The rise and fall of Crumbs Bake Shop: How the Y2K darling lost its edge and how its founders plan to bring the bakeshop back online and in groceries

It all started in 2000 when character Carrie Bradshaw ate a cupcake from Magnolia Bakery's West Village location. Tourists began flocking there and a "Sex and the City" tour bus made the location a destination. The cupcake craze had officially begun.

Mia and Jason Bauer, respectively a legislative counsel and a consumer product entrepreneur, were quick to jump on the trend, opening the first Crumbs on the Upper West Side in 2003.

"My expectations were very simple, and they came to fruition immediately," Mia Bauer told New York Family in 2012. "The goal was to have a neighborhood bakery where I knew everybody and their kids, and I made all their birthday cakes."

Crumbs started opening more shops in New York and expanded to Philadelphia, D.C., and Beverly Hills, among other cities.

But at the same time, hundreds of other cupcake bakeries opened across the U.S. Among them were Sprinkles Cupcakes, which launched in 2005; Cupcake Nouveau in 2007; and Georgetown Cupcake in 2008.

As the cupcake craze ballooned, television networks began taking notice. The Food Network started airing "Cupcake Wars" and TLC launched "DC Cupcakes," a show about Georgetown Cupcake and its owners.

Two years later, Crumbs was named one of Inc. Magazine's 500 fastest-growing companies in America and it moved into new corporate headquarters near Bryant Park in Manhattan.

With more than two dozen shops open around the U.S. in 2010, Crumbs generated about $1.8 million in net income on $31.1 million in sales and estimated that it would double its profit to as much as $3.9 million the following year, according to Daily Finance.

In 2011, the average check size was $19, with most customers buying cupcakes in bulk. That year, the typical Crumbs store generated more than $1,000 of annual sales per square foot, which was comparable with McDonald's when it came to sales volume, according to Daily Finance.

When Crumbs opened in 2003, there were only three bakeries devoted to cupcakes nationwide, according to Newsweek. By 2011, there were hundreds.

Bauer said Crumbs would remain competitive by expanding rapidly.

"We're looking to open 200 stores by the end of 2014. I want to be the national neighborhood local bakery," he told Newsweek. "Twenty years ago, people didn't go to Walmart to buy a birthday cake. They went to a bakery. We want it to be that way again. We want to be the neighborhood bakery in every town across the country. We're trying to position ourselves as the dessert destination."

A holding company called 57th Street General Acquisition Corp. acquired Crumbs and took it public in June 2011 at a price of $13 per share. Crumbs had 35 locations at the time.

Crumbs' troubles began in mid-2011, when it was orchestrating a massive expansion, according to former Crumbs President and CEO Julian Geiger.

Same-store sales started declining as the cupcake market was rapidly growing more crowded, and analysts began warning of a possible cupcake bubble.

Crumbs was also plagued by high real estate costs, according to Darren Tristano, executive vice president at the food industry research firm Technomic.

The company's shops averaged about 1,000 square feet, with one outlet near Chicago measuring 3,300 square feet, Tristano told Crain's New York Business reporter Aaron Elstein.

"That meant high rents and lots of extra space in places where shoppers seldom lingered," Elstein wrote.

The Wall Street Journal would later conclude that Crumbs' downfall was the result of mass "gourmet-cupcake burnout."

The company reported in August 2011 that same-store sales fell 6% in the three months ending June 30 of that year. By September, Crumbs stock had plunged to $3.75 from its $13 IPO price.

In November, Jason Bauer resigned from his position as president and CEO.

Despite falling same-store sales, the company kept opening new locations for several years, climbing to 70 locations in 2013, up from 35 in mid-2011.

Eventually, the chain started closing stores.

"We have talked repeatedly about wanting to close certain underperforming stores within our real estate portfolio," former CEO Julian Geiger said in an August 2013 conference call. "We are making real progress."

The chain shrank to 58 locations, according to a filing with the SEC.

Crumbs reported a net loss of $15.3 million in 2013, up from a $7.7 million loss in 2012.

The company tried to offset its declines by licensing its treats, with coffee and bake mixes sold in grocery stores.

Crumbs began selling the Crumbnut — which is a twist on the much-hyped cronut — as well as assorted cupcakes and ice cream cakes at BJ's Wholesale Club.

"We have known for quite some time now that we needed to evolve our business model," CEO Edward M. Slezak said in a March 2013 release. Our focus for 2014 will be on executing our initiatives and strategies of licensing our brand for complimentary product categories, positioning ourselves to move toward a franchise store model, and continuing to close under-performing stores. We believe these actions will put our business on a trajectory toward increased growth and vitality in the future."

In July, the company suddenly closed all of its stores and said that it was considering its options, including a bankruptcy filing. Its stock was also delisted from the NASDAQ.

Instead, the company ended up taking new investments from Marcus Lemonis, known for his CNBC show "The Profit," and Fischer Enterprises. The deal led to the reopening of Crumbs' stores, though the company shut unprofitable locations, whittling its store base down to 24.

Lemonis told Insider in October 2014 that the Bauers and Crumbs oversaw "an obscene expansion that cannibalized their own stores."

"They literally killed the brand," he said at the time.

Lemonis left Crumbs and took a "significant loss" on his investment in 2015, the New York Post reported at the time.

In December 2016, Crumbs closed all of its stores permanently.

Jason Bauer applied for trademark rights to the "Original Crumbs Bakeshop" brand in 2021, Insider reported this month. The cost to register the brand, once the mark of a $66 million business? Just $350.

The Bauers are taking a different approach to growing the brand, they told Insider. Instead of trying to be a neighborhood bakery, Crumbs is selling its baked goods through grocery stores and directly to consumers through its website. Customers in New York City can also order for same-delivery through services including DoorDash and Uber Eats, thanks to a partnership between Crumbs and ghost kitchen startup Reef.

Crumbs is also selling cookies in addition to its signature cupcakes.

"This time we want to elevate the cupcake category in supermarkets with a superior product or something you have never been able to get at a supermarket, but only at a local bakery," the Bauers told Insider.