TO UNDERSTAND the life cycle of food fads, consider the humble cupcake. Moms have baked them for decades, but they blipped into the cultural consciousness in a new way in 2000. It happened during an episode of Sex and the City, when Carrie dished to Miranda about her latest crush while the two ate cupcakes outside Manhattan’s Magnolia Bakery. Cupcakes were suddenly hot — and it happened in much the same way paparazzi shots of a Kardashian can send Uggs sales soaring and a Dr. Oz endorsement can cause a run on mangosteens. Before too long, Magnolia was turning up on Saturday Night Live and reality TV and being joined by competitors such as Georgetown Cupcake and Crumbs (both now have Boston-area outlets). At weddings, cupcakes seem to have become as established a part of the festivities as the white dress and the bouquet toss.
The first time that Dave LaLiberte really understood the power of cupcakes was at a friend’s wedding in New Hampshire in the spring of 2009. The longtime Needham resident, former head trader of Fidelity’s Magellan Fund, had retired from Jeff Vinik’s hedge fund at age 45. But four years on, he was already bored. He worried his layabout ways might prevent his young children from developing a work ethic of their own.
LaLiberte had been searching for a new business to run for about a year —he just wasn’t sure exactly what kind until he saw the cupcake tower at the wedding. “It really struck me that everybody was talking about the cupcakes,” he recalls. “It was then that I was sure that cupcakes were the way I was going to go.”
LaLiberte opened Treat Cupcake Bar in downtown Needham on July 4, 2010. While Treat offers varieties found elsewhere (with names such as Creamsicle and Peanut Butter Overload), it also features a build-your-own cupcake bar where kids can choose a flavor, an icing, and various candy toppings. The store has grossed around $500,000 in each of its first three years.
On April 5, LaLiberte opened his second location in The Street, the renamed Chestnut Hill Shopping Center where the first Boston-area Shake Shack had just debuted to great fanfare. But twelve days later, LaLiberte awoke to a dire headline in The Wall Street Journal: “The gourmet-cupcake market is crashing.” The article cited the falling stock price of publicly traded Crumbs, whose shares had dropped from $13 in mid-2011 to less than $2, and quoted independent store owners who said sales are falling. LaLiberte’s timing couldn’t have seemed worse.
Yet speaking to me a few weeks later, LaLiberte remains unfazed. “Cupcakes aren’t a fad,” he says resolutely before launching into a litany of the treat’s virtues. “They’ve been around [forever]. You had them at your birthday party. . . . This is a better way to give you a small piece of individual cake that’s to your liking.” He agrees the market is becoming saturated in Boston, but points out that he’s working in the suburbs.
Indeed, the more LaLiberte explains his business strategy, the more it makes sense. He tries to make each of his locations the only cupcake store for at least 4 or 5 miles, limiting proximate competition the way chains like McDonald’s sometimes do. And, like many Dunkin’ Donuts, Treat supplies its outlets from a centralized kitchen. Leveraging LaLiberte’s investment in the Needham bakery, Treat uses a customized van capable of carrying 1,000 cupcakes to haul products to its Chestnut Hill shop and its kiosk in the Natick Mall. In its first three weeks, the Chestnut Hill store alone grossed $2,000 a day.
So far Treat is running at break-even, but LaLiberte says it would be profitable if he managed day-to-day operations himself; instead, he hired two well-paid managers to run it, allowing him flexibility to spend more time with his family (he wasn’t that bored). If sales at his new locations increase, those fixed labor costs as a percentage of sales should drop, creating profits. He’s also finding new ways to boost sales. Lately he’s expanded his gluten-free offerings, and his bakers have re-created Treat’s whimsical cupcake flavors in larger cakes targeted to customers planning weddings and bar mitzvahs. He’ll continue to choose future locations carefully.
“There’s something about cupcakes,” he says. “I don’t see it as a fad at all. And hopefully I’m right.”
THERE IS NO DISAGREEMENT about the basic factors driving the froyo market. The serve-yourself aspect gives customers control over portions and price — eat a lot, spend a lot; eat a little, spend the same. The customizable nature of the flavors and toppings lets people express creativity and get exactly what they want. Froyo seems abundantly healthy, at least without the candy, and some of the chains have tried to make it even healthier: TCBY, for instance, unveiled the first high-protein Greek frozen yogurt in 2012, and a high-fiber version called Super Fro-Yo a year earlier. Continued...