CAUTIONARY TALE

Crumbling of Crumbs is warning to 1-item shops

Experts: Fad-based businesses risky

Crumbs Bake Shop managing partner Harley Bauer carries of tray of cupcakes during the store's grand opening in Beverly Hills, Calif. Crumbs on Monday, said it is shuttering all its stores, a week after the struggling cupcake shop operator was delisted from the Nasdaq.

NEW YORK — Turns out, being a one-trick pony is risky.

When Crumbs, the New York City-based chain that built its business around cupcakes, shuttered its remaining locations on Monday, it seemed like an abrupt ending for a company that opened a decade ago to ride the wave of popularity of the sugary treat sparked by the TV series Sex and The City.

Crumbs Bake Shop Inc. closed its high-end bakeries a week after the Nasdaq stock market suspended trading on the company’s stock and the company defaulted on about $14.3 million in financing.

Employees at its remaining 58 stores in 12 states and the District of Columbia were notified of the closings Monday, the last day of business. A Crumbs spokesman did not say how many workers lost their jobs.

Crumbs said in a statement that it was evaluating its “limited remaining options.” That will include a Chapter 7 bankruptcy filing.

Crumbs’ rise and fall isn’t surprising when considering the company’s dependence on a fad. In fact, it’s the latest cautionary tale for restaurants and other chains that devote their entire menus to variations of a single product.

● Krispy Kreme, for instance, expanded rapidly in large part on the cultlike following of its doughnuts. But sales started declining and the company closed locations. Last year, restaurant industry researcher Technomic said Krispy Kreme had 249 locations, down from 338 a decade ago. The chain has broadened its menu recently.

● Mrs. Fields, which is known for its cookies, has suffered in part because of the ubiquity of places that sell cookies, and it was down to 230 stores last year, from 438 a decade ago.

● TCBY had 355 stores last year, down from 1,413 a decade ago. Part of the chain’s problem is the competition, given the proliferation of frozen yogurt places.

Companies that only offer one item can fall victim to a number of risks. For one, trendy products tend to attract competition from big and small players that want to jump on the bandwagon. For instance, Starbucks and Cold Stone Creamery have been trying to capitalize on the cupcake trend with cake pops and ice cream cupcakes, respectively.

Being beholden to a single item also makes companies more susceptible to customers’ whims and changing tastes. There’s always a new fad. Frozen yogurt. Chopped salads. Freshly squeezed juices. Entrepreneurs may be eager to open stores selling these products, but there’s always the danger that fickle customers will move on to the next thing.

“A cupcake shop today can’t survive on just cupcakes,” said Darren Tristano, a Technomic analyst.

To combat the risks, many chains diversify their menus. And several have prospered by moving beyond their flagship products.

Dunkin’ Donuts, for instance, has been pushing aggressively into specialty drinks and sandwiches, with a focus on boosting sales after its morning rush hour. And Starbucks has introduced a range of new foods and drinks in its cafes, including premium bottled juices and salad boxes. The coffee chain plans to expand wine and beer offerings in the evenings to as many as 1,000 locations in the next several years.

Magnolia, another popular New York City cupcake shop, is credited for sparking the cupcake craze after it was featured in Sex and the City.

The chain, which opened in 1996, has endured while many of the cupcake shops that opened up in its wake — including Crumbs — focused on just cupcakes. That’s in part because Magnolia, which now has seven locations, offers a variety of desserts, including cakes, pies, cookies, brownies, and banana pudding.

Sara Gramling, Magnolia’s spokesman, said the company is learning about the dangers of focusing too heavily on one product, as well as expanding too quickly.

“We’ll be mindful of those lessons,” she said.