishing law school in Colombia and being admitted to practice law in this country, Giselle came to the United States to complete a Masters of Laws with the Brooklyn Law School. While being a single mom law school student in the U.S., Giselle completed her studies and a Business Law specialization. As part of her legal education in the U.S., Giselle worked with Good Counsel Services; a nonprofit organization focused on educating and empowering nonprofits and social entrepreneurs.
THE HOST: Mike Whelan is the author of Lawyer Forward: Finding Your Place in the Future of Law and host of the Lawyer Forward community. Learn more about his work for attorneys at www.lawyerforward.com.
If you are interested in being a guest on Contract Teardown, please email us at firstname.lastname@example.org.
Mike Whelan How are you today, Giselle?
Giselle Ayala Hi Mike, I’m good. Thank you for inviting me.
Mike Whelan Giselle, I have to tell you a story, briefly. I was standing in the kitchen, my son was at the microwave, and he was making something. And just randomly, 14-year-old turns to me and he goes, Dad, what do you do for work anyway? And I said, Son, I think I might be an influencer. He laughed and he said, No, seriously, what do you do? So sarcastically. What we’re going to talk about today, Giselle is on theme. We’re going to talk about influencers and how I’m sort of a big deal by making a reference to this document. I’ll share it here. This is an endorsement agreement between Shaq and Papa John’s. Giselle, tell us about this document. What is it? When are we going to run into documents like this?
Giselle Ayala Well, this agreement is an endorsement agreement, and it’s very interesting to know that you may confuse sometimes endorsement agreement with something called a sponsorship agreement, which is different. When you have a sponsorship agreement, you actually provide services to someone to support something; an endorsement agreement, you are promoting a product. And it’s really interesting that is in writing, especially with big companies and big celebrities like here, you may find this contract when you want someone who may drive content and may drive an audience to have interest in your product. Endorsement agreements are very important because whoever is endorsing your product or your service is actually a personality that has the potential to influence the conduct of consumers. And nowadays, like, you know, social media—TikTok, Snapchat—all these different platforms will have given a space for, like, new influencers to appear. We’ll find in different scenarios where attorneys want to advise these new influencers on how to deal with these contracts, what kind of things they can expect if they are just starting and they encounter a big company who has been in the market for a long time.
Mike Whelan See, and that’s what I’m saying! I can convince my 14-year-old that I’m a big deal, because there are contracts and there’s only contracts if there are big deals, son. So before we get into that, tell us about you a little bit, Giselle. What’s your background? What brings you to documents like this?
Giselle Ayala So, I’m from Colombia. I’m an attorney admitted in Colombia, but I’m also, of course, admitted in the U.S. I founded my law firm two years ago, which is called G.A.M. Law Office P.C. And I work with entrepreneurs, I work with Latinos, who are entrepreneurs and, you know, getting into this different entertainment field. But the focus also is to advise immigrants and Latinos who actually don’t really have a clear understanding of U.S. law, especially since it is a common law country. And sometimes that may reflect in different applications of, you know, the legal systems.
Mike Whelan Gosh, I’m imagining coming into the United States in this super weird media environment that we’re in, and becoming a Latino influencer and trying to figure this nonsense out while trying to figure the culture out. It’s super interesting. All right. Well, here’s what we’re going to do, Giselle. We’re going to go through this document, this agreement between Shaq and Papa John’s. We’ll go over a few sections that sort of stood out. And then at the end, we’ll talk big picture to try to persuade my 14-year-old that I’m a big deal. So let’s start up at the top. Just give us a bit of background on this document. As I recall, when we were talking about this before, there was a relationship between Shaquille O’Neal and Papa John’s pre the relationship that became famous because Papa John’s CEO was kicked out and Shaq joined the board as a way to sort of revive their public image. But at this time, this document is 2019. What’s the relationship between Shaq and Papa John’s at this point?
Giselle Ayala Yeah. So Papa John’s entered into this agreement with Shaqille O’Neal that he will endorse and promote, you know, the different products that they have. In that sense, the contract tends to be broad because they mention like, what are the products? And they say, like pizza, restaurants, entertainment spaces. The idea is to eat pizza. So, you know, around that unique product, there’s a lot to talk about in terms of what Shaquille O’Neal is promoting. He is chosen because he’s a celebrity. He’s someone who’s a basketball player, who has been in the industry of sports for a long time. So he has a lot to offer in terms of promoting the image of Papa John’s commercially and driving new consumers and making the product kind of young and interesting. That’s why the first thing we’re going to actually find is the definitions. And one of the most important definitions is the definition regarding celebrity. Because when it comes to endorsement agreements, these are agreements that usually are entered into because of the personality, because of the specific personal features of the celebrity who’s going to endorse the product. That’s why that definition is so important, it actually—it gives sense to the document, right? So the celebrity, it’s a person who is known, and the definition specifically states what kind of things are available for use by the company who is receiving that endorsement, like trademarks, likeness, copyright, personality rights. That’s very important. And the other concept that is important in this part—I mean, all concepts are important, but I’m highlighting these two because those are the concepts which could be important in case of litigation. And the other concept is competitive products or those products that are being endorsed and which place the celebrity in a specific place where he should not be allowed to promote or endorse other products that compete with the company’s products. So those are two important definitions for us, because it will give us a roadmap of what to expect from the contract.
Mike Whelan So to get to that, you know, those two definitions are up in the definitions section, but I’m getting down to the Grant of Endorsement, Sections A and B, and I guess give me just an idea of the media relationship. So you mentioned the difference between endorsement and sponsorship. It sounds like it’s not that Papa John’s is saying, okay, Shaq, you’ve got a podcast. It’s a big deal. Everybody knows what it is. We’re going to give you money to say Papa John’s, Papa John’s, Papa John’s ten times. You know, that’s a sponsorship agreement. This sounds like they’re agreeing to create new media with the face of Shaq. Is that right? Is that the distinction between those two?
Giselle Ayala Exactly, it is going to create like new media content: advertising material, basically. And Shaquille O’Neal is like the center of that media. He’s going to be photographed next to Papa John’s trademarks. He’s going to be photographed with the pizza, you know, next to the restaurants promoting the brand, the colors. They are going to actually use his publicity rights, his traits to put them there for the public. But when it comes to, like, media and [the] relationship, Papa John’s is going to create that content, but it has to be approved by Shaquille O’Neal because he is a celebrity. He is in a specific position when he also wants to take care of how he’s portrayed to the public.
Mike Whelan Okay, well, we’ll get to the approval. But before we do, I want to nail down this “work made for higher” concept and people who do this kind of work, you know, those of you who are writing this, you know what this is. But for simplicity’s sake, and for viewers who may not know, tell us what that “work made for higher” distinction is. And do you like the way in B under Grant of Endorsement, under three? Do you like the way that 3.B talks about Shaq’s work made for hire? So what is it? Do you like the way they frame it?
Giselle Ayala Yeah. So work for hire is a very important concept because it is related to the copyright protections of works, of authorship, creative works. Obviously, if you don’t actually include a work for hire clause or definition, you may have an issue, legal issue regarding who is the owner of a copyright and who has the right to exploit it economically to a court to create actually derivative works. So they include these work for hire provisions so that all that material that is advertising, which is protected under copyright, it’s owned by Papa John’s. So they are sure that if something happens and one day, you know, Shaquille O’Neal wants to go—work out of the agreement, they have the ownership of that advertising material and they can exploit it, create new works from that. They can use it for economic purposes and, you know, that’s not going to be an issue. So the work for hire definition, it’s basically saying that whatever is created with Shaquille O’Neal, with the celebrity, when it comes to economic rights and copyright enforcement, it’s owned by the advertiser the company. That’s why it’s so important.
Mike Whelan Yeah. And I’m thinking about, like, I have done these things, you know, I’ve been hired by companies to write an Ebook or to write a book or whatever, and they have the ability to then turn that into whatever they want. But, you know, that is a very open—it makes sense to start with that, to say this is work made for hire and we can do whatever, you know, we want to do with that. But for the celebrity or for the person whose image is being used, that can be scary, right? That can sound like they can go and, you know, take my image and do a deep fake and make it so I’m saying all kinds of things. But what they add into this that I think is interesting and you had mentioned this is a reflection of Shaq’s power in this relationship is the approval process. So let’s go down to E and to 1.General. Tell me, what is the approval process and do you like the way they framed this?
Giselle Ayala So here the approval process is that Papa John’s is going to set some dates, of course, and schedule to work with Shaquille, and they are going to create this content, but they have to send it to Shaquille for approval. They have to—Shaquille has a right to approve the concept, the way, like, the advertising piece is created and even the channels of communication for that advertising. Once they send this piece for approval, the first time, let’s say, if there is no answer from Shaquille O’Neal, he actually states there that the piece of advertising is going to be deemed as not approved. And that’s like a security measure. You know, sometimes these celebrities have a really, really tight agenda and they have different compromises. So they cannot really have, like, their legal team or their marketing team to review something. They probably prefer to say, We have not approved this. But of course, there have to be some kind of equilibrium, you know, between the parties. There has to be reasonability. For that, they say, If you send it a second time and we have not answered, you may think—you can assume, that it is actually approved. Because if there was anything in that—red flag—we will actually say something. You know, we will not, like, receive it a second time, and if there’s something wrong, keep silent. So that’s how you handle this and make a contract something reasonable.
Mike Whelan Mm hmm. Yeah. And I’m looking down at four in that same section they talk about—it sounds like they don’t want Papa John’s to be able to go out into the world and say, We’re Shaq’s favorite pizza, just randomly, you know, for the rest of forever. Even on— in terms of whether they’re representing that he’s doing work with them, it sounds like Shaq’s team needs to approve even a press release. What do you think about four in that same section?
Giselle Ayala Exactly. I think that when you talk about a press release, you are also involving additional things. Like, it involves the press and you will have other legal issues like, you know, freedom of speech if something goes wrong and someone quotes Shaquille O’Neal, you know, falsely or in a way that he doesn’t want to be portrayed. And if we have, like, constitutionality issues regarding freedom of speech and the freedom of press, it could be very complicated to keep risk small. So I think that’s why it’s so important here, this clause, which I haven’t seen in all contracts. I think some celebrities maybe don’t think it is important and maybe don’t think they are as famous as they would be to be able to actually include that. But someone who is well-known like him wants to actually control the narrative again. And when it comes to the press, you want to have more control. You are also dealing with third parties and you may not be able sometimes to limit what’s being said or how it is being said.
Mike Whelan Yeah. Speaking of press, let’s jump down to the social media post. This is in B of four under Services. So the thing with a personality like this, especially now, is the reason anybody trusts anything that he says about anything is because he’s genuine. He is seen as a person who wouldn’t, you know, sell his identity, which of course he is. But, you know that he wouldn’t make it up. You would expect that he probably actually likes Papa John’s. At least that’s what people would believe. Social media, I think, is a really interesting thing, because the brand, Papa John’s, wants to know that you, Shaq, are going to go do something with this. So you have to post these ads at least once a month and we’ll do the language and you guys will approve it and it’ll go through all this process. Where’s the balance between that, knowing that you’ve got a deliverable, and the genuineness that people come to expect? Do you like the way this agreement deals with an obligation about social media representations?
Giselle Ayala Well, here, what happens is that the responsibility for compliance with advertising—which is basically concern about not having material that is deceptive or misleading for consumers—the responsibility of compliance is fully for Papa John’s, basically, because they are the ones who are advertising. I think the clause is well-drafted. I will probably add something like—well, depends. If you have a celebrity that doesn’t have a lot of experience you may want to really highlight it or like call to the attention of the celebrity, that there are these guidelines and they have to, like, their team—especially if they don’t have a marketing team, if they are like maybe on their own doing TikTok videos or something that—they have to be aware of the fact that they have to make these disclosures. Of course, the other party, the company, Papa John’s, is fully responsible for the content. But if the influencer alone is going to be doing the obligation of this on Instagram, Twitter, or whatever, they have to remember that the are these guidelines by the FTC and they have to include maybe a tagline or capital letters saying “advertising,” uh, “endorsement material”; so that the public knows that he’s actually receiving some kind of compensation for that picture where he’s portrayed next to Papa John’s trademarks, brands, or product.
Mike Whelan Mm hmm. Yeah. I remember the early days of the internet when people would do this kind of work, and there was no disclosure about anything, you know, that they were paid to hold this can of soda or that these are affiliate links or anything. And then people sort of swung the other direction and just claimed responsibility for everything. What I like about this agreement is it’s saying, look, there are requirements and here’s who is responsible for them. I mean, Papa John’s is taking on the requirement that they will clearly and conspicuously disclose to the public that ABG and celebrity have been paid by Papa John’s. They’re saying we’re going to own that. Is that good practice for just somebody to say, We’ll be responsible for that?
Giselle Ayala I think it’s a good practice, because you might have someone who is going to be dealing with these advertising regulations, which can be very broad and which involve not only state law, but also the Federal Trade Commission, And this an entity that is like really serious when it comes to protecting consumers. They can start any kind of investigation on their own. They don’t have to be called by a consumer. And once they start looking, they will ask a lot of questions and they will, like, really try to make someone pay if they feel like consumers have been deceived. So if you have in a contract that actually Papa John’s, for instance, is fully responsible, you may actually show that you did your part. I think it’s a good practice, not only for your protection in terms of the contract, but also to have, like, a purpose of compliance. And you would be more protected and entities—federal or public agencies—are going to be more understanding if you actually have it in a contract. And they understand that you actually were aware of these kinds of risks and you kind of address them.
Mike Whelan Yeah, yeah, that makes sense. Well, let’s jump down to New Co-Branded Products. This is under D. It seems like it’s saying, ABG, the company, will permit celebrity Shaq and Papa John’s to collaborate in good faith to develop one or more co-branded products—and you mentioned to me in preparation, a pizza that they came out with—using the personality rights, any such co-branded products shall be subject to the separate mutual agreement of the parties. It sounds like you’re saying, ABG don’t get in the way of Shaq having some fun with some pizza names. We’re going to make a pizza name and then we’ll talk to you about the money later for that other pizza. Do you like the way that they deal with the co-branded product requirement in this section?
Giselle Ayala Well, I think the problem is that we hope everything is going to go right, basically. Like if there’s litigation, we may have a problem. And these—like they have a clause that says you cannot engage in, like, advertising or endorsement with competitive products. But at the same time, you have this clause that says, eventually you can have co-branded products. If something goes wrong, you may end up with a judge who has to figure out what was actually the purpose of the agreement. So if you’re going to do something like that, maybe because the possibility is that an advertiser wants to engage on a celebrity and they want to, like, cover as much as they can because then the celebrity is going to be busy and you don’t know what’s going to happen in one or two years. Then you have to contact them again and have them sign another agreement if something is really interesting to put on the table. So they may [have] included that saying, If we come up with something, great, we may do it, we change—but at the same time, you may have a problem when it comes to interpretation of a contract. application of the contract. If you want to say something is [muffled], if the agreement is not clear, you may have a problem and you don’t want to have the judge figure out what you want, especially if the judge doesn’t know a lot about your brand. Or maybe he doesn’t know a lot about what Shaquille considers important for his publicity rights—.
Mike Whelan —Or what the heck an influencer is—.
Giselle Ayala —When you have an agreement which references to another agreement, you as an attorney should do your due diligence to make sure that all agreements are coherent with each other. So you will need more diligence again because you need to coordinate the different clauses of the agreements, that’s dates, deadlines, all those kinds of things.
Mike Whelan Hmm. I would point out, if you look down in H—sub H—it talks about no dangerous activity, that Shaq doesn’t have to do stunts. If you watch TNT’s halftime show, you know that at Shaq’s size, just running back to the TV screen can be dangerous activity. There is much footage of him running into Christmas trees and falling on his face. Under I, it talks about additional services and I face this as a, you know, power influencer, as my son would say as well, that there’s sort of scope creep, that people—when when you become the Papa John’s guy, you start to get associated with a whole bunch of things that aren’t necessarily, you know, you guys as part of an agreement, you get scope creep a lot. And I seems to say, you know, there is no scope creep. It is exactly what we said in this document unless there’s some other agreement. But it’s keeping the door open to some other agreements in case people say, Papa John’s guy, who is that? That Shaq. Let’s go do something. Do you like the way that they sort of try to limit the scope to this document? Is it even realistic to limit that? Because public perception, the point is, that it’s going to spread?
Giselle Ayala Well, I think that with that clause, the franchise clause, when they say they may do other things, actually Shaquille is acquiring more risk. So he has these clauses that say, you Papa John’s are responsible for our advertising content. You are responsible for our product not being risky for the public, for not being dangerous, for example. But if you actually own a franchise, if you actually are part of the company, let’s say you have ownership rights, you may not be in a position to say, I don’t have any kind of responsibility because actually you became the owner of part of that. And if you eventually sit on the board, you’re making important decisions, you’re part of that making decision process, you cannot say, you know, like, I can’t—I don’t have to respond. And when it comes to, like, liability again for consumers, for third parties that have nothing to do with a contract, that clause probably is not going to protect you. So I think it’s better to have an endorsement agreement on one hand and then a franchise agreement on the other, at least when it comes to really, really limiting your risk. And we have a bunch of attorneys then protecting you. But these, again, leave some holes to the fact that he said, I’m not responsible for any kind of damages to people or dangerous products. But if you become the owner of something, the company, or you become part of the board, that changes. And that’s contrary actually to the, I think, the spirit of this endorsement agreement, which is like keep [muffled] control.
Mike Whelan Yeah, well, yeah. I mean, he obviously has multiple relationships with the business at this point. I think I saw an article that referred to him as a triple threat. He’d be that—now, in the way he is now, he’s got this endorsement agreement, this arrangement. He is the first African-American member of the board, and he’s a part-owner of nine franchises. He called himself a triple threat. He’s got these multiple relationships. And maybe that’s normal in these situations. You know, nobody has one job anymore. They’re doing many things, especially if they’re in this internet world. And I’m wondering, stepping back a little bit, do you think documents like this are useful just in the multimillion-dollar Shaq context? Do you think they’re useful in the much more common context in the long tail of the internet where people are getting a pair of shoes or some swag or whatever for being, you know, being an influencer, involved with that. Or do you think documents like this are actually going to get in the way of the freedom of transacting that kind of defines those internet relationships? What’s the power of contract in these kinds of arrangements?
Giselle Ayala So I think that we as attorneys don’t want to kill the career of any kind of influencer who probably is going to get famous really fast, and his fame is going to go fast as it happened. But on the other hand, if you actually become so famous and so important that you have millions of followers, you are going to be in the eye of, again, enforcing agencies. And I say stuff about that, because when it comes to public advertising, the Federal Trade Commission has always been very strict. So having an agreement in writing, even if it’s not as complex as this, can protect you, because you’re going to have a document that you can actually present before a judge or someone and kind of make an argument. If you don’t have anything, you’re in the hands of, you know, U.S. common law, dodgy interpretation of the facts if you don’t have anything in writing and you maybe were only like using some phrases during WhatsApp conversations, making very informal deals, it’s more difficult for you to protect you. And if you are receiving products from big companies and you are in litigation, maybe you cannot defend yourself also because litigation is very expensive. So, you know, these big companies aren’t going to have any problem, they’ll get a lot of attorneys, you know, to defend themselves. What about you? You’re just starting. You prefer to have an agreement and maybe you don’t sign it, personally, you sign it through your LLC corporation and you manage your risk. I mean, if you’re a small influencer, just enjoying this, like, transitory fame, that’s fine. But if you really like these and you want to drive more public, you want to grow more content, if you think you’re going to have a career with this, you should have agreements. And you know, have an attorney understand what you want, so it’s not going to be, like, in the way of your career. But I think it’s important to have these agreements.
Mike Whelan And something that we talked about. I’m thinking about a book by Jaron Lanier called Who Owns the Future, and he talks about the economic inefficiency that these SaaS companies, especially, these technology companies, are making enormous amounts of money with very small staffs, in part because they can go to these internet influencers and a bunch of the, you know, customer acquisition work can be done by people online. And so he talks about in his book this huge economic inefficiency that’s created because the workers who are building the brand are not getting any of the wealth that is going to these brands. I think one of the things that we talked about and I’d love to get your take on this, is like if you’re doing this kind of work, even if you’re not famous, even if you’re, you know, you’re going out there and trying to build your brand—try to get an agreement that gives you some pay for—like, stop getting paid an exposure, get paid for the work that you’re doing because you’re creating value for this brand. That brand should compensate you for the value. And if nothing else, a document like this will help make sure that you’re getting compensated for that work. What do you think about a document like this and its ability not just to pay for fame, but to pay for the time that you spent making the video?
Giselle Ayala At the end, you have something in writing, you have a better possibility of getting paid—for example, in New York, when you have special regulations for freelance workers. Additionally, I just remembered something from the advertiser perspective in New York City, they can be fined if they don’t have actual agreements in writing for more than $800 for freelance workers. So even the advertiser sometimes wants to put something in writing. From the celebrity or influencer side, you have an agreement in writing and it has some money amount, you are in a better position to go and ask for that money, and that may be a reference for you to recover something. If you don’t have any kind of agreement or money that you want to receive in writing, what happens is that, how do you prove that your fame or your recognition is this amount of dollars and not what the other party says? If it’s really difficult to prove, a judge may be hesitant to actually give a judgment in your favor. So that’s something you want to think about, that even if you start getting paid something, maybe it’s not what you want, that’s a reference. And that helps you in the future to negotiate an agreement or to defend your rights.
Mike Whelan Yeah. If even my 14-year-old can’t understand what a big deal on the interwebs I am, I certainly don’t want a judge trying to sort that out. That would be ugly. Giselle, we thank you for hanging out with us and talking to us about Shaq and pizza. I could just Shaq and pizza all day. For people who want to reach out to you and learn more about what you do and documents like this, what’s the best way to connect with you?
Giselle Ayala They can connect with me via Facebook, which is G. A. M. Law Office, or you know, they can go to the website. We try to put there a lot of interesting content that can be useful for entrepreneurs and artists to gamlawoffice.com.
Mike Whelan Well, we’ll include that contact information and this document on the blog post up at Law Insider dot com slash resources. And if you want to be on The Contract Teardown Show and beat up contracts like this, you can just email us. We are at community at law insider dot com. We’d be happy to have you. We’ll look forward to that. Giselle, thank you for joining us and we will see you guys next time. Have a good day.