Late last year, in a bold move, Crumbl Cookie decided to undergo a rebranding initiative that transcends its cookie-centric identity. Recognizing the need to diversify and capture a broader market, Crumbl is shedding its focus on cookies to embrace a more versatile brand image. The rebranding strategy involves a fresh visual identity that will support future broader product ranges extending beyond cookies.
Crumbl’s new narrative aims “to infuse new life and energy into Crumbl” while “stay[ing] current and connect[ed] with its audience.” This strategic evolution could position Crumbl as more than just a bakery; it could become a destination for an array of delightful and high-quality specialty food items. They launched a line of ice cream products in their stores in the summer of 2022 (now discontinued), and it looks like their next new product will be sweet hand pies (similar to an empanada). As of a few months ago, it appears they have started testing this item outside of their home state of Utah.
They have opened over 950 stores through a franchise model in only six years. While this is very impressive growth, it seems there are some locations closing already (in as little as four months). Is this an issue of franchise density?
There are a few things on the horizon that could make that a more challenging hurdle than their press releases and Wall Street Analysts suggest.
Labor Costs:
Crumbl’s commitment to baking all their cookies in-store comes at a significant cost. The food service industry has been especially hit hard by record low unemployment rates, dwindling consumer support for ‘tipflation’, and rising minimum wages. High labor costs will pose a formidable obstacle as the company looks to expand its offerings in-store.
Many chains leverage a commissary model where products are partially or fully made in a centralized location and transported to the stores daily. As it ventures into new markets, the challenge lies in maintaining the same level of quality and personal touch in its products while grappling with varying labor expenses. Switching to this model risks losing their premium status in the eyes of customers making them more akin to Dunkin’ Donuts than the boutique bakery they desire to be compared to.
Repeat Purchases:
While Crumbl boasts a loyal fan base, the nature of its offerings might present a hurdle for repeat purchases. Chains like Starbucks and Dunkin’ have heavily shifted their focus to drinks, knowing that customers are not going to buy a donut or pastry every day. Crumbl has a weekly rotating menu of new flavors, which is certainly a strategy to bring people in more regularly, lest they miss out on the latest flavor. A single cookie costs around $5 (depending on location), but comes with 760 calories with 32 grams of fat*.
While the price is right for repeat impulse purchases, they will need to balance their perception as an everyday treat (lower cost, higher volume) with a special treat (premium price, lower volume). They’ve tested adding “minis” to their menu, literally a smaller version of the same cookie, but this juxtaposition of minis versus the full-size cookies as a “special treat” could have a negative effect on repeat purchases lowering store sales volume. In a recent Reddit Ask Me Anything, Crumbl’s CEO acknowledged the challenge with minis: “When we offer [them] for sale, not as many people buy them and it causes stores to waste dough”.
The menu additions we’ve seen so far (ice cream, empanadas, etc.) are still very much in the ‘treat’ category which risks cannibalizing their cookie business rather than increasing their total business by bringing people in for more occasions.
Square Footage Limitations:
Expansions inside a physical location come with its own set of challenges, especially when constrained by limited square footage. Crumbl has opened its 950 locations in only six years, leveraging a franchise model to do so. All of these legacy stores are around 1,400 to 1,600 square feet and filled to the brim with their open kitchen industrial equipment and baking supplies.
Crumbl Cookie’s business model heavily relies on the in-store experience, and constraints on space may limit the potential for pivots such as introducing new product lines or creating immersive customer experiences. Creative space utilization strategies become paramount in overcoming this hurdle. Their cookies are baked on a just-in-time delivery model, so introducing new baked goods into the mix would have to be done in alignment with temperature and timing since they likely don’t have room for additional ovens and equipment.
Aligning Hours to Market Demand:
Compared to your standard bakery, Crumbl is open quite late – until 10 PM in most markets. However direct competitors like Insomnia Cookies and alternatives like fast food are open until 1 AM or even 24 hours in some cases. With their high labor costs and freshly baked approach, it would be hard to offer such round-the-clock service.
They also have something in common here with popular Chick-fil-a. Both abide by the religious backgrounds of their founders and are closed on Sunday. While this hasn’t prohibited Chick-fil-a’s growth over the years, cookies may be more aligned with something to bring to a Sunday get together than fried chicken. Weekends are the busiest days of the week for bakeries versus Sunday being one of the slowest days of the week for restaurants.
Conclusion:
As Crumbl sets its sights on expansion, it must navigate these challenges thoughtfully and strategically. By addressing issues such as high labor costs, repeat purchases, maximizing limited square footage, and fine-tuning business hours, Crumbl can not only overcome hurdles but emerge stronger and sweeter in new markets. The recipe for success lies in adapting to the evolving tastes of both its cookies and its customers.
* Nutrition information based on their Milk Chocolate Chip cookie