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Cupcake Wars: Two Divorces, Two Mortgages, and a Bunch of Damn Good Cupcakes

By Will Yacowicz | Small Business

As a child in France, Elfie Weiss became a famous actress by age 6 as the host of national French children's TV show "Recre A2."  In 1989, she moved to L.A. to make it in Hollywood. Her career fizzled. So did her 14-year marriage. Newly divorced and jobless, the single mom took on a $150,000 mortgage to buy an old bakery business in an 825-square foot rented space on South Centinela Avenue in 2006. There she founded the cupcake company Hotcakes Bakes. Weiss was not a trained baker, nor a business woman, but she knew she had no choice but provide for her son and continue to pay back the bank. She took no salary, lived on credit cards, and ate at her friend's house every night for four years.

But her shop was close to many Hollywood studios, and slowly but surely the stages began calling for catering orders, and soon she was making cupcakes for the likes of Ron Howard, Quincy Jones, and Arnold Schwarzenegger. She landed gigs like catering the Grammys and Emmys each year. Still, her big risk--betting her home and financial stability on her business--paid off only after winning the Food Network's Cupcake Wars in 2009, which helped her gain notoriety and a massive influx of customers. In 2012, she bought the building in which she was renting. Last year, Hotcakes pulled in $1.4 million in revenue. This year she is expanding to five locations. Weiss told her story to Inc.'s Will Yakowicz.

 

Elfie Weiss and her CupcakesElfie Weiss and her Cupcakes

 

In 2005, I was a single mom in the entertainment industry, I was struggling and my son was four years old. To help make money, I used to bake at home. My dad was a good baker in France, so all my life he had taught me what he knew . Shortly after my divorce, my mom told me: "You didn't go to college, so you have two choices right now. You can go into the food business, because people will always need to eat, or you can go into the baby business because people will always make babies."

I decided to go into the baking business. I wanted to open a bakery--at the time in Los Angeles, there were only a few bakeries. The problem was that I had absolutely no money and no financial support. I was fresh from a divorce, and I was only getting $500 in child support each month. The only asset I had was the house, so a friend told me to use the house. He took me to the bank, told the banker I would need a $150,000 line of equity on the house and they gave it to me just like that because I had good credit.

That's how I got capital to launch my business, but the thing was that I knew nothing about business. Knowing how to bake is very different than knowing how to make money with a bakery. As an actor my whole life, I was bad at math and didn't understand the first thing in running a business. In March 2006, I found a bakery for sale, the people wanted $650,000 and I said O.K. and wrote them a check without negotiating. I was naive. Within the first few months, the city closed the street for an entire year for construction. It was a ghost town. We would make $80 a day. Every day, I would get to the bakery at 5 a.m. with my son sleeping in the back and work until 8 a.m. to drive him to school and come back for the rest of the day. It was really hard, and I would have never done it if I knew what I was getting into. The one positive thing was that what I made was good, so I would give out my cupcakes to people, celebrities, and cater for charities. Little by little, people realized that Hotcakes was good.

'I ran out of money'

About a year in, I totally ran out of money because I was doing so much for free. I was paying my house's property taxes and buying groceries on my credit card. We ate at my best friend's house every night for dinner those first four years. We made enough to pay rent and keep the lights on and when I couldn't, my parents would pay the interest on my mortgage. My dad took off work in France and came over to help me bake for six months. Without capital for marketing or advertisements, I decided to do every charity event I could. In 2008, I catered a charity campaign called PS Art, which puts art up in poor neighborhoods. I donated 1,000 cupcakes and pastries, which landed me on their website. While I was there, I met someone who was doing desserts for the Grammys and ever since then I have catered the Grammys and Emmys each year. Slowly, the studios started to call. Ron Howard would make orders all the time. I have served Arnold Schwarzenegger, [Los Angeles real estate developer] Rick Caruso. Little by little, I gave as much as I could. Eventually, people started to come.

Cupcake Wars

In September 2009, producers came to me and said they wanted to start a pilot called "Cupcake Wars" they were pitching to the Food Network and asked if I wanted to do it. I said, "yes, of course." After winning the Cupcake War, my business changed completely. Since it was the pilot, I didn't win the $10,000 people get now but I was on national television. All of a sudden, I was flooded with orders and my shop was filled with people. My business finally passed the pump and we were making $1,000 a day, then $2,000 a day, and then $4,000 a day. After this, I was able to pay off my $80,000 credit card debit and pay back the bank.

Throughout the tough times, I would trade services with other professionals. I couldn't pay my accountant, so I told him I would make cupcakes for all of his Christmas presents and cater parties. I would cater for legal advice and other services I needed. I would rent out our guest house to pay for the mortgage. Somehow, I was never in the red in my business. I managed to pay the rent and pay the bills each month. There was 50 cents left over the first few years, but at least creditors weren't knocking on my door. For five years, I had a knot in my tummy because I had no idea what I was doing and didn't know if it would even work. I deflected the risk from my business to my personal life--I made sure the business was all paid but it made everything else suffer.

More Mortgages

I was married again for two years, but just got divorced in June. That meant I had to give up my liquidity. Before the divorce, I had made enough money to buy the building I had been renting space in for 10 years to expand my business. I bought the building in 2012, but I had to wait to get another mortgage and expand after the divorce. I got the second mortgage for $300,000 four days ago.

Now we're finally ready to expand the store across the entire ground floor. I hired Karim Bedda, who had two bakeries in France and is an expert bread maker, as the executive chef. He's also my partner in our bread company Bitchin' Bread, which we're creating to expand our menu and offerings to lunch and sandwiches. I also am planning to open five dry locations across LA, which will not have kitchens but get deliveries from our main store. I am also meeting with investors to expand nationally.

Now that I made it through the risk, we are successful. Two years ago was the first year we hit $1 million in revenue. Last year, we made $1.4 million. Although I had to take a second line of equity on my house, we're in a better place as an establish brand and a solid 10-year-old company.

The funny thing is that I am not a baker. I know how to bake a couple of things, but that doesn't make me a baker. At the core of it, I'm an entrepreneur. As a little girl, I would imagine I was in a big office in Manhattan, sitting on a swivel chair in the top floor. To be successful, you have to take risks, but you also have to be extremely resilient and extremely positive.

 

Read More:

Family Business Is Risky Business

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