Drop Fatigue Cycles

Shaan Puri discusses the inherent risks of drop-based business models, using Crumbl Cookies as a case study. While acknowledging their current success, he expresses skepticism about the long-term sustainability of drop-based business models due to natural consumer fatigue.

Key Points:

• Current Success of Crumbl Cookies:

  • Doing approximately $800M-$1B in revenue annually
  • Opening a new store every 5 days
  • Has 730 stores currently
  • Strong digital presence with millions of followers across platforms
  • Weekly cookie drops drive app downloads and engagement

• Drop-Based Business Model Concerns:

  • Natural fatigue sets in for buyers over time
  • When everyone's into drops, it becomes more exciting (hunt/scarcity factor)
  • Once drop fatigue kicks in, the perceived value plummets
  • Notifications become ignorable rather than exciting
  • Scarcity appeal diminishes when items become readily available

• Historical Context:

  • Similar to frozen yogurt franchise boom and bust
  • Pattern of trendy food businesses experiencing rapid growth followed by plateau

• Counter Perspective on Sustainability:

  • Even if growth plateaus, $1B revenue is significant
  • Sam Parr: "Maybe they'll plateau, but a billion a year is a nice plateau"
  • Comparison to regional broadband companies: "Until then, I'm making $5 million a year in profit"

• Franchise Economics:

  • Highest revenue store: $3.6M
  • Average store revenue: $1.6M
  • Highest net profit: $600K
  • Average profit: $350K
  • Initial franchise investment: $150K