Business Spotlight: A Rush on the Sugar Market

Last edited 3:34 p.m., Dec. 10, 2012

Kim Wheeler remembers when the green box passed the threshold of the conference room, and people looked up and went wild. They reached over tables, and ducked under the tangles of laptop wires and phone chargers. She remembers turning to a friend as 60 people – a mix of FedEx marketers and Information and Technology workers four days into planning a multiyear integration project in Memphis, Tenn. – all got up for an unscheduled break and asking what could possibly be in the boxes.

Cupcakes.

Two years later, Wheeler runs Gigi’s Cupcakes of Springfield, where the back room is filled with the same green boxes, and the 400-count glass displays are filled with cupcakes. After seeing firsthand how people reacted to the brand and spending a few months researching the company in late 2010, the marketing professional signed a franchise agreement with Gigi’s Cupcakes in April 2011. By September, the Battlefield Marketplace store opened at 900 E. Battlefield Road.

But the 7,000 cupcakes Wheeler sells each month are but a fraction of the whole. In the 76 Gigi’s locations across the country, about 40,000 cupcakes are sold every day, according to the Tennessee-based franchise company. In the nearly five years since founder Gigi Butler opened the first store in Nashville, Tenn., the company has exploded, collecting $20 million in revenue systemwide in 2011. Each month, Gigi’s president Alan Thompson says the company receives about 100 franchisee inquiries. Of those, maybe two or three get the green light to move forward.

Visible mostly as ziggurats of sculpted icing, the cakes in Wheeler’s store have names such as Wedding Cake, Miss Princess and Midnight Magic. Those recipes, just a few of the 30 currently in rotation throughout the week, are standard across the board, made from a cookbook handed down by the franchise headquarters.

According to Gigi’s website, the typical store opening requires about $225,000, including the $35,000 franchise fee. Once operating, franchisees pay 4.5 percent monthly royalties and a 2 percent marketing fee.

While the Springfield store adheres to certain franchise rules and systems in place, Wheeler says she puts her local imprint on Gigi’s via interactions on the store’s Facebook page and community outreach.

In the store, sitting at one of the window-facing stools, a young girl is shoveling fork-sized mounds of the sweet stuff into her mouth. Wheeler speculates it might be a reward, something she says spans all ages. The store, which also does catering and special orders, sells individual cakes, which seem to go mostly as treats. Kids receive them after getting haircuts down the strip center. Adults usually a day or two into the workweek are swinging in for one on their lunch breaks.

It’s something Amy Stokes, an assistant marketing professor at Missouri State University, says seems to have resisted the economic downturn. As people have cut back on their budgets, the smaller, comfort luxuries haven’t felt the effects quite as much.

“What we’ve seen in this recession is that consumers, while they may be giving up their larger purchases or they may be prolonging time between making big purchases, they haven’t really been willing to give up the small little treats that don’t hit the pocketbook real hard,” Stokes says.

Gigi’s isn’t the only place making a rush for the sugar market. In Springfield, other specialty shops such as Star Cake, Alexandria Cupcake Cottage and The Cake Pop Co. are after the same piece of pie. Of course, there are some recent casualties of the dessert market, with closings by frozen treat shops Cherry Berry, Fria and Gelato Mio.

“When you have a fad, you have something people are jumping on,” says Denise Alvarez, marketing manager for Springfield-based trade association Retail Confectioners International. “Just like anything else in the free market, the successful ones are going to stand up during the test of time.”

While leaning on the branding of the Gigi’s franchise, Wheeler is focused on expanding into Branson, where she invested another $10,000 to open a store Nov. 7 at Tanger Outlet Mall off of Highway 76. Wheeler, who declined to disclose first-year Springfield store revenues, says the Branson store follows her five-year plan.

All cupcakes are baked in Springfield, where Wheeler employs 11, and the sweets are shipped to the Branson store each morning and frosted by the crew of four employees there.