Why Crumbl won't last

Mrs. Fields built the format and then proved its ceiling. It went from 1 store in 1977 to 780 by 1993 — and store-level margins at founding were genuinely good, 20% against 21% at McDonald's, 16% at Taco Bell and Starbucks, 15% at Pizza Hut and 14% at KFC.

The problem was never margin, it was ticket size. The average Mrs. Fields grossed $353,000 in 2000 against $1,600,000 at Starbucks, $1,393,388 at McDonald's, $944,000 at Subway and $823,000 at KFC. You can only charge so much for one cookie.

Twenty-two years later that number has not moved: $353K, $357K, $321K, $283K, $319K, $342K, $361K. The average Mrs. Fields grosses less today in real terms than it did at the turn of the century.

And the reported figure flatters it. On $361,497 of gross, an owner keeps $220,513 after royalties and dough costs, then $160,513 after rent — before any payroll. Which is why a Mrs. Fields today is usually staffed by one person, and that person is the franchisee.

So the company stopped selling cookies and started selling franchises. Under private equity it bought Pretzel Time, Hot Sam's and TCBY, and profits went from −$3M and −$5M to $36M, $32M and $29M — earnings shrank while profits quadrupled, because the customer became the franchisee.

The margin split says it outright. Selling cookies at retail and by gift tin runs 6% to 14%. Franchising the same product runs 69%, 62%, 78% and 81%. These are two completely different businesses wearing one brand.

Levain solved the ticket-size problem instead, by changing the product. It turned a 2-ounce flat cookie into a 6-ounce softball and now charges $5.77 — the highest in the category — grossing roughly $1.2 million per store. But it has only 17 locations, does not franchise, and expanded slowly on purpose to avoid diluting the brand.

Insomnia solved it with occasion and location — late-night delivery from college campuses — reaching 300 stores and $769,231 per store. Between them the two proved the format could support a real number, which is the opening Crumbl walked into.

Crumbl took both lessons and added a third. Oversized photogenic cookies like Levain, campus first like Insomnia, and then weekly rotating flavours — a page from fashion, where scarcity beats consistency. Limited-time flavours create urgency and repeat visits, and turn a cookie shop into a destination rather than a pit stop.

It worked spectacularly at first. Average store revenue went $698,000, $1,316,002, $1,582,090, $1,769,339 — and store-level operating margin hit 30%, higher than Mrs. Fields at 26%, Taco Bell at 24%, Popeyes at 23%, Burger King at 21% and McDonald's at 16%.

That performance is what recruited the franchisees: 1, 15, 55, 327, 689, 970, 1,068 stores. Running a Crumbl was cheaper, easier and more profitable than running a McDonald's — and the whole expansion was funded by operators, not by corporate.

Then the terms tightened. The non-refundable upfront fee went from $25,000 to $50,000 in two years, level with Burger King, Popeyes and McDonald's and more than triple Subway's $15,000. Royalties went from 10% to 12.0% — above McDonald's at 9.3%, Mrs. Fields at 9.0% and Burger King at 8.5%.

The rebates are where it gets specific. Crumbl's own disclosures describe a 2% administrative fee on everything franchisees buy, roughly 12 cents a pound back on chocolate, $4.29 per case rebates, 50 cents a case on cereal and a 1–2% cut on primary food supply — about $32 million a year, collected through an affiliate LLC. Franchisees also pay 3% on card transactions where the processor charges Crumbl 2.37%.

The squeeze is visible in the accounts. Average store sales fell from $1,769,339 to $1,100,536, gross margin from 60% to 45%, 42% and 39%, and store operating margin from 30% to 22%, 18%, 14% and 10%. Since most stores run on minimum-wage staff, that drop is markups on supplies rather than overhiring.

Which lands the average franchisee back where Mrs. Fields owners already are: net take-home per store of $114,549 at Crumbl against $160,513 at Mrs. Fields, $150,000 at McDonald's, $205,000 at Burger King and $47,554 at Cinnabon. Meanwhile corporate revenue went $4M, $13M, $47M, $140M, $152M, with company margins above 30% while store margins fell to 10%.

The independents are the control group. Cookie Good in Santa Monica has run crazy rotating flavours since 2008 — Crumbl before Crumbl — and grew from $26,608 at home to $1,067,791, but its margin fell from 58% baking at home to −1% last year, because rent is what kills this business rather than ingredients or labor. Bake Some Noise answered that by refusing a lease entirely: four classic cookies sold out of a 1972 Volkswagen bus, $210,000 a year at a 35% margin — the same margin Crumbl earns as a franchisor.