Last month, the internet briefly fixated on a cheating scandal that threatened to tarnish the squeaky clean image of the Try Guys. For roughly two weeks, the three YouTubers — Keith Habersberger, Zach Kornfeld, and Eugene Lee Yang — found themselves trying to salvage the multimillion-dollar brand at the center of the media circus.
Though Twitter users are no longer taking sides, TMZ has backed off, and the Try Guys are trying things again, the future of the Try Guys business — 2nd Try LLC — is still in flux. Eight million YouTube subscribers may still be on their side, but being squeezed through the public ringer and becoming the butt of late-night jokes is terrifying. “I was fearful this has jeopardized everything for us,” said Habersberger in a recent podcast. 2nd Try employs a staff of more than 20 and he worried the fallout would “hurt other people and their careers.”
So I want to know how it’s all going down now, legally speaking. What lasting effect does an SNL-level public scandal have on the business of a small production company like 2nd Try?
Anita Sharma is the founder and managing partner of Sharma Law, a firm that represents digital talent like TikTokker Drew Afualo, YouTubers Michelle Khare, Brad Mondo, and Joshua Weissman, and actor and dancer Alyson Stoner. They’ve been in the business since 2013 and, according to the firm, now boast the largest roster of creators and influencers in New York City — over 80 — across lifestyle, beauty, culinary, and even ballet.
“We’re very well entrenched in this space and the business aspect is big for us,” Sharma told Mashable. “We are looking for creators who are building businesses, or using their social media platforms to expand into other places. There’s not a deal in the space that we have not seen and we’ve dealt with numerous scandals and crises.”
We asked Sharma to use her experience to weigh in on what usually happens behind the scenes when a creator is caught in a brand-bruising public scandal.
Mashable: To start, do you think that this debacle had a net good result for the Try Guys business and brand, even if they were portrayed negatively at times?
Anita Sharma: They handled it so swiftly and quickly. It’s a textbook case to me of how to handle this type of situation. I don’t think that this is going to negatively affect their business for too long. They removed the bad apple and reinforced their brand by saying this is not consistent with it. So, he’s out.
Business-wise, there’s going to be a dip because they have to bring on lawyers, HR personnel, [and] a crisis manager. There are all these expenses that weren’t foreseeable. It’s like the stock market, it goes up and down. They took a hit, I think that they will be able to recover. And they’ve already increased their subscriber numbers.
You think they brought in a crisis manager? How is that different from PR?
Given the way that it was handled, 100 percent. Some PR people do crisis management, but there are also crisis management specialists who know how to draft statements and work the situation. When we work with crisis managers there are pre-crisis, crisis, and post crisis reactions.
Pre-crisis, there was a Reddit thread about [Ned] Fulmer’s cheating. The noise was getting louder, and the Try Guys decided “there’s a crisis happening” and to investigate. They probably brought in a third party who sat down with the staff, asked a bunch of questions, talked to Ned and the employee in question. There was a plan of action.
During the crisis, they got rid of Fulmer and put that short statement on social media. They were very quick to react and not condone the behavior. And now post-crisis [they] are managing it by talking about it on the podcast, about the fallout and how they’re feeling but also letting people know what’s going on in the future.
They had a plan of action at every stage and put it in place in a swift and timely manner. They sort of cut the legs off of the negativity. They controlled the narrative.
I saw that The Food Network had moved the finale of the Try Guys’s pilot series from a prime Wednesday evening slot to an undesirable position on a Friday morning. That’s a pretty big deal for a business.
There’s going to be a chilling effect. Brands are so risk-averse; nobody wants to get canceled. And for better or worse, the internet holds people accountable. It’s a huge deal for business. They can write off losses and mitigate it, but it’s [still] a hit in their gross revenue that’s coming in. And by the way, it’s a hit for your whole team. Lawyers representing talent operate on 5 percent commission. If you have a manager and an agent on board, that’s always 10 percent each. There’s a trickle down effect. People don’t realize that if you have a team of a manager, lawyer, agent and a business manager, that’s 30 percent off the top.
There are morals clauses in every brand deal we do that say “if you engage in conduct that’s embarrassing for us, and it’s scandalous, criminal, etc, we can terminate this contract.” We’ve had clients do things and the brands reach out and say, “what the hell’s going on? We don’t want them posting, we’re not going to pay.” We have to manage that and say, “no, the morals clause doesn’t cover this, you still are obligated.” It becomes an individual negotiation with each brand, doing that damage control. We actually try to do a reverse morals clause [with] language that if the brand does something embarrassing, our clients can get out of it. Most brands do not accept that, but we try.
The bottom line is money for everybody. Whether it’s the brands, the networks — if they think they can make money off these guys, they’re gonna bring them in again.
When you say they brought on lawyers, does that mean that their legal firm brings on more lawyers?
Lawyers are specialized in different areas, so they have to bring in the right person for the job. They probably needed an employment lawyer who’s specialized in this situation. If any threats of litigation are made you bring in litigation counsel, and then they probably had a third-party law firm doing the investigation. There would be the corporate commercial attorney handling the operating agreement, what’s going to happen now with the company, and the exits.
Speaking of exits, they’ve removed Fulmer as a manager and as an employee, but that doesn’t mean that he doesn’t have some sort of director status or other claws in the business, right?
This, to me, is where the fight would probably happen. We assume he’s a member of the LLC, [so his future involvement with the business] really depends on what’s in the operating agreement. How are members removed? What would constitute removal? Do they each get a vote? Is it a majority vote to remove somebody? Once they’re removed, are they allowed to transfer their membership interests? Or is there a right of repurchase for the other members?
If I was [Fulmer’s] attorney, I would say, “He’s still entitled to… 25 percent of the business or whatever it is. He walked away, he’s done what he needed to do.” And [representatives for the Try Guys brand] are going to say, “Are you kidding me? You’ve damaged our brand.” The nitty gritty now is the money. I would assume that money flows through the LLC, or they formed different LLCs [for different projects, like Fulmer and his wife Ariel’s book]. He may still be entitled to distributions. It would all be governed by the operating agreement.
What about Fulmer’s ability to affiliate himself with the Try Guys brand to promote himself in future?
This is all going to be in negotiation. If the trademark is legally owned by the LLC, I would think if he gets booted out of it, he’s not gonna be able to use the trademark. If I was his attorney, I’d say, “If you don’t want [Fulmer] to use the trademark, you’ll have to buy him out.” The other thing is, too — and again, I’m speculating — we don’t know what skeletons are in the closet of the other three. Ned could be going like, “What the fuck, guys? What about you when this happened?” To be a fly on the wall during those conversations would be interesting.
Are there any adjustments they would make business-wise to ensure that the employee involved felt supported?
Doing a workplace investigation with a third party [like the Try Guys did] is really helpful. That person comes in, talks to her, and really tries to understand what happened. You have to be really careful in these situations, to handle the employees with kid gloves. You can’t [abuse] that power balance with her [or] assume that she was responsible for anything.
I think that legal will get involved in trying to paper everything, trying to make sure… all policies were followed through, everything is in writing. “This happened on this day, we spoke to [this person], procedure was followed.” That’s where the lawyer gets involved. They’ll probably get her to sign an NDA, maybe they’ll pay her off, who knows? They may be like, “Look it’s not good for employee morale for you to remain on. Maybe we give you six months severance and move on.” There’s probably already an NDA in her employment contract.
Is there anything that could have done better in your opinion?
It would have been good if it didn’t happen. The question is… how did this transpire? People are human… People have affairs and, obviously at work you have easy access to somebody. I’m just speculating, but I’m shocked that [the Try Guys have publicly insisted] “Oh, [we] didn’t know, nobody knew.” That’s weird to me. So maybe they could have nipped it in the bud sooner, and it wouldn’t have turned into this.
