09 Jul 2014 US: RIP Crumbs cupcake chain

Crumbs Bake Shop, America’s largest specialty cupcake chain, told employees on Monday that the New York–based company would be shutting down all of its stores at the end of the business day.

“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 announced in a statement to the Wall Street Journal. A spokeswoman told the paper those “options” include filing for bankruptcy.

Though the 48-store company had shut down three stores in 2013 and six stores in 2014 with more closures reportedly on the way, the news came as a surprise to employees.

The company began being publicly traded in 2011 when the appetite for the cupcake craze was still strong, but on July 1 the Nasdaq Stock Market suspended trading, saying the company did not have the either mandatory shareholder equity nor had it met required benchmarks for market cap and net annual profit.

Comments Forbes.com, who predicted its demise back in April 2013:

“If Carrie Bradshaw were still tottering around New York,” we asked, “where would the Sex And The City protagonist meet her girlfriends for a nosh and some gossip?”

Perhaps a modish food truck for mini gourmet tacos, our experts suggested. Or at socially-responsible Chipotle for a salad bowl. The ladies might even be on a BluePrint juice cleanse. But they wouldn’t be eating cupcakes.

It was Sarah Jessica Parker’s Bradshaw and her Manolo-clad gal pals who turned the 500-calorie-plus treats into an aspirational noughties-era craze after the gang first stopped by downtown Manhattan’s Magnolia Bakery in 2000.

In the 14 years since, countless cupcake stores cropped up to fuel the trend, from home-baked mom and pop outfits to public companies like Crumbs….

Wedbush Securities restaurant analyst Nick Setyan said he wasn’t surprised to see Crumbs close up shop. “They expanded too quickly with a product that simply was not differentiated or compelling enough,” he said. “When the returns are not there, it’s impossible to continue to operate.”

Brian Sozzi, CEO of Belus Capital Advisors, understands the speedy proliferation of Crumbs and its mom-and-pop counterparts over the last decade. There’s a low barrier of entry to market and a promise of high profit margins if run properly.

Today, he sees the end of the line for Crumbs as a warning for other one-item wonders: store chains trading off the popularity of one particular food or drink trend.

“The demise of Crumbs will go down as why one needs to appreciate the worldly success of Starbucks and brilliance of Howard Schultz,” said Sozzi, a retail and consumer expert, on Tuesday. “Unlike Crumbs and countless other niche restaurants and eateries, Starbucks has found a way to take the obsession with its core product and expand it into all sorts of fun eating and drinking experiences.”

He added: “If you can’t get beyond the one item that made you a star in the restaurant business, in the case of Crumbs its ginormous caloric bomb cupcakes, chances are you will die an ugly death.”