With the recent announcement of the closure of Crumbs, a cupcakery that got its start in 2003 on the upper west side of NYC that became a public company in 2011, I’ve heard lots of buzz, shock, awe, horror and opinions from friends and patrons. It’s the end of the cupcake era! The cupcake bubble has burst!
To be blunt, a business model that relies on selling a $3 item and its own brick & mortar requires crazy volume. This is very tricky to pull off. The wrong location, excessive overhead (ie taking on a larger location that whats needed), and overstaffing can keep a business upside down until its last breath. There’s a blessing and a curse being out in front, and Crumbs was the leader of the pack in going big. The blessing of being first is attaining that proverbial “first mover’s advantage”, getting in before others do. The curse of being first & having hysterical success is that its possible to attribute success to the wrong factors. The truth gets revealed when like-conditions are not maintained. And sometimes, the truth just isn’t very pretty, especially in the not always sweet world of desserts.
When I concocted the business plan and brand of Sweet Revenge®, my restaurant & wine bar, I wanted it to be experience based, not reliant on any one particular product. I’d read about the success and failure of Krispy Kreme and wanted to steer clear of that unsavory trajectory. Big things can go against you in small business that are far out of your control. I built in flexibility in the event the cupcake fad turned into a cupcake fade.
By no means am I saying I’ve got it all figured out and have perfected the business model. Quite the opposite. I’ve stayed really small and not because I want to. Location, location, location. If I would’ve had beginner’s luck & a heftier appetite for rent risk, I might’ve chosen a well trafficked location on Bleecker street or one on the upper west. My hunch says I would’ve achieved brilliant financials, but I wouldn’t have known that those were largely due to phenomenal foot traffic. Proof: there’s a lot of mediocre establishments in primo locations doing seemingly well. Their financial success has nothing to do with the service they provide, their menu or their ambiance.
It’s important in small business to look out for the what-ifs and have contingency plans. By doing so, I babystepped my way from dessert & wine bar to restaurant & wine bar. Its a tricky transition asking yoru patrons to think of you and treat you as something different from what they’ve known you for. Having the resilience of a tortoise, patience, a commitment to excellence and an appetite for the long distance race come in handy. I make a lot of mistakes as an entrepreneur but manalive do I “note to self” myself. And I keep going.
I’m not shocked that Crumbs didn’t make it. I was more shocked when they went public. Fundamentally, the business model has to be sound. As a business owner you’re on the hook to nail the crazy tidal wave of factors that create and sustain success. Similarly you’re on the hook to fix what’s broken and to look out ahead to avoid Krispy Kreming or Crumbing your business.
“Failure is a great teacher” (Steve Harvey)