Cardmember Profile: CakeLove

It’s a bright spring day on the waterfront of Baltimore’s famous Inner Harbor, but it’s not just the sun that’s bringing a smile to the faces of the patrons of a light, airy and funky food emporium on Boston Street. Foodies scan the rows of cupcakes in mouthwatering combinations (just a taste: chocolate-raspberry, strawberry-vanilla, lime-lemon). Also on display are formidable strawberry layer cakes oozing buttercream icing as well as a particularly lethal-looking chocolate-and-ganache concoction, aptly named My Decadence. The customers’ rapturous expressions tell a simple story.

We’re here at CakeLove, to meet 38-year-old Warren Brown, the company’s charismatic founder and CEO. “People associate cake with celebration, good feelings, and memories,” he says, as a white-haired woman practically skips out of the shop with a large slice of Cynthia’s Sin (a delicious combination of chocolate, caramel and peanut butter). “It’s a really rewarding thing.”

It’s certainly proved so for Brown. Since CakeLove’s founding in 2002, he’s opened five locations, plus a café – named the Love Café, naturally – in the Maryland/Virginia/D.C. area (a sixth location, in National Harbor, Maryland, will launch later this year). He has won numerous accolades, including D.C.’s Small Business Person of the Year Award in 2006, published CakeLove: How to Bake Cakes from Scratch, and has a Food Network baking show called Sugar Rush. Oprah has lauded him, but his most glowing testimonials come from the kids he teaches in his Introduction to Baking classes held at his Silver Spring, Maryland, location (“Your cakes were so good, I wanted to marry them,” six-year-old Shauna, wrote, enthusiastically, in the class guestbook). Brown is inclined to downplay his achievements, however. “I’m offering what’s already well-known, but I’m just making it a little better, by using the freshest ingredients,” he says. “It’s not revolutionary, it’s back to basics. But hopefully I’m getting people fired up about food.”

Brown has always appreciated the feel-good factor in food. He grew up outside Cleveland, Ohio, where, he says, “My mom always encouraged us to cook, and I really felt a sense of accomplishment in producing a family meal. With baking, in particular, you kind of surrender yourself to the process; the preparation and presentation is so meticulous.”

Brown’s real cake epiphany came when he was ferrying one of his homemade chocolate offerings to a family-reunion dinner back in 1999. “People at the airport, complete strangers, were coming up to me and practically cooing over this thing, saying, ‘You made this from scratch?’ ” he recalls. “It was like having an adorable child or puppy in tow. I was getting the same reaction on the plane, and I’m thinking: OK, if this is what happens with one cake, what would happen if people were encountering whole shelves of them?”

At that point, Brown was laboring at what he calls “a job I didn’t really like” – after earning a B.A. in history at Brown and a Master’s in public health from George Washington University, he’d become a litigator in health-care fraud. “I was just out of law school, I’d just broken up with my girlfriend, and I was one of millions of lawyers in D.C.,” he says. “I felt I had more to offer, so I found myself considering the bakery idea really seriously.”

With faith that if he baked it, they would come, Brown started producing seven to 10 cakes a week out of his apartment, in tandem with his law practice – a baking/litigating workload that brought on an ER visit for exhaustion. With momentum building, he took out a $125,000 bank loan and opened his first CakeLove – with the apt motto: “Cakes from Scratch” – in D.C.’s up and coming U Street corridor (Brown is a proponent of urban economic development and looks to make an impact where he can). It set the template for the CakeLove empire: an interior that’s both compact and airy, where customers can order personalized cakes and watch the layering and icing process in action. Enthusiastic and knowledgeable staff proudly wear CakeLove T-shirts – “Make CakeLove Not War” being a particular favorite. “The first shop took off almost immediately,” says Brown. “But I knew it could if I stayed focused and did it right. Because of my relaxed attitude people underestimate how much this whole venture was calculated. My idea was to focus solely on cakes. They have the best margins, so why waste your time on other things?” (For this reason, he says, he won’t be opening another Love Café, which sells sandwiches and savories alongside the cakes: “It’s too complicated and it dilutes the brand.”)

Growth has come at a moderate pace – Brown opened one new CakeLove location a year for the first few years, with the last three coming in the last nine months – and, so far at least, his product seems impervious to economic teetering. “Our core customers don’t regard cake as a luxury; they regard it as an essential part of their lives,” he says, grinning. “I’m amazed by the breadth of the customer base – we get young and old and all shapes and sizes, and when they find a cake that’s good they’ll not only come back for more, they’ll pass the word on. Most of our exposure, and the other opportunities that have come my way like the TVshow, are all due to word-of-mouth.” Perhaps people are also responding to the green values that Brown espouses; three of his stores and his office are powered by electricity generated from wind turbines (“I’m looking to get more heavily involved in wind-power as the business grows,” he says), while recycling of glass and cardboard is mandatory, and customers are (gently) dissuaded from using plastic bags.

Brown doesn’t give out any financial figures for the business – “Let’s just say we’re profitable, and the bank likes us,” he says archly – but he concedes that he’s now got the base he needs to continue to grow – if that’s what he wants. “People say, ‘Oh, you should grab money from a rich investor and add 700 stores in five years,’ ” he says with a smile. “I’m not compelled to try that. I want to keep the company in my own image, to have my own recipes, my imprimatur on it,” says Brown. “I’d like CakeLove in places across America, beyond its borders, even, but I want to keep the quirky feel. It shouldn’t get too ubiquitous; it should be a place that people feel they’ve discovered.” He shakes his head. “Growth is a challenging thing, particularly when food and gas prices are killing us. We’re having to raise our prices, which makes me more cautious – instead of opening another four to six stores next year, I’m thinking it might be just one. At this point, I’m finished with major cash outlays. I’d rather people came to me.” He adds with a grin: “After all, when you don’t grow is when you can actually enjoy the profits.

Whatever the future holds, Brown’s already proud of what CakeLove’s achieved. “My sister says I sell memories,” he says, taking a nibble on a cupcake. “Most people taste this stuff and they’re right back to their childhoods, birthday parties, good times. Making them happy makes me happy. So, whether we have seven stores or seven hundred, I’m confident that we’ll be sticking around.”

Plateau considerations

Mature companies have iced the process of providing value to customers; now the business should be tuned to meet the needs of the owner. Consider the following points if your business has reached plateau stage:

1. Restructure finances for cost savings. — A mature business is in the enviable position of being “bankable.” Take advantage of this by locking down lower rates and seek bigger credit lines.

2. Withdraw some cash. — Use the improved financial structure to move some cash into your personal life. It’s about time the business started paying you back for your original investment… with interest.

3. Negotiate with vendors. — With size comes privilege. Now is the time to step back and reevaluate your purchasing power. Go for better pricing and longer payment terms.

4. Invest in efficiency. — Improve your technology and upgrade your equipment – but only where it will have an impact on efficiency. Try to centralize and consolidate processes where possible.

5. Save where possible. — Build a war chest for future growth and acquisition.

6. Position for exit. — Is the business the best size to interest a strategic buyer? Find the optimal size and benchmark your financial performance against recent acquisitions, competitors or industry leaders.

7. Think about succession. — To whom will you pass the business? Start grooming a lieutenant now. Build a trusted team of managers who can run the place without you.


From OPEN Book: A Practical Guide to Financial Planning Download the full PDF.