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Crumbs shows how the cupcake crumbles for companies large and small

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “What are the pros and cons of bankruptcy ?”

Three years ago, New York City-based Crumbs Bake Shop stepped out into the public market after merging with an investment firm, 57th Street General Acquisition Corp. With the backing of 57th, Crumbs obtained a stock listing on the Nasdaq stock exchange.

Gourmet cupcakes Charlotte Bankruptcy Lawyer North Carolina Chapter 7 AttorneyIt was a long road to the top for the purveyor of oversized gourmet cupcakes, which first opened in March 2003 on Manhattan’s Upper West Side. By the end of 2013, Crumbs had opened 65 locations in 12 states and the District of Columbia.

Was all that irrational exuberance? Perhaps.

Less than three years after its initial public offering, Crumbs reported closing nine “underperforming” stores towards the close of 2013 and six more at the beginning of 2014. In the first three months of 2014, Crumbs reported a loss of $3.8 million. Nasdaq delisted the company at the end of June. By that time, shares for the shop were trading for less than a quarter.

On Tuesday, Crumbs told its 165 full-time and 655 part-time and hourly employees it was closing all of its stores nationwide at the end of the business day. Distraught employees told the New York Daily News they were worried about whether they would still get paid on Friday for hours they already worked; a district manager had turned off her cell phone and wouldn’t return calls.

While sudden closings are not unheard of, the Crumbs closure shows just how quickly fortunes can turn in the cutthroat world of gourmet cupcakes. The same chain that won its founders the 2011 Ernst & Young Entrepreneurs of the Year Award said it was filing for Chapter 7 bankruptcy liquidation late Monday.

A Chapter 7 bankruptcy—unlike a Chapter 11 bankruptcy—means Crumbs will liquidate its assets, pay off creditors, and dissolve. In other words, investors will see no more icing from Crumbs cupcakes.

At least one observer believes Crumbs’ tale is one of buyer beware. Investing in a hot new company might seem like a good idea, but it can backfire. A Forbes reporter noted that signs of trouble came early for Crumbs; just a month after its initial public offering in June 2011, it reported a drop in sales. Sales continued to decline from that point onward, until the bottom dropped out in early 2014.

Maybe Crumbs is just another casualty of the great recession, a casualty of the recovery, of bad timing, irrational exuberance, or a combination of those. We can only hope the bankruptcy of the company doesn’t drive its ex-employees—who went to work Tuesday and were looking for jobs by Wednesday—aren’t pushed into bankruptcy.

If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.


About the Author

Bryan 1Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.

Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.

In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.














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