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The Kuddly Krab was an establishment opened up by Pearl in the episode "Bossy Boots." She had attempted to improve the Krusty Krab by making it appeal to younger customers.
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, also.
The inside has many stuffed animals. The menu consisted only of salads and tea, which SpongeBob did not know how to make. The uniforms were also changed. Employee and manager uniforms now 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, a job that humiliated him.
While deciding on how to re-establish the Krusty Krab and the Kuddly Krab, Pearl and SpongeBob thought of renaming the restaurant. SpongeBob and Pearl thought of names such as the Kutie Krab, the Kooky Krab, the Khaotic Krab, the Kissy Krab, the King Krab, the Kandy Krab, the Kool Krab, the Kowboy Krab, the Kurly Krab, the Kreepy Krab, and the Killer Krab. Then, at the same time, they both thought of "the Kuddly Krab," and chose that name.
The Kuddly Krab was also meant for teenage girls, because Pearl was a teenager, she made it teenager themed. 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 her father. Eventually, the Kuddly Krab is turned 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, much to the displeasure of his pet snail.