Cupcake Wars

CEO Jack Long of Plano-based Cookies by Design is betting there’s still life in the gourmet-cupcake craze.

Gourmet cupcakes have been a culinary fad at least since 2000, when a New York cupcake chain was featured on the HBO series Sex and the City. National chains like Sprinkles and Gigi’s Cupcakes sprang up later in the decade, helped along by celebrity endorsements and cooking shows like the Food Network’s “Cupcake Wars.” Some of the chains have continued to thrive.

One big chain, though, called Crumbs Bake Shop, filed for Chapter 11 bankruptcy protection last year after a high-profile IPO, and analysts said the once-white-hot cupcake craze was fizzling out. Even so, a Plano-based company called Cookies by Design still sees plenty of opportunity in the 15-year-old trend. So it has decided to add gourmet cupcakes in its 90-plus U.S. locations, five of them in North Texas.

“The cupcake is as old as you and I,” says Jack Long, Cookies by Design’s president and CEO. And, he adds, his cookie company has “to keep evolving.”

Founded in 1983 by entrepreneur Gwen Willhite, who’s still the owner, Cookies by Design offers edible cookie bouquets, gourmet cookies, and other specialty items as “tasteful gifts for any occasion.” According to Long, an English-born former MCI executive who became chief executive in 2011, the company’s 91 franchised and two corporate locations have been generating revenue of $28 million to $29 million annually. Adding cupcakes to the mix in all the stores by the end of the second quarter, he says, will boost traffic and help soup up the company’s corporate business. Cookies by Design grew its B-to-B business 40 percent last year, he says, offering “logo” cookies in bulk for big corporations like Ericsson, AT&T, and American Airlines.

Priced at $3.15 for singles or at $2.65 for each of two dozen, Long’s cupcakes will eventually be orderable online, or available for hand-delivery within a 50-mile radius of the stores. That will give Cupcakes by Design—a wholly owned “sub-brand” of the parent company—a leg up over competitors like Gigi’s and Sprinkles, Long contends. Tennessee-based Gigi’s reportedly has more than 90 franchised and two corporate-owned stores, including two in North Texas. Sprinkles, which is based in Beverly Hills, California, is said to have 17 locations, including one in Dallas that offers a “Cupcake ATM.” (Neither company responded to requests for comment.)

When Cookies by Design added cupcakes to its first location in Grand Rapids, Michigan, total sales there rose by 38 percent, Long says. He adds that another store in Oklahoma City has sold out its supply of cupcakes every day since adding them. While cupcakes currently account for about 5 percent of the company’s annual revenue, Long says that figure could increase to 10 percent or 15 percent by 2016.

With the strategy in place, the CEO is betting that business analysts like Michel Theriault are right—and those experts who say the cupcake trend is over are wrong. “Not everyone who opens a cupcake store can possibly last …” Theriault wrote on Forbes.com. But, “adding cupcakes to an existing establishment or a small part of your culinary offerings is likely a good idea.”  

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