Days after closing all its stores amid financial struggles, Crumbs Bake Shop Inc. could get a second chance after an investor group said it plans to revive the brand and expand its offerings.
Marcus Lemonis — who heads Camping World and Good Sam Enterprises and stars on CNBC's "The Profit" TV series — said he and another potential investor funneled money into the cupcake chain to keep the company afloat. He called it a prelude to an acquisition.
Lemonis said the group includes Mark and Scott Fischer, who bailed the futuristic ice cream chain Dippin' Dots out of bankruptcy in 2012. The Fischers already were major shareholders in Crumbs after investing $5 million in January through Fischer Enterprises.
"The company has limited cash, and we are trying to come up with a situation that allows the company to remain viable," Lemonis said. "We are in the final stages of working on a plan to get the stores reopened and people rehired."
The Fischers declined to comment on the Crumbs deal through a spokesperson.
Crumbs stock soared from 3 cents to close at 40 cents a share Thursday.
On Monday, the high-end, specialty cupcake chain closed 48 stores in 10 states, including one in Los Angeles, after it lost its stock listing on Nasdaq and defaulted on about $14.3 million in financing. It lost $3.8 million in the first quarter, nearly twice the $2-million loss in last year's first three months. The company said it was evaluating its "limited remaining options," including a Bankruptcy Court liquidation.
Crumbs had shops in trendy areas such as Beverly Hills, Malibu, Manhattan and Greenwich Village.
The chain's dire financial situation has analysts questioning why the group is bothering to revive a company that reflects a cooling market for opulent desserts, such as Crumbs' nearly 600-calorie monster cupcakes costing $5.
"This is a big mission," said Warren Solochek, vice president of food service for NPD Group. "Part of what happened is that Crumbs became considered a premium-priced indulgence, so they need to change that image and they need to do it quickly."
Lemonis said he understands the chain's grim position and called the deal a "herculean effort." But he has previously poured money into floundering, high-risk businesses — as he does weekly on his TV show.
He agreed that Crumbs' major downfall was selling only one dessert — gigantic, expensive cupcakes. Lemonis plans to infuse other sweets and increase its coffee offerings to make it more of a "sweets and snack shop."
"It's called a bake shop, so we want to make that happen," he said.
Lemonis owns Florida candy chain Sweet Pete's Candy and wants to incorporate that, along with other brands, into a new Crumbs entity.
The chain needs a makeover to succeed, Solochek said, pointing out that the market is already filled with a host of national-chain baked good and coffee shops. Consumers will also be wary of a company that closed all its stores without warning and plans to reopen under the same name.
"What is going to set them apart from Caribou Coffee, Starbucks or Dunkin Donuts?" Solochek asked.
Lemonis did not give any details about the deal or a timeline as to when the Crumbs revival will take place. The chain made need radical surgery, said Kevin Burke, a restaurant industry expert at Trinity Capital, a Los Angeles investment banking firm.
"Bankruptcy might be the only way to stop the bleeding and discharge Crumbs' bad leases," he said, "and the Fischers might be able to do that."
The Oklahoma father-son team bought Dippin' Dots, based in Kentucky, out of Chapter 11 bankruptcy for $12.7 million in April 2012.
Lemonis said he plans to sit down with the company and come up with a plan to create an expanded chain but still retain the Crumbs brand.
"My main goal is to rescue the business," he said. "I truly believe in the brand."Copyright © 2014, Los Angeles Times