The Wall Street Journal today reported there may be investors interested in resurrecting Crumbs, a chain of cupcake bakeries which ceased retail operations earlier this week.
This makes sense. At this point Crumbs is a good value on paper. One could reason the company's biggest problem was over-expansion. Founded as a single location in 2003, within a decade it had grown to a chain of 79 stores. By 2011, is was listed on the NASDAQ. The cash intensive nature of expansion, coupled with the decline of the cupcake industry are what initiated the financial death spiral.
However, Crumbs had a more fundamental problem. Their cupcakes were lousy.
By volume, a Crumbs cupcake was about half frosting. This made for an unwieldy cupcake that defeated the point of the medium. On top of that, the frosting had no flavor. Though visually exotic, Crumbs cupcakes all featured this same insipid, sickly sweet frosting piled on a dry, flavorless cupcake. Factor in the $3-4 price for a single cupcake, and it's no wonder the novelty faded.
Crumbs may still become a useful investment. For the right price, it makes sense to buy the company and strip it to the bone. However, Crumbs is worthless as a bakery.
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