With a major redesign to appeal to a new generation, Chuck E. Cheese is making a comeback four years after emerging from bankruptcy.
CEC Entertainment, the parent business of Chuck E. Cheese, filed for Chapter 11 bankruptcy protection in June 2020, even as some jurisdictions started to lift their pandemic lockdowns. Months later, under new leadership, it came out of bankruptcy, with debts of roughly $705 million paid off.
Finding ways to amuse kids and their paying parents in the era of iPads and smartphones posed an existential danger to the business even after COVID weakened. In order to address that difficulty, the corporation has invested over $300 million in recent years, and the investment is beginning to yield results.
According to CEO Dave McKillips, CEC Entertainment, which also owns Peter Piper Pizza and Pasqually’s Pizza & Wings, has had eight consecutive months of same-store sales growth and is debt-free. Although the business isn’t listed on a stock exchange, bond investors are informed of its financial performance.
According to Reuters, CEC Entertainment’s yearly sales increased from $912 million in 2019 to almost $1.2 billion in 2023. Even with fewer Chuck E. Cheese locations open, that is. The chain now operates 470 stores in the United States, compared to 537 in 2019.
It will not be simple to maintain the expansion. Like many eateries, the business must attract customers who are becoming less frequent diners as prices increase. In a media industry that is fragmented, Chuck E. Cheese must also attract the attention of parents and kids.
Goodbye, animatronics
Chuck E. Cheese has become a mainstay of many childhoods since its first facility in San Jose was launched by Atari creator Nolan Bushnell in 1977. It is well-known for its pizza, birthday parties, and band and animatronic mouse mascot.
Chuck E. Cheese and its stores got a makeover after emerging from bankruptcy, which resulted in a significantly different appearance for the locations today. The physical tickets, SkyTube tunnels, and animatronics of the past are vanished. Trampolines, a smartphone app, and floor-to-ceiling JumboTrons have taken their place.
McKillips, a former Six Flags executive, was responsible for such modifications. He started working for the corporation in January 2020, a few months before all of its facilities will be temporarily closed due to lockdowns. The business has been investing $650 million on its restaurants since raising $650 million in bonds by April 2021.
For long, many years, the business was capital-starved. It was still unremodeled. He said that it had not been touched.
Chuck E. Cheese was taken private by Apollo Global Management in 2014. Five years later, CEC Entertainment merged with a special purpose acquisition firm in an attempt to go public. However, the transaction was abruptly canceled.
A candid examination of the Chuck E. Cheese model, which includes its famed animatronic band, Charles Entertainment Cheese and his colleagues, was inspired by the new money.
The animatronics came out. Although it was a contentious issue for many legacy bands, McKillips claimed that children were consuming entertainment in a whole different way because they were growing up with screens and constantly evolving bite-sized entertainment.
Additionally, the chain updated its menu to include freshly baked pizzas. Kidz Bop was officially added as a musical partner. For its games, it partnered with other kid-friendly companies including Paw Patrol, Marvel, and Nickelodeon.
The trampolines followed.
According to McKillips, “we discovered one obvious opportunity for us to engage in active play.” He went on to say that activity-based companies, such as rock-climbing walls and trampoline parks, are primarily responsible for the increase in the family entertainment sector.
After testing the trampolines in Brooklyn, the company went on to Miami, St. Louis, and Orlando. Kid-sized trampolines are now available in 450 Chuck E. Cheese restaurants as of December. Additionally, trampolines cost more to use than the old-fashioned ball pits or SkyTubes. (While SkyTubes remained for around ten more years, the ball pits at Chuck E. Cheese restaurants vanished in 2011.)
McKillips now claims that the $230 million the corporation spent remodeling Chuck E. Cheese restaurants is complete.
The product needed to be fixed. He said that the product was corrected.
Subscription spenders
Another goal has been to reintroduce consumers to the brand, particularly those who are only familiar with the Chuck E. Cheese from their own youth.
You arrive at the age of three, depart at the age of eight or nine, and don’t return for fifteen years. We were off-air during COVID, and we had to go talk to a whole new generation of children. “All of that had to be built,” McKillips stated.
One of the company’s most effective marketing strategies, Chuck E. Cheese’s birthday business, for instance, suffered after the epidemic. It is now returning to what it was before the pandemic.
Additionally, Chuck E. Cheese had to figure out how to appeal to the budget-conscious consumer as it began to notice the decline in consumer spending that affected numerous eateries last year, including Outback Steakhouse and McDonald’s.
Chuck E. Cheese introduced a two-month tier-based subscription plan throughout the summer that included unlimited visits as well as savings on games, food, and beverages. Families were encouraged to visit more frequently than the usual two or three times a year by the membership. With tiers at $11.99 and $29.99 that offer greater discounts and more games played, the membership starts at $7.99 per month.
We sold 79,000 passes in 2023. We sold about 400,000 passes in the same time frame this year,” McKillips stated, alluding to 2024. This demonstrates how consumers will look for and spend value if they receive a high return on their investment.
More than 100,000 passes have already been sold since the firm followed up on the success of the passes in the autumn with a 12-month membership.
An entertainment empire?
Beyond the four walls of its eateries, McKillips’ greatest aspirations for the chain and its mascots are found.
There s another cute mouse down in Orlando that does this pretty well, so I see us in the same way, but we re just getting started right now, McKillips said.
In addition to 30 licensing deals for everything from frozen pizzas to apparel, Chuck E. Cheese is also exploring different entertainment partnerships that would make its mouse mascot a starring character, according to McKillips.
And that’s not all. The business has investigated the potential for a game show. It has aprolific YouTube channel, with videos focused on its characters, not its pizza or games.
Plus, Chuck E. Cheese himself has six albums available on streaming platforms, and his band plays live, choreographed concerts.
My dream would be to have a feature movie, McKillips said.
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