Out Of Dough, Crumbs Bake Shop Crumbles

Does the closing of the once rapidly rising Crumbs Bake Shop indicate some larger societal shift, as the Hollywood Reporter’s headline suggests: “Has the Cupcake Craze Already Crumbled?” Or is it simply a case of bad management of a delectable idea?

“Famous for its 600-calorie, 4-inch, frosting-topped sweets, [Crumbs] notified employees Monday that the popular chain had run out of dough,” Ginger Adams Otis writes in the New York Daily News. Indeed, employees reporting for work yesterday were apparently shocked to learn that the 11-year-old chain, whose website claims 78 locations in 12 states and the District of Columbia, would cease operations at the end of the day. 

Otis spoke to several employees who appeared to be in the dark about the development. “Nobody knows anything or what to do, the employees are finding things out online or from customers coming in and asking us stuff,” one worker said.

“I come into work today, I'm happy, I'm skipping to work, and suddenly I don't have a job,” Kareem Wegman, a manager in a Crumbs store in Brooklyn, told the Wall Street Journal’s Sara Randazzo, who broke the story. Wegman lamented that he had just paid his rent and added that “he may have to live with his mother until he finds a new source of income,” which would seem to lend impetus to another widely reported trend of young people living with their parents.

But the Atlantic’s Derek Johnson wrote the other day that the official census statistics are “criminally misleading” because there’s an often overlooked caveat: “It is important to note that the Current Population Survey counts students living in dormitories as living in their parents' home.” That adds up to “almost half” of the Millennials — who are attending college to a far greater degree than earlier cohorts — who are reportedly living at home.

Apparently, however, they haven’t been buying enough oversized gourmet cupcakes lately. 

“Regrettably, Crumbs has been forced to cease operations and is immediately attending to the dislocation of its devoted employees while it evaluates its limited remaining options," the company said in a statement to the Wall Street Journal, which included a possible bankruptcy filing.

“Once the sweet indulgence of choice for Carrie Bradshaw and her ‘Sex and the City’ gal pals, cupcakes have recently become as unfashionable as the towering designer shoes that Sarah Jessica Parker tottered to Magnolia Bakery in,” writes the Hollywood Reporter’s Debbie Emery. 

“Crumbs went public three years ago at the height of the gourmet-cupcake boom,” reports the WSJ’s Randazzo. “Since then, its financial outlook has grown bleak amid several years of losses, a dwindling cash supply, and a food craze that is petering out.”

Crumbs reported a loss of $18.2 million last year on top of a $10.3 million loss in 2012. NASDAQ suspended trading of the company’s stock on July 1.

“The company had warned in a filing with the Securities and Exchange Commission this past May that it ‘may be forced to curtail or cease its activities if its operations didn't generate enough cash flow,’” the AP reports.

“Started by Jason Bauer, and his wife, Mia, in 2003 with a single bakery in New York,” the company “went public in 2011 through a $66 million merger with an investment company, the 57th Street General Acquisition Corporation,” Sydney Ember reported in the New York Times.

“‘My expectations were very simple, and they came to fruition immediately,’ Mia Bauer told New York Family in 2012,” reports Hayley Peterson in Business Insider in a piece that traces the company’s rapid rise and fall. “‘The goal was to have a neighborhood bakery where I knew everybody and their kids, and I made all their birthday cakes.’”

High real estate costs, growing competition and cupcake burnout are several of the factors cited by observers for Crumbs’ demise. It may be as tempting as a Girl Scout Chocolate PB Cream cupcake to suggest that the development portends the descent of larger, dark forces on our overindulgent society. But whatever you do, don’t panic.

“When everything looks like it's falling apart when the pressure is on, that's when people tend to screw up,” as Jim Kramer said about the market on “Mad Money” yesterday. So heed his advice, take a breath, realize the dough isn’t falling after all and head to nearest Sprinkles Cupcake ATM if you need a fix.

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4 comments about "Out Of Dough, Crumbs Bake Shop Crumbles".
  1. Michael Strassman from Freelance , July 8, 2014 at 8:32 a.m.
    Gosh, what a surprise...you can't build a company on a single baked good with a shelf life of 2 days. Wow, who coulda saw that coming. Alright, I admit, this business model worked pretty well for Dunkin Donuts, but then nobody eats cupcakes for breakfast. This is one of the stupidest business fads since the tulip craze.
  2. Jim O'neal from Independant Media Consultant , July 8, 2014 at 9:51 a.m.
    Don't open a cakepop store any time soon... They are next!
  3. Paula Lynn from Who Else Unlimited , July 8, 2014 at 10:24 a.m.
    Once they went public, the percentage of gross income had to be so much higher because profits had to be higher for more levels of management and dividends plus other gathering expenses.
  4. Adam Hartung from spark partners , July 8, 2014 at 6:08 p.m.
    Crumbs was a little business, but it has 2 big lessons according to Forbes magazine - beware of becoming overly passionate about your product and spend a lot more time tracking trends and preparing for change http://onforb.es/1kBkmY5