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Wednesday, July 9, 2014

Business Attorney Peter J. Lamont Explores Why Crumbs Crumbled

As fans of Crumbs know, the popular cupcake business started out as a single bakery and quickly grew to over 40 stores.  So what led to the demise of Crumbs and its recent bankruptcy filing?

In my opinion, there are three factors that contributed to the crumbling of Crumbs.  

Growth Must Be Paced
First, it grew too quickly. Growth is good but it must be controlled. Rapid growth can lead to cash flow problems, loss of revenue, operational failures, and leadership shortfalls. In Crumbs' case, it expanded so quickly and was spending so much money do so that when business started to slow it could no sustain the losses. 

Single Product Focus Has Inherent Risks
Crumbs capitalized on the growing cupcake craze in the early 2000's. However, its product line stayed relatively limited to cupcakes. As competitors moved in Crumbs had no other products to fall back on. While a business can be successful by offering a single product, there are inherent risks and when cash flow becomes an issue there is a high likelihood that it will lead to the company's demise. The reason that company's like Carlo's bakery remain successful is because growth is slow and steady and there are a reasonable variety of products in their inventory. 

Fads Come & Go
It can be risky to bet on the trends. Over the years we have seen cookie, cupcakes and cake fads come and go. It is one thing to hop on board the trend train but you have to expect that the train will leave the station at some point. It is easier for retail businesses to bet on trends if they have other products in their inventory. For example, where would you be today if all your company sold was parachute pants? 

The demise of Crumb's teaches us valuable lessons that all business and entrepreneurs should learn.  
If you would like more information about this topic or have general legal questions, please feel free to contact me at (973)949-3770 or via email at plamont@peterlamontesq.com We answer legal questions on a daily basis and would be happy to discuss any issues or questions that you have with you.  Offices in: New Jersey New York, Colorado & Puerto Rico.  Affiliated throughout the country.

© 2014, Law Offices of Peter J. Lamont. This Update is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between the firm and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances. This Update may be considered attorney advertising in some states. Furthermore, prior results do not guarantee a similar outcome.
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