CEC Entertainment Inc., parent to the Chuck E. Cheese’s and Peter Piper Pizza chains, is putting more emphasis on appealing to parents as it overhauls its marketing strategy, executives said Friday.
Executives at the Irving, Texas-based company, which has a total of 735 units across both brands, said they will continue to enhance kid messaging, but also work on keeping the concepts top of mind with parents to help boost same-store sales, especially at Chuck E. Cheese’s. In the first quarter ended March 29, same-store sales at Chuck E. Cheese’s fell 5 percent.
CEC CEO Tom Leverton said in a call with analysts Friday discussing earnings that the company needed to direct some marketing at parents and continue investments in more adult menu items, better seating and amenities like Wi-Fi.
“We neglected communicating to moms and dads directly about the terrific experience that Chuck E. Cheese’s does give,” Leverton said, adding that he believes the units still deliver a “wonderful, magical time” for children.
“But if we don’t continue to talk to mom and dad directly, sometimes they are going to forget that terrific experience,” Leverton noted. “So when the kid is asking to go, it’s easy for mom to veto.”
Leverton noted that CEC went without a chief marketing office for more than a year and a half, but in January it hired Michael Hartman, most recently senior marketing office for SeaWorld Parks & Entertainment, for that role.
Hartman “really is hitting the ground running and reestablishing a lot of the process and thought process that we need here from a marketing standpoint,” Leverton said. The company is shopping for a new advertising agency.
The brands will continue to make investments in unit amenities to enhance their value propositions, Leverton said.
“Chuck E. had opportunities to make investments in the business over the past few years that we maybe skipped out on,” he said. “Wi-Fi is a good example.”
The chain added free Wi-Fi to about 100 locations in the first quarter, he said, and the company plans to roll it out to the entire system.
“When you think about the various businesses out there that offer free Wi-Fi, having a business like a restaurant, where average visits can be up to an hour and half to two hours,” Leverton said. “Without Wi-Fi, it shows the guests that we haven’t been making all the investments we should be doing.”
Wi-Fi availability has increasingly become part of a restaurant’s package. Last year, according to research from industry data and analysis firm Technomic Inc., 65 percent of consumers expected restaurants in the quick-service segment to offer free Wi-Fi.
Leverton said the company had “under-invested in the food side of the business. We want to make sure we deliver those excellent experiences every time. Over the years, we didn’t invest there adequately for our guests.”
Expanding on digital handheld games
On April 1, Chuck E. Cheese’s introduced a new menu with sandwiches, wraps and thin-crust pizzas for adults, and new items like pretzel dogs for children.
Leverton said the company’s research indicates that children visit Chuck E. Cheese’s two to three times a year, but they have a desire to visit as many as 11 times. He suggested that new marketing might increase those visits, as well as adding new games.
The brand has been able to expand upon games children already play on handheld devices like iPads and iPhones.
“We have very large versions of games like Temple Run and Flappy Bird,” Leverton said. “The kids gravitate to them because they know them and get a different experience for something they already have an affinity toward. It’s a fascinating dynamic.”
Temple Weiss, CEC’s chief financial officer, said about 44 percent of CEC’s total revenue is derived from food and beverage, and 56 percent from entertainment merchandise and franchise fees. For Chuck E. Cheese’s, he said, that breakdown is about 55 percent of sales from entertainment and merchandise and 45 percent from food and beverage. Pied Piper generates about 75 percent of sales from food and beverage.
For the first quarter, privately held CEC swung to a profit, reporting net income of $14.7 million, from a loss of $13.2 million in the same quarter last year. Revenue rose 3.8 percent, to $265.5 million, from $255.8 million the prior year.
Scottsdale, Ariz.-based Peter Piper, which CEC acquired last October from Washington, D.C.-based private-equity firm ACON Investments LLC, reported a 6.8-percent increase in same-store sales over the same period last year.
CEC is owned by private-equity firm Apollo Global Management LLC, which acquired the company in January 2014.
The company has 592 Chuck E. Cheese’s units and 143 Peter Piper Pizza restaurants.
This story has been revised to reflect the following correction:
Correction: May 11, 2015 Peter Piper Pizza is the name of one of the brands under CEC Entertainment Inc.
Contact Ron Ruggless at [email protected].
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