248 Broome Street
Lower East Side
When Erin McKenna was diagnosed three years ago with allergies to wheat and dairy and she decided to give up sugar, all she really wanted was a cupcake. Magnolia was off-limits, along with just about every other bakery in New York City. So she decided to open her own. “I wanted it to be really adorable and scenic and big on atmosphere,” says Erin, a California native, now 30. “A destination place.”
BabyCakes was born in August, a button-cute shop dominated by a clanging vintage cash register. Erin, an aspiring stylist, put the word out to well-connected fashion friends, and before long, her vegan treats had a following among customers of all dietary persuasions.
Behind the brisk business and gee-whiz décor, however, lies a tale of trial and error. Erin got a deal on a Broome Street storefront but made the mistake of signing her lease before a $120,000 bank loan came through. It didn’t. Milking her mother’s life savings and calling every well-to-do friend she could find, she ended up with $12,000, just enough to open her doors and keep recruiting investors (she has nine now). She says she’s not in debt, but she is one plumbing problem away from disaster (or a tenth investor).
She keeps staffing costs low by logging twelve-hour days. Her assistant baker got 5 percent of the company for a summer’s free labor and now receives $600 a week. Erin’s youngest sister works full time for $500 a week. All are paid in cash. (“What are books?”) Erin designed the staff uniforms herself ($125 each).
Stitching together a profit has proved more difficult. She says she’s $500-a-month shy of breaking even, owing to high-cost ingredients like cold-pressed coconut oil and agave nectar. It costs her $2 to make the cupcakes she sells for an average of $3; a healthier markup would be 100 percent. Coffee is more profitable with a 500 percent markup, but BabyCakes is equipped to sell only a few cups an hour. Her shortest route to a windfall is heading into wholesale, but she says it won’t happen “for the next five years.”