Rocky Road to stardom for Gigi’s Cupcakes
Gina Butler, the founder of Gigi’s Cupcakes, has two favorite sayings: “God will provide” is one, invoked countless times, including the night before her first store opened and she got an unexpected drywall bill for $15,000. “It was the scariest day of my life. How can God provide for me? I have $33,” she remembers thinking at the time. But six years and nearly 100 stores later, she believes the question is answered.
“That’s not really my problem,” is the other, which she learned in the brutally critical music business as she chased her dream to be a country music star at night, and cleaned houses for some of the biggest names in Nashville during the day. If others don’t like what she’s doing, well, that’s on them. Can her story play on a bigger stage? Stay tuned.
Gina Butler remembers the day she thought her cupcake shop might make it. She’d been open just a couple of months and a woman came in to ask for the Scarlett’s Red Velvet —this customer had driven more than an hour to get one. But the flavor wasn’t available that day. “How dare you not have that?” the customer screamed.
“Most people would go in the back and break down,” Butler recalls, and at first she felt the same way. But then she paused. “I thought—wait a minute. People are yelling at me because I don’t have a cupcake. I started jumping for joy because,” and she raises her voice to emphasize each word, “people are yelling at me over a cupcake. Cha-CHING.”
Butler is the founder of Gigi’s Cupcakes, which she has built since 2008 to nearly 100 stores with Alan Thompson, who was the landlord for her first store, in Nashville on the famed Music Row. When she moved here, she wanted to be a country music star, and after two years of junior college had asked to take the rest of the tuition money her parents provided—$6,000—and make a demo tape instead. “I thought God would take care of me,” she says, using one of her two favorite phrases, “and I moved to Nashville on August 11, 1994.”
She would clean houses by day, including eventually for legends like Taylor Swift and LeAnn Rimes, soaking up their knowledge about making it in the music business. “They would say you always have to have something original. I knew I had to have a shtick,” she learned from them, and today she provides, whether in the form of super-thick icing on her cupcakes or well-worn stories about her background. She would waitress at Red Lobster in the evening, and then sing until 4 a.m. “I loved cleaning. I loved singing. I loved to work,” she says, but she struggled every day. “I never had any money.”
Gigi’s Cupcakes has new management, new investors and a new store design that showcases products in addition to cupcakes, which execs believe will help it grow to 250 stores and beyond.
She also developed the world’s thickest skin. The music business “is the most brutal,” she says. “Every day you’re being criticized for how fat you are, how your voice isn’t good enough. Every day you are kicked around. From seven to 32, that’s what my life was,” she says, referring to the age she first felt called to become a performer, to the age she gave up her music career and hit rock bottom. “I didn’t want that dream to go because it was all I ever had. I felt like a failure,” she says today. “The path of righteousness takes some turns. You get bounced off sometimes.”
But one day she was cleaning a bathroom for a client—at least, that’s how her story goes, even though it seems too good to be true—and got a call from her brother Steve, who was visiting one of New York’s newly popular cupcake shops made famous on the TV show “Sex and the City.” Gina’s cupcakes were better than those, and she should open her own shop, he urged. “I would lay in bed at night and say, ‘Lord, challenge me,’ and God heard me and said OK—open your cupcake shop,” she says. She decided to try. “What could happen? I could fail but I’ve failed before.”
She went to four bankers. “They literally laughed. They said no, absolutely not.” She took a $100,000 cash advance from three credit cards, one with 18 percent interest, one with 11 percent and one with 8 percent. She started baking 12 dozen cupcakes each night for clients whom she said would “feel sorry for me” and give her an order.
Then she set her sights on a vacant restaurant, 1,000 square feet, and called the phone number on the sign with a business plan for a store that would sell 750 cupcakes a day. The landlord was Alan Thompson, who also turned her down at first, but then couldn’t get rid of her, he recalls with a laugh. “She said, ‘God told me this is where I’m supposed to be,’ and I said, ‘Great, now I’m pissing off God.’” He called a friend for advice. “This girl is driving me crazy. The friend said, ‘Can you make money at cupcakes?’ I said, ‘I don’t know but if anyone can, it’s this girl.’ ” Today that store sells 750 to 1,000 cupcakes a day, Thompson adds, and Butler sits atop a franchise brand on the cusp of major growth.
Armed with $2 million in capital raised from two private investors, and with new titles for all the principals—Butler is now chief brand officer and Thompson is CEO, Gigi’s Cupcakes has just signed its first international deal to develop up to 100 stores in South Korea. It’s targeting Houston as its first ‘A’ market, unlike the smaller, Southern cities that have been its bread and butter to date. “A key to this was Gina and I recognized we’re not the talent to get it to 250 and above,” Thompson says, referring to unit count. “We’re going from an entrepreneurial company and we’re growing up.”
Chad Fitzhugh officially joined Gigi’s about a year ago, brought in to help with projects and eventually signing on as chief financial officer. He’s just added president to his title after Thompson assumed the CEO title from Butler. “It’s amazing that Alan and Gina have been able to grow to almost 100 stores without the proper capital,” Fitzhugh says.
“I’m not wishy-washy,” says Gina Butler, who has built Gigi’s Cupcakes to more than 95 stores and just signed its first international deal, in South Korea. “I’m a stickler for recipes, for beauty, for cleanliness. I can’t stand a dirty store.”
He won’t reveal the investors’ names because they prefer to stay private, but he’s confident Gigi’s Cupcakes is well capitalized “for now.”
They’re building up the team and the infrastructure, including adding an executive who ran cafes for 600 Barnes & Noble bookstores, and an operations chief who helped the brand save significantly on commodities like sugar. Food costs that were 27 percent have dropped by 3 percent in recent months for one of Thompson’s stores, he says, even as commodity prices in general have risen.
Fitzhugh, who worked for O’Charley’s and then for a real estate development company, is bullish about Gigi’s first deal outside of the United States, in South Korea, where master franchisee Sung Shin-je has signed on to open up to 100 stores. Shin-je was the master franchisee for Pizza Hut in South Korea and opened more than 50 locations there.
Fitzhugh is also eager to unveil a new store design that includes a full bakery case. “We have great lighting in those cases. Our cheesecake is a really good product, but we didn’t have a good way to showcase those because we didn’t have refrigeration. But now we can.” Thompson says they have a backlog of 12 stores to open, which they delayed until the first quarter of 2015 so they could use the new design.
During our visit, in July, Crumbs Bake Shop had just filed for bankruptcy protection and was later scooped up by the owner of Dippin’ Dots, Fischer Enterprises. Stories of the demise of the cupcake craze were everywhere in the press, but those tales don’t faze Gigi’s execs. “They don’t have a story. They don’t have you,” Thompson says, speaking to Butler. “They focused entirely on cupcakes, but we have a strong product development team. You’d be amazed at the quality. We’ve realized we have to diversify.”
Fitzhugh rattles off some numbers. The average investment for a Gigi’s shop is $225,000 to $250,000; average unit volumes are in the $400,000 range. Cost of goods is 25 percent; labor is 25 to 30 percent; and return on investment is 20 to 25 percent, meaning you get your investment back in four to five years. “In my store, I made enough profit to make it back in one year,” Thompson says.
Yet he still gets asked: Cupcakes—really? “Every single day,” Thompson says, but he dismisses the question. “It was 1995 when the cupcake craze took off. We’re almost 20 years into it, so I don’t know when they’ll quit saying that.” Adds Fitzhugh: “For us, cupcakes is not a fad.”
Nor for Butler, who seems happiest when she puts on her apron, gets in the stores and starts pushing cupcakes. This day we’re visiting her Franklin, Tennessee, store, and as she poses for the photographer, she frets that we’re taking up space so customers can’t place their orders. She poses like a pro, then stops to ask her manager to take care of a patron, then assembles a giant platter of treats and insists we all taste every one, guaranteeing a sugar coma for the rest of the day.
Butler says she allows herself only two cupcakes each week, after gaining and later losing half her body weight when pregnant with her daughter. For the other countless taste tests each day, she spits out the bites like a wine taster. “I gained 65 pounds while pregnant and have to tell myself every day, ‘Lord, let me be good today,’ ” she says.
Butler is a single mother to her daughter, “the best thing I ever made,” she says, and she’s applying the no-nonsense ethic she learned growing up to raise her. Raised on a small farm in California, her father worked five different jobs and she herself started her own cleaning business at age 15. She deplores the lax parenting methods she sees around her in wealthy Franklin County, Tennessee, where people routinely buy their teenagers brand-new cars. Her girl, now 3 years old, will find otherwise. “If she needs extra money, she’ll be in the store schlepping cupcakes. This is a team effort. Get to work,” Butler declares.
Gina Butler will gain fame this year for her role on “Undercover Boss” on CBS, which started December 14.
“On a farm everybody has to pitch in,” she says. “You don’t say, ‘Where’s my allowance?’ What do you mean allowance? There’s no allowance. Get your butt out there and feed the pigs.” Butler took a different route to earn money, buying some buckets and mops and starting a cleaning business. “I walked a mile to an assisted living facility and knocked on doors,” she says. Home construction was booming then, so she decided to become a commercial cleaner and went to the job sites. “They said, ‘Who’s this little girl?’ I didn’t know how to bid,” and she’d accept $100 a house. “I’d get in there and say—hmmmm, I underbid this.” And she learned to deal.
“I’d say, ‘Let me think about that.’ I’d come back with the facts and say, ‘I’ll do it for this.’ I didn’t go to business school, I went to the school of hard knocks.”
Today she’s exacting about her franchise, whether rolling out a new schedule for cupcakes—Scarlett’s Red Velvet will be on the menu every day, she vows—conducting “Gigi’s swirl training” for franchisees, or personally meeting each prospective franchisee, a practice she won’t admit may not be sustainable. “I’m not wishy-washy,” she says. “I’m a stickler for recipes, for beauty, for cleanliness. I can’t stand a dirty store.”
Butler herself marvels at the lengths she’s traveled, from desert farm to house-cleaner to country singer to entrepreneur, to her just-announced role on CBS’s “Undercover Boss” Season Six. She doesn’t hesitate to give credit where she believes it’s due. “People will think it’s trite: ‘Oh, she’s doing the Lord thing.’ But honestly, all I can tell you is my path and what God has done for me. I know if God can create something beautiful out of 33 bucks and a broken-down country singer—I’ve lived a miracle,” she declares. “Call it trite, but if you’ve lived it, it’s not trite.
“When we go to the big city and go global, I don’t know how people are going to take it,” Butler adds, and then she delivers the second of her two signature lines, learned in the rough music business. “That’s not really my problem.”
Thompson is confident Gigi’s Cupcakes will hit the big-time. “She came to Nashville to be a star,” says Thompson about Butler. “And she’ll make it, just in a different way.”