Courtesy of Lovely Confections Bakery  Lovely Confections Bakery in Denver has to sell 2,800 cupcakes a month to cover expenses.

Move over restaurants and bed-and-breakfasts. A new fantasy seems to have taken hold for people who long to own their own business: the cupcakery.

There is no Cupcake Manufacturers Association keeping count, but anecdotal evidence indicates that stand-alone cupcake shops have been spreading not just in the acknowledged cupcake meccas of New York and Los Angeles but also in Boston, Denver, Austin, Tex., and lots of smaller places. Nationwide, cupcake sales, according to the market research firm, Mintel, are projected to rise another 20 percent over the next five years at a time when other baked goods are expected to grow in the single digits.

“Cupcake Wars,” a series pilot in which four bakers vie to create the most interesting concoctions, will soon have its debut on the Food Network. “Martha Stewart’s Cupcakes” (Clarkson, Potter), a collection of 175 recipes, was published in June, and spent 11 weeks on The New York Times best-seller list. And the most popular of the cupcake blogs, Cupcakestakethecake, is visited by some 9,000 people a day. At least a dozen blogs chronicle each new flavor — from bacon to s’mores — as well as the best frostings, the quirkiest decorations and the newest twists (so far, the meatloaf cupcake with mashed-potato frosting seems to have been contained within Chicago).

New York’s Magnolia Bakery, which helped set off an earlier cupcake craze when its treats appeared in a “Sex and the City” episode, is now expanding operations into Los Angeles, where its $3 red velvets and devil’s foods will compete with the chai lattes and ginger lemons of Sprinkles Cupcakes, which is based in Beverly Hills but has owner-operated shops in six other cities and plans to open in far-flung locales like New York, London and Tokyo.

“Cupcake stores are taking the place of ice cream stores,” said Adam Borden, whose Baltimore-based venture capital firm, Bradmer Foods, specializes in food-focused enterprises. “Cupcakes aren’t seasonal like ice cream, and they appeal to people who want the authentic experience. They have an allure based on nostalgia.”

All of which suggests a couple of questions: How many cupcakes do you have to sell to pay the rent? And are cupcakes a viable business? These are still very early days in the Great Cupcake Rush, but the answers appear to be, respectively, a lot and maybe. (What do you think? Click HERE to leave a comment.)

Thus far, there seem to be four basic cupcake business models:

The Chain

Founded by two married former investment bankers, Charles and Candace Nelson, Sprinkles is looking to grow. The couple spent two years working on their recipes before opening their Beverly Hills location in 2005. “You have to have a great product, brand and location and then it can be very scalable,” said Mr. Nelson.

Sprinkles is slated to open three more stores next year. Seventy percent of its business comes from walk-ins, so location is crucial. Mr. Nelson declined to say whether the individual stores or the company as a whole had achieved profitability, but he did say that Sprinkles had a 20-year business plan and was committed to the long haul.

ClickHere to read the entire article.