Dieting and high prices did in America’s largest cupcake chain.
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After 11 years in business, the bakery chain Crumbs Bake Shop, once touted as the world’s largest provider of cupcakes and known for its humongous pastries, has closed down all of its 65 outlets in twelve US states and Washington D.C. The move comes after the bakery had been delisted by NASDQ.
The bakery was known for its huge cupcakes that weighed six ounces and rose to four inches in height. They sold for as much as $5 each. Crumbs was the largest cupcake chain in the United States, with more than 50 varieties of gourmet cupcakes. It was also kosher.
The NASDQ delisting followed Crumbs’ defaulting on $14.3 million in financing.
Crumbs Bake Shop Inc. reported a loss of $3.8 million for the first quarter of 2014. Its losses for the same period in 2013 were $2 million. The company had also failed to meet the NASDAQ’s minimum stockholders equity requirement of $2.5 million
Its shares had plummeted to $0.27, down from a high of $16.
The company will now be filing for chapter 7 bankruptcy liquidation. It released a statement saying, “Regrettably, Crumbs has been forced to cease operations and is immediately attending to the dislocation of its employees while it evaluates its limited remaining options.”
All of Crumbs’ employees were informed of the move on Monday. More than 20 of its stores had already been closed earlier this year.
Crumbs will make for an excellent case study at business schools around the world of what not to do. The chain soared for a few years, as the US was experiencing a brief fad in which oversized gourmet pastries were popular.
The downfall of the bakery chain is attributed to the slow US economy, as well as dieting trends that have led people to avoid the rich, sugar filled pastries the chain was serving. Crumbs was also said to charge higher prices than a slew of new competitors that popped up across the country.
Other factors include increasing rents. Hurricane Sandy, which devastated the New York area, was also to blame. And supermarket chains everywhere began to offer their own specialty pastries.
The chain also made the mistake of continuing to expand and open new locations, even as its sales and revenues were decreasing steadily over the last two years.
Crumbs Bake Shop was founded in 2003 as a small mom and pop style bakery, by the married couple Mia and Jason Bauer. Its first location was on Manhattan’s Upper West Side.
Crumbs went public early in 2011. As its financial woes began in 2013, the company borrowed $10 million through convertible promissory notes and announced plans to close some underperforming stores.
Mia Bauer studied political science and women’s studies at Brandeis University before attending New York Law School. She studies at the Kabbalah Center and brings the couple’s 3-year-old daughter and 11-month-old son to celebrate Shabbat and holidays there. Mia lived in Israel as a child.
Jason Bauer, 44, grew up on Staten Island and has a B.S. in marketing and finance from Boston University.