Insomnia Cookies: Does the Late-Night Craving Have Legs?

The story of Insomnia Cookies is a classic bootstrapped hustle. It started in a college dorm kitchen, where founder Seth Berkowitz baked cookies to satisfy his own late-night craving. The economics and history major spent about $150 on ingredients and drove deliveries around campus as late as 4 a.m. The business took off after a campus newspaper wrote about it, jumping from a few orders to 80 a night. The core idea was simple: a warm, delicious treat when other options were limited. That basic, high-demand craving became the engine for a global chain.

That engine is now roaring. In 2025, Insomnia opened 55 new bakeries, including a record 25 locations in Q4. The brand just passed a milestone, opening its 350th store worldwide. This explosive growth is backed by a clear expansion plan: the company is projected to open more than 75 new locations in 2026, aiming to scale to 1,800 locations globally by 2034. The promise is straightforward: a loyal brand with a proven growth engine, now betting big on its ability to replicate that success everywhere.

The setup here is a classic "kick the tires" investment thesis. The product quality is undeniable-warm cookies are a universal comfort. The brand loyalty, built over two decades, feels real. The numbers show a business that can scale, with revenue topping $200 million last year. Yet the sheer scale of the expansion plan raises a fundamental smell test question: can this model keep working at this pace? The aggressive rollout, including new channels like airport partnerships and sports arenas, shows ambition. But for a brand built on a late-night, college-town niche, the path to 1,800 stores requires proving that the craving is truly global and sustainable. The bet is on a simple product with a big promise. The real test is whether the growth engine can run on empty.

The Financial Reality Check: Revenue, Valuation, and the "Free Cookie" Trap

The numbers tell a story of a business that has clearly found its niche. Last year, Insomnia Cookies brought in over $200 million in revenue. That's a solid foundation for a brand that started in a dorm kitchen. But when you look at the valuation and the marketing tactics, the picture gets more complicated.

The most recent valuation figure is a red flag. In July 2024, a private equity sale valued the company's enterprise at $350 million. That's a significant discount to the price Krispy Kreme paid for a majority stake in 2018. The earlier purchase price was roughly $139.5 million for 74.5% of the company, implying a pre-money valuation of about $187 million at that time. The jump to $350 million in just six years sounds impressive, but it's worth noting that the private equity deal was for a controlling stake, not a full exit. The math here suggests the market is pricing in a lot of future growth, not just current cash flow.

The real pressure point, however, is the heavy promotional spending required to fuel that growth. Insomnia's playbook relies on limited-edition cookies and high-impact giveaways. Just last month, they ran a contest offering free cookies for a year to winners found inside a special holiday cookie. While this is a clever way to drive short-term traffic and build a loyalty app, it's a direct hit to margins. You can't give away a year's worth of product for free and expect the profit per cookie to stay high. This is the classic "free cookie" trap: you win new customers today at the cost of your profitability tomorrow.

This creates a direct tension with the aggressive expansion plan. The company is projecting more than 75 new locations in 2026, aiming for 1,800 stores globally. Opening that many new bakeries requires massive capital investment. If the core business is funding that expansion through heavy promotions that erode margins, the financial model starts to look stretched. The growth engine needs to generate enough cash to pay for its own expansion, not just to attract customers with freebies.

The bottom line is that Insomnia has a strong brand and a proven concept. But the financial reality is that scaling it this fast means trading near-term profit for long-term footprint. For the stock to work, that trade needs to pay off. The company must show it can convert its loyal "Insomniacs" into profitable, repeat customers without having to give away the store. Until then, the valuation looks ahead of the cash flow, and the promotional spending is a clear margin pressure.

Catalysts and Risks: Can the Craving Last Beyond College Towns?

The expansion thesis hinges on two simple questions: can Insomnia replicate its cult following in new markets, and can it maintain product quality as it scales? The company's smart moves to increase visibility are clear attempts to answer "yes" to both.

On the catalyst side, Insomnia is aggressively embedding itself into new cultural touchpoints. The brand has struck partnerships with major sports teams like the Philadelphia Flyers and New York Knicks, and secured a spot at the Philadelphia International Airport. These are savvy plays to reach customers during peak late-night cravings, whether it's a post-game snack or a traveler needing a pick-me-up. The goal is to turn the brand into a default option, not just a college-town curiosity. Combined with the record 55 new bakeries opened in 2025, these efforts aim to build a global footprint that matches its ambitious target of 1,800 stores.

Yet the major risk is a classic scaling problem: diluting the very brand loyalty that fueled the initial success. The company's marketing playbook leans heavily on high-impact giveaways, like the recent contest offering free cookies for a year to winners found inside a special holiday cookie. While this drives short-term traffic and app sign-ups, it directly cannibalizes sales and erodes margins. It's a classic "free cookie" trap that works for growth but not for profit. The risk is that over time, customers start waiting for the next freebie instead of paying full price, training them to value the brand for the discount, not the warm cookie itself.

The financial contribution of these new channels remains unclear. While the partnerships with sports teams and airports are smart visibility plays, they are likely still in the early stages of contributing meaningfully to the bottom line. The company's projected more than 75 new locations in 2026 will be the primary driver of future revenue, but opening stores in new markets is expensive and takes time to become profitable. The promotional spending needed to fill those new locations may pressure margins just as the expansion accelerates.

The bottom line is that Insomnia's growth engine is powerful but fragile. The catalysts-new partnerships and relentless store openings-are designed to spread the brand's reach. The risk is that the promotional tactics used to fuel that reach could water down the brand's premium appeal and profitability. For the expansion thesis to work, the company must show it can convert its loyal "Insomniacs" into profitable customers without having to give away the store. The craving is real, but can it last beyond the freebie?