It's early afternoon on the Lower East Side of Manhattan, New York, and Erin McKenna’s Bakery is buzzing. The cozy, little shop has pink walls, Christmas lights, knickknacks and, of course, desserts — a glass case with rows and rows of vibrant cupcakes, doughnuts, cookies.
Alessandra Fabiani has been coming to the bakery for years. "I have a severe nut allergy, and my sister can't do dairy," she says. "So we found a place that we could both safely eat at. And, yeah, we've been loyal customers ever since."
Today, she’s ordering the lemon tea cake. Everything at the bakery is gluten-free, vegan and kosher. It’s been that way since McKenna opened it in 2005. As it turned out, the food-allergic, kosher vegans of New York were a substantial demographic. And they were substantially excited that someone was finally letting them eat cake. "In the beginning, we were the only game in town," McKenna recalls. "People were coming in droves, and then I got on Martha Stewart." That TV spot
was a very good thing for McKenna, who suddenly had orders pouring in from across the country. By 2019, she had a multimillion-dollar business with locations in New York, Los Angeles and at Disney World.
She was ready to take her thriving business to the next level: opening her biggest shop ever, in a wealthy Santa Monica, California, neighborhood. "This location was going to be transformative for us," McKenna recalls. "I knew the customer. I'm like, 'This is a slam dunk.'" It was a major investment, but McKenna had done her homework and she was confident. "I took out this massive loan, and we opened in July of 2019." Then, of course, came the pandemic and lockdown.
"It just completely destroyed the business," McKenna says. "I was trying to make that location work and using all my resources to keep it open." McKenna’s other bakeries were thriving, and she started using money from those locations to keep the new location afloat. "I realized I was throwing good money after bad. I said, 'I just can't do it anymore.' I had to close it. I just was done."
What wasn’t done? The loan. McKenna’s original loan for the Santa Monica store was for $800,000. When the loan reached maturity a few weeks ago, McKenna still owed about $330,000. She went to refinance her loan, but the interest rate she was offered was 15%. That would put her whole business at risk. "I'm facing a dilemma of how to refinance my loan without bankrupting my company," she says.
The new lease would mean McKenna would have to pay $8,000 a month in interest and fees alone. "That was going to put me in a position where I wouldn't be able to pay my rent. I wouldn’t be able to make payroll." |