New Crumbs Investor Reveals How The Brand Destroyed Itself

CNBCIn less than a decade, Crumbs Bake Shop went from being one of the biggest cupcake companies in the world to shutting down all of its stores.

How does a company fall so far in such a short period of time?

We asked Marcus Lemonis, the CEO of Camping World and Good Sam Enterprises, who made a joint investment with Fischer Enterprises to save Crumbs and start reopening some of its stores.

Lemonis is famous for his brutal honesty with struggling businesses on his CNBC show, "The Profit." He didn't shy away when asked about one of his latest investments.

Crumbs' owners "went from taking a really good concept that had a reasonable number of stores to an obscene expansion that cannibalized their own stores," Lemonis said.

They also spent money recklessly, "setting themselves up with corporate office in New York City with layers and layers of management."

They made matters worse by failing to diversify their products beyond cupcakes.

"They literally killed the brand," he said.

Lemonis is now trying to revive Crumbs by axing some management positions and adding new dessert offerings, such as pies and Baissants, which are hybrids of bagels and croissants.

He's also paring down on the number of locations and reopening just 26 to 28 stores out of the 48 that closed in July.

"We shut down the unprofitable stores," Lemonis said. "The way I look at it now, we need to run these stores like 28 small business" and not like one giant corporation, he said.