Baked Bros was a rapidly expanding bakery chain known for its artisanal breads, pastries and sandwiches. Founded in 2008 by childhood friends Lucas Smith and Noah Wilson, Baked Bros grew from a single shop in Portland to a regional powerhouse with over 50 locations throughout the Pacific Northwest. However, in 2021 the company filed for bankruptcy, shuttering all of its stores seemingly overnight. What happened to this once promising bakery chain and fan favorite?
The exponential growth of Baked Bros
Baked Bros was founded on the principles of using high quality, locally sourced ingredients to create handcrafted baked goods. Smith and Wilson believed deeply in traditional baking techniques and refused to cut corners. This artisanal approach quickly caught on, and the first Baked Bros bakery in Portland gained a cult following. Patrons raved about the rustic sourdough loaves, flaky croissants, and creative sandwich combinations featuring seasonal, fresh ingredients. The Baked Bros brand was built on customer loyalty and word-of-mouth marketing rather than large advertising campaigns.
Impressed by the success of their first store, Smith and Wilson began expanding Baked Bros in 2011. They introduced new product lines like pies, cookies, and gluten-free items to appeal to more customers. To fuel growth, Baked Bros took on its first round of investor funding in 2012. With more capital available, they accelerated expansion throughout Oregon and into Washington. By 2015, Baked Bros had grown to 15 locations with over 200 employees. Revenue tripled from 2014 to 2015.
This breakneck growth continued until Baked Bros peaked at 52 locations in 2019. The company expanded as far south as Eugene, Oregon and as far north as Seattle, Washington. They even branched out into packaged goods like bread loaves and granola sold in grocery stores. However, the rapid expansion came at a cost. Keeping quality and service consistent across so many new stores and employees proved challenging. Some baked goods and sandwiches failed to live up to the original Baked Bros standards that customers were accustomed to.
Trying to balance rapid growth and quality
Baked Bros grew from a scrappy startup to a regional player in under a decade. However, the rapid expansion strained company resources. With so many new stores and employees added in a short timeframe, it became difficult to maintain operational excellence. Customer complaints started to rise about inconsistent product quality and service.
Behind the scenes, the company culture was also changing. The intimacy and collaboration of the early days as a small business gave way to miscommunication, turf wars, and “siloing” of departments as Baked Bros scaled into a corporation. Supply chain and inventory management struggles emerged. Waste increased as stores over-ordered perishable ingredients that went bad.
Founders Smith and Wilson were committed to preserving the artisanal standards that defined Baked Bros. However, they disagreed on how to balance rapid growth with quality. Wilson wanted to slow expansion and focus on perfecting operations and employee training. Smith pushed for more aggressive growth targets, arguing that the economies of scale would lead to profitability.
Failed attempts to remedy issues
Baked Bros tried several initiatives to fix rising quality issues without sacrificing expansion plans, but these fell short:
- A facility was built to centralize bakery production and distribution. But it failed to consistently replicate the small-batch recipes and techniques.
- Employee training programs were developed to onboard new hires faster. However, high turnover rates undermined their effectiveness.
- Smith hired executives from major chains like Starbucks to professionalize operations. Longtime employees resented these outside hires.
- Wilson tested new quality control procedures at certain stores. But compliance was inconsistent across the broader chain.
While Baked Bros continued expanding, the underlying operational and cultural issues festered. Customer complaints ticked up as quality became more uneven. Behind the scenes, employees were burning out from the breakneck pace and high turnover. Supply chain costs ballooned from inefficient distribution and over-ordering. The rapid growth was not generating the efficiencies and economies of scale that Smith expected. Baked Bros was expanding faster than it could keep up with.
The beginning of the end
Despite Baked Bros’ ongoing struggles, investors continued pouring money into the rapidly expanding chain. However, in 2020, a perfect storm of challenges hit that would ultimately take down the company:
Pandemic impacts
The COVID-19 pandemic changed customer behaviors and severely impacted the restaurant industry. Dine-in traffic plummeted, especially in Baked Bros’ urban cafes. Catering and wholesale accounts dried up. Supply costs rose and finding staff became harder. These external pressures further strained Baked Bros’ already precarious operations and finances.
Changing tastes
The artisanal bakery segment grew more crowded with new competitors. Fast casual chains like Panera captured market share. Sourdough bread trended down in popularity after peaking early in the pandemic. Baked Bros failed to adapt its recipes and menus to evolving consumer preferences.
Leadership stalemate
Tensions between founders Smith and Wilson reached a breaking point. Wilson demanded a moratorium on new stores and a comprehensive revamp of quality assurance protocols. Smith ousted his co-founder from daily operations and doubled down on aggressive expansion plans. Removing Wilson’s expertise further damaged morale and operations. This leadership stalemate exacerbated existing issues.
These body blows accelerated Baked Bros’ downward spiral. Monthly same-store sales declined by double digits in late 2020. Foot traffic kept dropping. Waste, costs and complaints went up as quality and service suffered. The growing problems were apparent to employees and customers, but not sustainable solutions were implemented.
Bankruptcy and failure
In June 2021, Baked Bros shocked the industry by filing for Chapter 7 bankruptcy and permanently closing all its stores. Liabilities were estimated at $32 million against just $18 million in assets. Hundreds of employees were suddenly unemployed. Gift cards and loyalty rewards were erased. Bakery and cafe shelves were emptied as inventory was liquidated.
How did this beloved, booming bakery chain fail so quickly? Industry experts argue Baked Bros expanded too fast without building an operational foundation to maintain standards consistently across all locations. Employee training did not keep pace. Supply chain logistics cracked under pressure. Devoting resources to rapid expansion came at the cost of nurturing the culture and quality that defined the brand. When co-founder Wilson exited, the heart and soul of Baked Bros went with him.
Other analysts blame Baked Bros’ unwillingness to adapt to changing consumer tastes. The core product lineup changed little even as sourdough fatigue set in. Competitors proved more nimble and reactive to diners’ evolving preferences. Once the pandemic hit, Baked Bros’ weaknesses were fully exposed. The balance sheet could not withstand the supply chain blows and shift away from in-person dining.
Ultimately, Baked Bros collapsed under the weight of overly aggressive expansion, reduced product quality, leadership conflicts, changing consumer habits and unprecedented external shocks. The company grew bigger but lost sight of its artisanal foundation. When crisis hit, the infrastructure was too fragile. No turnaround was possible.
Could the failure have been prevented?
Several actions may have helped Baked Bros avoid bankruptcy:
Focus on sustainability over speed
Growing slower with a maniacal focus on company culture, quality training and operations excellence could have built a solid, stable foundation for future expansion. The breakneck pace of new store openings exceeded Baked Bros’ capacity.
Maintain core product integrity
Guarding Baked Bros’ artisanal standards and small batch baking techniques could have prevented the quality erosion that dimmed brand reputation. Customers wouldn’t have abandoned stores with inconsistent experiences.
Listen to early warnings
Co-founder Wilson raised concerns about expansion years before the bankruptcy. Proactively addressing his warnings on quality, morale and mismanagement could have steered Baked Bros in a more sustainable direction.
Watch competitive landscape
Tracking consumer preferences and rivals’ moves would have allowed Baked Bros to retain relevancy through menu innovation and refreshed recipes. Complacency during the sourdough fatigue led to lost sales.
Strengthen crisis readiness
Aresilient supply chain, ample liquidity and leadership contingency plan could have helped Baked Bros weather the pandemic’s demands more gracefully. The existing infrastructure had no capacity to absorb external shocks.
While overexpansion and growth strategy missteps put Baked Bros on the brink, earlier course-correction and crisis preparation may have saved the chain. Tighter focus on core competencies and responsiveness to internal and external signals could have steered Baked Bros in a more sustainable direction.
Baked Bros’ legacy
At its peak, Baked Bros operated over 50 stores with 500 employees. Though the rapid expansion was ultimately its undoing, the chain left a lasting impact on the Pacific Northwest’s culinary scene. Here are some of its most notable achievements and contributions:
Sourdough popularity
Baked Bros helped catalyze the artisanal sourdough craze that swept through the region starting in the 2010s. Their signature crusty loaves inspired many home bakers to try their hands at sourdough starters.
Spotlight on local ingredients
The chain partnered with area farms, creameries and food artisans to source ingredients. This created a steady revenue stream that helped small producers thrive and expand.
Cafe culture hub
Baked Bros cafes became go-to neighborhood spots to relax, work, and meet up with friends. Patrons built community over Baked Bros baked goods and coffee.
Bakery education programs
To help underserved youths, Baked Bros ran bakery skills education programs to provide career opportunities. Graduates often were hired by the chain or other area bakeries.
Inspired similar businesses
Other small bakery-cafes replicating parts of the Baked Bros model still thrive today and carry on parts of its legacy in the region.
Though its dramatic expansion and bankruptcy capture headlines, Baked Bros’ role in nurturing local communities and spurring an artisanal baking movement remains its lasting positive impact. The chain grew too fast and ultimately failed, but its legacy still enriches the region’s culinary landscape.
Could a comeback ever happen?
Is there a chance the Baked Bros brand could resurrect in some form? Industry experts are skeptical of any imminent revival. The company burned through significant investor capital over the years. Liabilities like unpaid rents and vendor bills still loom. Founders Smith and Wilson have not signaled any reconciliation. Relaunching a bankrupt brand also poses marketing challenges.
However, nostalgia for Baked Bros remains strong in the Pacific Northwest. Former employees and loyal customers still mourn the loss of their favorite bakery-cafe chain. If funded smartly with realistic growth plans, a modest Baked Bros revival focused on artisanal quality could potentially garner enough community support to work. This is especially true if the company can pivot to a more resilient business model less dependent on indoor dining. Any comeback would hinge on rebuilding consumer trust in the brand’s reliability and quality.
Baked Bros still owns certain assets like brand names, recipes, and trademarks that offer a launching pad. But massive liabilities and burned investor relationships must be overcome. Still, sound leadership from someone passionate about preserving Baked Bros’ original craft baking standards and local community ties could inspire a grassroots return. The company may be bankrupt currently, but don’t count the brand out forever.
Key takeaways
Here are the big lessons from the rapid rise and fall of Baked Bros:
- Growing too fast can kill even hot brands if the operational foundation cracks under expansion pressures.
- Consistency in product quality and customer service cannot be compromised amid rapid growth.
- Leaders must balance speed with building sustainable infrastructure and company culture.
- Brands must continue innovating their core products as consumer tastes evolve.
- Nimble responses to market trends and external shocks determine survival.
- The most beloved brands mean little without passionate leaders committed fully to the original vision.
Baked Bros provides a cautionary tale of uncontrolled growth without the infrastructure to maintain standards. But beloved brands can sometimes rise from the ashes if company leaders learn from past mistakes. Only time will tell if Baked Bros can recover and achieve a comeback.
