Select Page

Chuck E. Cheese is celebrating its comeback after bankruptcy

Chuck E. Cheese is celebrating its comeback after bankruptcy

The parent company of Chuck E. Cheese has spent $230 million renovating its stores.

Source: CEC Entertainment

Four years after emerging from bankruptcy, Chuck E. Cheese is making a comeback thanks to a dramatic remodel to introduce its games and pizza to a new generation.

In June 2020, as some states began lifting their pandemic lockdowns, CEC Entertainment, the parent company of Chuck E. Cheese, filed for Chapter 11 bankruptcy protection. Months later, the company emerged from bankruptcy under new leadership, reeling from debt Approximately $705 million is exempt.

Even as Covid eased, the company faced another existential threat: figuring out how to keep kids — and their paying parents — entertained in the age of iPads and smartphones. The company has spent more than $300 million in recent years to address this challenge – and the investment is starting to pay off.

CEC Entertainment, which also owns Pasqually's Pizza & Wings and Peter Piper Pizza, posted eight straight months of same-store sales growth, according to CEO Dave McKillips. The company is not publicly traded but discloses its financial results to bond investors.

According to Reuters, CEC Entertainment's annual revenue rose from $912 million in 2019 to about $1.2 billion in 2023. And that's with fewer Chuck E. Cheese locations open. The chain currently has 470 U.S. locations, up from 537 in 2019.

Sustaining growth will not be easy. Like all restaurants, the chain needs to win over consumers who are eating out less because of rising costs. Chuck E. Cheese also needs to capture the attention of children and parents in a fragmented media market.

Goodbye, animatronics

Since Atari founder Nolan Bushnell opened his first location in San Jose in 1977, Chuck E. Cheese has become a staple of many childhoods, known for its pizza, birthday parties and animatronic mouse mascot and band.

After bankruptcy, Chuck E. Cheese and its stores underwent a remodel that gave its current locations a completely different look. Gone are the animatronics, SkyTube tunnels and physical tickets of yore. Instead, they were replaced with trampolines, a mobile app and floor-to-ceiling JumboTrons.

These changes came from McKillips, a former Six Flags manager. He joined the company in January 2020, just months before lockdowns would temporarily close all locations. As of April 2021, the company raised $650 million in bonds, which it issued for its restaurants.

“The company suffered from a lack of capital for many, many years. It hasn't been rebuilt. Nothing was touched,” he said.

Apollo Global Management took Chuck E. Cheese private in 2014. Five years later, CEC Entertainment attempted to go public through a merger with a special purpose vehicle. But the deal was abandoned without explanation.

The new money prompted an open look at the Chuck E. Cheese model – including its iconic animatronic tape featuring Charles Entertainment Cheese and his friends.

“We took out the animatronics. It was a hot debate for a lot of long-established bands, but kids consumed entertainment in a very different way, you know, growing up with screens and ever-changing, bite-sized entertainment,” McKillips said.

The chain also revamped its menu and switched to made-from-scratch pizzas. Kidz Bop became an official music partner. Other kid-friendly brands such as Paw Patrol, Marvel and Nickelodeon became partners for its games.

And then came the trampolines.

“We found a great opportunity for ourselves… active play,” McKillips said. He added that growth in the family entertainment category was largely driven by activity-based businesses such as trampoline parks and climbing walls.

The company tested the trampolines first in Brooklyn and then in Miami, St. Louis and Orlando. As of December, 450 Chuck E. Cheese locations have child-sized trampolines. And unlike the SkyTubes or ball pits of the past, customers have to pay extra to use trampolines. (The ball pits disappeared from Chuck E. Cheese locations in 2011, while SkyTubes continued to exist for another decade or so.)

After the company spent $350 million remodeling Chuck E. Cheese locations, McKillips now says the process is complete.

“We had to repair the product. The product is repaired,” he said.

Subscription editions

Another focus was on reintroducing customers to the brand – especially adults who only know Chuck E. Cheese from their own childhood.

“You come in when you’re about three years old, you go out when you’re about eight or nine years old, and you don’t come back for 15 years. We had to go and talk to a whole new generation of kids, and we weren't on the air during Covid. We “I had to build all of this,” McKillips said.

For example, Chuck E. Cheese's birthday business, one of the company's best marketing tools, has struggled in the wake of the pandemic. Today it is back to pre-pandemic levels.

And as Chuck E. Cheese felt the effects of a slowdown in consumer spending last year that hit many restaurants from McDonald's to Outback Steakhouse, the chain had to find a way to appeal to the value-oriented customer.

Over the summer, Chuck E. Cheese launched a two-month, tiered subscription program that offered unlimited visits and discounts on food, drinks and games. Membership encouraged families to visit more frequently than the usual two or three annual visits. The subscription starts at $7.99 per month, with additional tiers at $11.99 and $29.99 that promise deeper discounts and more games played.

“In 2023 we sold 79,000 passes. “This year, we sold almost 400,000 passes over the same period,” McKillips said, looking ahead to 2024. “That shows that the consumer is looking for value and spending when they're doing well to get a return on their spending.”

In the fall, the company built on the success of the passes with a 12-month membership and has already sold more than 100,000 of them.

An entertainment empire?

McKillips' biggest dreams for the chain and its mascots lie outside the four walls of her restaurants.

“There's another cutie in Orlando who does this pretty well, so I see us the same way, but we're just getting started,” McKillips said.

In addition to 30 licensing deals for everything from frozen pizza to apparel, McKillips said Chuck E. Cheese is also exploring various entertainment partnerships that would make its mouse mascot a main character.

And that's not all. The company has explored the possibility of a game show. It has an extensive YouTube channel whose videos focus on its characters, not its pizza or games.

In addition, Chuck E. Cheese himself has six albums available on streaming platforms and his band plays choreographed live concerts.

“My dream would be to have a feature film,” McKillips said.

Correction: An earlier version of this story misstated the company's current debt load and its investments in site remodeling.

About The Author

Leave a reply

Your email address will not be published. Required fields are marked *

RECENT REVIEWS

Recent Videos

Loading...