🍟 8/28/2023 – The Cookie Wars
The Cookie Wars
Crumbl was founded in Utah in 2017, and today boasts 893 locations open around the United States. Beyond the rapid expansion, they also (as I’ve analyzed in past newsletters) have millions of social media followers, and some fantastic unit economics on a per location basis.
There’s been a lot of debate about the longevity of this cookie concept, with franchise investors continuously asking, how long can Crumbl keep up the impressive store performance?
But I’m not here to try and answer that question today. I’m here to give my thoughts on the lawsuits Crumbl has dolled out in what’s been categorized by mainstream media as “The Cookie Wars”.
Many in the franchise community have labeled Crumbl as a “Goliath” picking on multiple “David’s” via lawsuits that are anti-competitive, and perhaps even considered predatory.
My quick take is this situation is a bit more nuanced than that, and that Crumbl has good* reason to file these lawsuits as a protective measurement for their business and all their franchisees.
For the long take, keep reading….starting with how the Cookie Wars started and where things stand today.
*Note: “good” doesn’t necessarily mean “fair”
May 10th, 2022
On May 10th, 2022, Crumbl fired the first shot in what sparked The Cookie Wars. They submitted legal documents claiming trademark infringement against two companies: Dirty Dough and Crave Cookie.
Crumbl claims that Crave Cookies and Dirty Dough have similar logos and packaging to their own, while also alleging the two businesses are trying to profit off Crumbl’s reputation and branding.
Dirty Dough’s response was to use the lawsuit as a marketing opportunity, in which the CEO went on a mini media tour via podcasts, and also put up billboards that generated lots of organic press (see below for the cheekiest of the bunch).
Dirty Dough has used the limelight to sell over 180+ franchise units, which on one-hand is brilliant, but on the other hand, possibly a bit reckless or even irresponsible (see industry veteran Jonathan’s Maze thoughts):
Regardless, as Dirty Dough’s marketing campaign hit the headlines, Crumbl CEO Jason McGowan posted an update on LinkedIn regarding the lawsuit. He said, “Dirty Dough has stolen trade secrets from Crumbl’s internal database. An ex-employee has turned over at least 643.7 MB of information that Dirty Dough had in their possession.”
There’s been numerous reports on the ongoing lawsuit, with snippets of how Dirty Dough states they’ve taken nothing that is proprietary, while Crumbl claims to feel differently. Dirty Dough has even been reported to be suing Crumbl in return for “bad faith” in the trademark dispute.
Legal technicalities aside, it’s pretty clear Dirty Dough has
copied taken inspiration from Crumbl’s marketing, branding, and packaging…
Whether or not that merits a legitimate lawsuit is one thing, but I don’t think Crumbl cares about “winning” the lawsuit.
They’re sending a message to the market: “Don’t f*ck with us, because we’ll do everything in our power to stifle your ability to be in business”.
On the surface, you might think, “damn, those guys are jerks aren’t they?”. But this is business folks. Business is war, so don’t be surprised.
It’s a good lesson if you’re starting a company, be it a franchisor, franchisee, or any other capacity: don’t expect any handouts or favors from anyone. It’s a dog fight day in and day out, so you better be prepared for anything. Plain and simple.
After all, do you think McDonald’s would play nice with upstart burger brands if they came anywhere close to ripping off their famed golden arches packaging? Absolutely not.
And if you try to remove emotion from the equation, and think about it from Crumbl’s perspective, it may not be admirable, but you might begin to understand a little bit where they’re coming from.
Let me explain….
The Explosion of The Cookie Category
Since Crumbl began franchising, they saw success almost immediately. This has led to a booming cookie franchise category, as other brands have tried to cash in on what they see as an opportunity.
Just look at the influx of new entrants (all research thanks to Krokit) that has occurred:
- Crumbl – founded in 2017, franchising since 2018
- Dirty Dough – founded in 2018, franchising since 2021
- Cookie Co. – founded in 2019, franchising since 2021
- Chip – founded in 2016, franchising since 2022
- Cookie Plug – founded in 2016, franchising since 2022
- Schmackary’s – founded in 2022, franchising since 2022
- Milk Jar Cookies – founded in 2013, franchising since 2022
- Chip City Cookies – founded in 2017, franchising since 2022
- Blueprint Cookies – founded in 2019, franchising since 2022
I’m sure there’s more out there, but as you can see, Crumbl was ahead of the game as far as franchising their concept in the modern era.
I say “modern era”, because incumbents (mainly Great American Cookies and Mrs. Fields), have been around since the late 1970’s. I’d also be remiss to not mention Insomnia Cookies, which was founded in 2003, though technically is no longer franchising even with a 240+ store count across the country.
So why does this matter as it relates to “The Cookie Wars”?
Because the greatest threat to Crumbl isn’t Dirty Dough, or any one off brand on that list.
Crumbl’s greatest threat is their own success, and the aggregate competition that success has created.
And Crumbl knows this.
Oversaturated Franchise Categories
Whenever a new franchise concept starts doing well, there’s almost always franchise competitors that begin to pop up. People see the success of the first mover, and think, “hey, if I start franchising, that can happen to me too”.
The problem is, you typically get too many franchise competitors all offering effectively the same product/service.
This makes awarding franchises more difficult, as franchise buyers have more options. But more importantly, there’s far more competition amongst franchisees vying for market share.
Nobody wins in an oversaturated market. Not Crumbl, Dirty Dough, or anyone else.
It creates pain for everyone in the short & medium term, and only the strongest will survive, albeit with battle scars. Just look at what happened with frozen yogurt and cupcake brands in the past, and what I believe is happening in boutique fitness today.
So when it comes to cookies, one has to ask, is there really enough demand from consumers to satisfy multiple new national cookie brands?
Crumbl knows that just by the sheer optionality of cookie businesses being open in different cities and towns, their average unit volume will decrease amongst their franchisees. A customer may want to go to Crumbl, but if a Dirty Dough, Crave, Chip City, etc. happens to be a 5-10 minute closer drive, then it’s very possible that they opt for convenience over loyalty on certain occasions.
So by simply opening a business that sells cookies, regardless of how good it is, it will hurt Crumbl franchisees, which in turn hurts Crumbl Corporate.
Crumbl Corporate has planted their flag, and decided they will protect themselves and their franchisees, at all costs.
To me, that’s what these lawsuits are about. As I said earlier, it may not be admirable, but there are franchisees livelihoods on the line here, and fortunes to be won and lost.
If you were in their position, would you just sit back and hope for the best? Through this lens, what’s “right” and what’s “wrong” isn’t as clear cut as Goliath picking on David.
The bottom line; business can get ugly, and this is a prime example.
Keep your head on a swivel out there folks 👀
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