The Kuddly Krab was an establishment opened by Pearl in the episode "Bossy Boots." She had attempted to improve the Krusty Krab by making it appeal to the teenage audience.
Outside of the Kuddly Krab, the clamshell sign of the Krusty Krab is replaced with a heart that has green writing on it and a blue crab waving. The restaurant's outside was painted pink as well.
The inside had many stuffed animals. The menu consisted purely of salads and tea, the former of which SpongeBob did not know how to make. The uniforms were also changed. Employee and manager uniforms consisted of a pink outfit with purple flowers and two "K"s attached to springs on the head. Pearl also made SpongeBob stand outside the Kuddly Krab in a crab costume to advertise it.
While deciding on how to re-establish the Krusty Krab to make it appeal to teenage girls, SpongeBob and Pearl choose many different names, but settle on the "Kuddly Krab."
The changes to the restaurant are unacceptable by SpongeBob's standards, for his grill and spatula are revoked, and he is forced to make salads instead of Krabby Patties, a process which devastates him.
In the end, Pearl confesses to SpongeBob that she's actually been trying to get fired since the beginning and that she was only helping out with the restaurant to please Mr. Krabs.
Eventually, the Kuddly Krab is reverted back into the Krusty Krab, and all the materials of the Kuddly Krab were then brought into SpongeBob's house, costing him a one-year salary.