Magnolia Bakery Is in Its Private Equity Era. And It's Determined to Get It Right

Magnolia Bakery Is in Its Private Equity Era. And It's Determined to Get It Right Magnolia, the 30-year-old NYC based bakery chain, is making a push into domestic franchising after being purchased by the PE firm RSE Ventures in 2021. The hardest part of franchising is consistency: a cupcake in Louisville needs to tastes like the one in the West Village. Can Magnolia and RSE do it without losing what made the brand a cult favorite in the first place? There’s an art to frosting a Magnolia Bakery cupcake. You have to turn the cupcake with one hand while shaping a “teardrop” of buttercream frosting into a perfect swirl with a metal icing wand. New hires and franchisees master the technique by practicing on 3-D-printed cupcakes at the company’s training center in Midtown Manhattan. Bobby Lloyd, who has been with Magnolia since 2006 and is now its chief baking officer, earns rave reviews from famed restaurateur, Danny Meyer: “I’m not the least bit surprised that she has had success at... Magnolia Bakery. She plays to win. I even recall her leading our team to a big win in the Great Waiters Race in Central Park back in 1988, which included carrying a silver tray holding a bottle of Evian!” By the end of this year, Magnolia expects to have 19 U.S. locations and 50 international shops. Surprisingly, about 39 percent of its retail bakery sales come from banana pudding, not cupcakes, to the tune of 2.5 million cups sold a year. Today, cupcakes account for just 16 percent of its bakery sales, with a still-respectable more than 1 million cupcakes sold annually. Some PE-backed bakeries have stumbled in recent years. Cookie chain Crumbl closed 19 stores in the past few years. Sprinkles, the cupcake shop, shut down all of its locations last year. “It’s easy to say, oh, private equity’s bad,” counters Stowe Shoemaker, from University of Nevada, Las Vegas. “Ultimately, it really comes down to the management skillset of the firm.” Is RSE the firm that drives Magnolia’s success?