Cupcakes and Franchising?

Check out this article on cupcakes and expansion in the New York Times.

September 4, 2008, 4:00 pm
Will Cupcakes Be the Next Krispy Kreme?
By Jennifer 8. Lee
New York Times
http://cityroom.blogs.nytimes.com/2008/09/04/will-cupcakes-be-the-next-krispy-kreme/?hp

Cupcakes at Magnolia Bakery in the Village. (Photo: Joyce Dopkeen/The New York Times) New York City may well be the cupcake capital of America. Magnolia Bakery of Greenwich Village has produced a list of progeny very Old Testament in length: Magnolia begat Billy’s and Buttercup, and Buttercup in turn begat Sugar Sweet Sunshine.
And then there are Crumbs, Cupcake Cafe (which dates to 1988) and Burgers and Cupcakes. Los Angeles appears to be hopping on the cupcake bandwagon, but New York remains the genesis of cupcake awareness. (Los Angeles, however, gave us the yogurt craze with Pinkberry.)
Many of the cupcake shops have started to clone themselves. Magnolia opened a second spot on the Upper West Side in addition to its Village location. It plans a third store in Rockefeller Center this month. Buttercup Bake Shop now has two places on the East and West Sides of Manhattan. Within the last several years, Cupcake Cafe also now has two locations. Even with expansions, these places have retained their boutique appeal.
But Crumbs, which started in 2003 with a single store on the Upper West Side, is expanding more aggressively, with 40 planned stores over the next year and 150 within the next five years. (All self-financed.)
This kind of growth brings to mind the tale of Krispy Kreme, another sweet phenomenon that went national very fast. It, too, offered a nostalgic dessert at premium prices, with lines around the block and fawning press coverage. Krispy Kreme went public in 2000 and was a high-flying stock that confounded analysts with its market appeal, rising even as the dot-com bubble burst.
Krispy Kreme quickly came down to earth, through dilution of the brand and mismanagement. And finally, another indignity — the glazed donuts were transformed into Krispy Kreme bacon cheeseburgers.
Mia and Josh Bauer, the couple who opened up Crumbs, see Krispy Kreme as a cautionary tale. “We look at them all the time,” Ms. Bauer said. “We don’t want to make the same mistakes by overexpanding.”
“I was a fanatic when they opened up,” she said. “They pirated themselves by overexpanding and the quality dropped immediately. Their choices were not the greatest. You could get them in the gas stations.”
There are now several Crumbs shops in New York and two in Los Angeles.
“We will expand to places where there is a demand,” Ms. Bauer said. “We want to be very careful and strategic and not to expand too quickly.”
One sign of demand is the large volume of requests that Crumbs gets for shipping. (Last year, it stopped shipping until it could come up with a better process.)
Is there enough demand for premium-priced cupcakes to warrant this much expansion? Or is the cupcake just another food fad? (The Atkins Diet, for example, broadsided Krispy Kreme, though now the Atkins Diet has receded from view.)
Even now, the cupcake appears to be at a tipping point. There are signs of a cupcake backlash — both from schools concerned about childhood obesity and from foodies who can only maintain