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The Best Industries For Starting A Business

BUYING A SMALL BUSINESS

Building a Cupcake Empire

As consumers warm to splurging on little luxuries, niche bakeries are booming. Here's how one law student spotted the trend and found the sweet smell of success.

Courtesy CupcakeStop

From law school to the sweet life: Lev Ekster, founder of CupcakeStop, turned his sweet tooth into a company.

From carrot cake to mint chip to drunken raisin, CupcakeStop's lineup changes seasonally, and occasionally features special holiday varieties, such as Margarita for Cinqo de Mayo.

Courtesy CupcakeStop

From carrot cake to mint chip to drunken raisin, CupcakeStop's lineup changes seasonally, and occasionally features special holiday varieties, such as Margarita for Cinqo de Mayo.

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On a recent Tuesday morning, Lev Ekster paced around his future storefront in Manhattan's newly opened Limelight Marketplace. He adjusted the 1960s kitchen-kitsch inspired décor and awaited the delivery of a cupcake display case. It would be the first non-mobile location of CupcakeStop, the gourmet cupcake truck he debuted on the New York streets last May.

From the BlackBerry in his palm, on which he'd just updated roughly 12,000 Twitter followers on the existence of a special Cinco de Mayo cupcake (lime-and-tequilla flavored Margarita), Ekster clicked open an image. "See, I just got this picture," he said. "It's the new truck design for at South Street Seaport. Whaddya think?"

It was a yellow van, adorned with the cheery, if slightly adolescent, CupcakeStop logo (appropriately enough, a cupcake wielding a Stop sign). It would be Ekster's second full-service, full-time vending truck. Pending imminent New York City health inspection, it will be ready any day to take its spot for the summer at Wall Street and the entrance of the seaport, one of the top summer tourist draws in New York City.

Also this month, a storefront at his new bakery in Montclair, New Jersey, opened to customers. His website just launched, and a new delivery truck is operational. That's two storefronts, two full-time cupcake trucks, one delivery vehicle, one website taking mail orders, and one massive bakery, all staffed by about a dozen more employees than Ekster had 12 months ago. "Everything is coming down right now and it's hard to fall asleep," Ekster said.

If you needed proof that people love cupcakes, let this be it.

Ekster, 26, could be considered one lucky entrepreneur: He lives in what might be epicenter of the artisan food movement – Brooklyn, New York – and found himself itching for ideas right as both the food truck phenomenon and the cupcake trend took off.

While working toward a degree at New York Law School, Ekster would search out sweets from vendors during long evening study sessions. As graduation neared, Ekster assumed he would be offered a full-time position by the law firm at which he'd been a summer associate. Instead, at the firm's holiday party, he was notified no position would be available: The economy was tanking too hard for the firm to take on any new lawyers.

Ekster was devastated. Before his May 2009 graduation, Ekster says, "I was so turned off from law and the experience of working full time, coming in on Saturdays all summer and all year. I worked so hard for someone else, and I didn't want to do that ever again."

He started scheming about alternatives and saw potential in sweets, with New York City bakeries such as Magnolia and Buttercup Bakeshop often amassing long lines outside of the store for their luxe little treats. "I thought if you can get this kind of buzz for an average product, what could you do for a great product?" Ekster says.

He posted an ad on Craigslist seeking a baker. "I wanted the cake to be so good you could knock the frosting off and would love to eat it still," he says. He found a local baker willing to experiment and used savings to buy a secondhand truck and rent a Brooklyn kitchen space at nights.

At the same time, in early 2009, consumers started substituting little indulgences – say, a $19 scarf, a $4 popsicle, or a $2.50 cupcake – for the big splurges, like travel, they had been scrimping on since the 2008 economic downturn. Private research firm AnythingResearch.com listed bakeries and baked goods as its eighth fastest-growing industry hospitable to small business this year, saying "growth may be the result of people cutting back on larger entertainment expenses (e.g., vacations) and choosing instead to spend more on daily indulgences." (See Inc.'s complete list of best industries for starting a business.)

Instant indulgences often equate to food, experts say. There's a significant feel-good factor involved, thanks also to the locavore movement, which stresses quality, sustainable ingredients. Nichelle Stephens, a sweets expert who co-founded the blog Cupcakes Take the Cake, says the bakery trend is exemplified by but not limited to cupcakes. "It's also cookies, popsicles, brownies, and a lot of artisan candies," she says.

"The center of the movement is easily Brooklyn. The Brooklyn artisan food movement, whether it is beef or pickles, is thriving, and it seems there's a real sweet tooth," Stephens says. "It's focused on small batches, local suppliers, seasonal ingredients and creativity when it comes to combinations of flavors."

It's a movement that started in the mid-2000s and hasn't tapered out yet. A former sous-chef of renowned Manhattan restaurant Le Cirque co-opened The Dessert Truck in 2007, revving something of a trend. The Treats Truck, which focuses on simple baked goods, was all the buzz last year, and Limelight Marketplace, the Flatiron District's new luxury shops mall, has an entire wing devoted to bakers. Aside from Ekster's CupcakeStop, it houses Mari's New York, a bite-size brownie shop owned by the former creative director of Balthazar; Wannahavacookie; The Little Candy Cake Co.; and Butterfly Bakeshop.

Stacey M. León, the cheery co-owner of Butterfly Bakeshop, a new cake shop based in Manhattan that specializes in pristine, simple cakes and delicate mini cakes at a low $4.50 each, says she and her husband are set to break even on their cake-making endeavor within a month or two. She credits low overhead to the ease of entering the bakery field.

"It is a business you can open up in your own home. I mean, every baker starts like that," León says. "And with the popularity of shows like Ace of Cakes, there's a real cultural interest in baking. If people have a real skill, they can break in."

Starting small, baking from home is one thing; financing a location in an urban area is another. Even the booming gourmet food truck movement has a fairly steep financial barrier to entry. A used step truck can be found in the $20,000 to $50,000 range, but retrofitting it to fit health inspections and work for vending will more than double that.

"People think, Oh, start a truck, you'll make a million, but even after I had the truck, I had to rent a bakery and hire a staff," Ekster says. "I looked for storefront spaces, but in the recession or not, I just could not afford it. "

Selling cupcakes for $2.50 each at a couple of hundred per day (CupcakeStop might sell just 100 on a rainy day, but might stock, and run out of, 500 on a busy, sunny, Saturday in SoHo), is sustainable as a business, but it isn't much to bank on. Instead, Ekster has developed a parnership with FedEx to ship delivery orders around the country and abroad. The CupcakeStop truck also does events, such as birthday parties and bar and bat mitzvah parties. Corporate events, such as those for Victoria's Secret and Major League Baseball, also drive significant profits.

"You can make more money selling cupcakes outside than at an event, only an event is guaranteed," Ekster says. "You sign a contract and rain or shine you get paid."

With the new bakery, Ekster has the flexibility to experiment with small batches of new flavors - like Margarita or Mexican Chocolate - and offer seasonal selections such as Egg Nog in winter and Green Apple Martini in spring, without taking a hit if they don't take off. He likes that his business is still small enough that he can retain control of quality assurance ("I personally taste and approve every kind of cupcake," he says) and even customer support. The CupcakeStop Twitter, which responds to dozens of fan and customer tweets a day and updates followers on truck locations and offerings, is managed solely by Ekster.

Despite nearing profitability with CupcakeStop, Ekster is still in debt from law school. He started out by using a combination of his savings and loans from his family. He began with a partner but found another revenue source right next door to his family's home in Manhattan Beach, Brooklyn. The neighboring Kallman family runs Bookazine, the oldest and largest independent book distributor in the United States. When introduced to Richard Kallman, Ekster talked up cupcakes but was met with a shrug. As Ekster tells it, Kallman called him back a few days later after seeing Ekster's CupcakeStop on local TV and in The New York Times. "Let me hear more about these cupcakes," Kallman said. Now he is Ekster's biggest investor.

"Now I have 50 years of big business knowledge informing my small business," Ekster says.

For today, Ekster's goals are to get his South Street Seaport truck up and running, complete staffing at his Limelight location, and ensure the storefront at his New Jersey bakery is running smoothly. For tomorrow?

"I'd like to be shipping 100 orders a day and selling 1,000 cupcakes a day," he says. "That will be great. Then I sleep."

Last updated: May 24, 2010




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