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Crumbs Bake Shop files for Chapter 11 with a sweet ending

When crazes happen, smart business owners jump on board and capitalize on the new fad. As the fad slowly begins to fade or the industry changes, the companies that were part of the fad may begin to feel the effects and lose money in their business. New Jersey businesses that suffer heavy losses may find some comfort in filing for Chapter 11 bankruptcy, in an effort to restructure and get back on their feet.

At the height of the cupcake craze, Crumbs Bake Shop Inc. was in its heyday and called a breakout company by Inc. magazine. The company was known for its gigantic 1,090 calorie cupcakes that served six to eight people and cost $42. As the craze came to an end, however, the cupcake giant noticed that restaurants were reducing their cake offerings by 1 percent, compared to three years prior when the need raised by 8 percent.

As of June, Nasdaq was delisting Crumbs' stock, which could possibly cause a default on $5.1 million in unsecured notes and $9.3 million in secured. Court documents showed that two unsecured Toronto-based creditors, IA Clarington Global Tactical Income Fund and Kitchener Investment Corp. were owed $1.83 million and $1.5 million respectfully. On July 7, Crumbs closed the doors to all of its 65 locations across the United States and the District of Columbia.

After filing for Chapter 11 bankruptcy, the New Jersey-based company received word that a joint venture by Fischer Enterprises LLC and Marcus Lemonis LLC were looking to attain the company's assets. According to a statement by Crumbs, the two businesses would be lead bidders in the bankruptcy auction and look to attain the company's assets and provide financing while they were in Chapter 11. They are looking to reopen some of Crumbs' locations and even open some new ones. Filing for Chapter 11 is a great way for a business to restructure and get back on its feet, giving it a sweet ending after all.

Source: Bloomberg, "Crumbs Cupcake Chain Files Bankruptcy With Bidder on Tap", Phil Milford and Dawn McCarty, July 12, 2014

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