"Baking Bad" starts out in typical Family Guy fashion with many tangential skits and an one-liners. These initial jokes are in regards to a blood drive Lois wishes to hold for victims in Haiti. As the hi-jinks progress, Peter tries one of Lois's cookies and is stunned by their deliciousness.

Peter and Lois proceed to try and get a loan from a bank, and then subsequently realize that they need a marketing strategy to attract new customers. 

Meanwhile, Brian watches as Stewie develops a liking for a strong prescription cough syrup known to contain alcohol. Stewie's alcoholism worsens as the episode progresses.

Peter tries to attract up new customers by appealing to the sexual desires of men, but ends up accidently converting "Peter's Wife's Cookies" into a a strip club that gives away free cookies. 

Lois is furious that her efforts to raise money and own a loving and caring business with her husband has gone so awry, and she storms out leaving Peter to fend for himself. He doesn't last long, and comes back with a genuine, yet still flawed in typical Peter Griffin fashion, apology that warms Lois's heart. 

They mend their differences over a cookie Peter made with one of the strippers at the store. 

Brian eventually prevents Stewie from spiraling out of control by holding an intervention with all of the family's stuffed animals. Stewie learns his lesson, and Brian remembers just in time to go break up the ill-advised intervention he has set up in the other room for Chris's masturbation.