The Oct. 17 announcement that Peter Piper Pizza had been acquired by CEC Entertainment Inc. means there is a new $1 billion-plus domestic sales player in the pizza segment, albeit across two brands.
CEC, the parent of the Chuck E. Cheese’s chain, is owned by Apollo Global Management LLC and Peter Piper Pizza’s seller was ACON Investments LLC.
The Peter Piper acquisition – terms for which were not disclosed – marks Apollo’s second pizza-chain buy this year, as it acquired previously publicly traded CEC just this past February in a deal valued at about $1.3 billion. It also continues the recent trend of private equity companies trading restaurant brands among themselves, as can be seen in Golden Gate Capital’s June sale of the On the Border casual-dining chain to Argonne Capital Group LLC and Apollo Global’s own sell off of burger players Carl’s Jr. and Hardee’s to Roark Capital in December 2013, among other transactions.
Given CEC’s new privately held status, and Peter Piper’s new relationship with CEC, the following peek at some of the numbers for those concepts may be the last we see for the foreseeable future.
The Nation's Restaurant News Top 100, Second 100 and Next 20 reports focus on U.S.-only, systemwide food-and-beverage (F&B) sales - meaning that the fiscal 2013 numbers reported for Chuck E. Cheese's and Peter Piper Pizza excluded amusement or arcade and non-food merchandise income. Along those lines, Chuck E. Cheese's had NRN-estimated fiscal 2013 U.S.-only F&B sales of $386.9 million, giving it a rank of No. 100 among 2014 Top 100 chains, and Peter Piper reported U.S. F&B sales of $135.9 million, qualifying it for the 2014 Next 20 roster. That gave the two chains a combined F&B footprint of $522.8 million.
CEC previously reported that in fiscal 2013 Chuck E. Cheese’s amusement and merchandise sales accounted for 54.9 percent of its total sales, while Peter Piper said that category represented 25 percent of total sales. These large percentages of amusement and merchandise sales have ramifications for profitability, as CEC said that at Chuck E. Cheese’s in 2013 the cost of amusement and merchandise sales was 6.6 percent of sales, versus a 24.5-percent cost for food.
If all store-level sales are considered, Chuck E. Cheese's had estimated fiscal 2013 U.S.-only systemwide sales of $857.5 million, while Peter Piper reported domestic systemwide sales from all lines of about $182 million. Combined, the two pizza brands had fiscal 2013 U.S. systemwide sales of approximately $1.04 billion, which was up about 3.4 percent from the similar pro-forma consolidated effort of $1.01 billion a year earlier.
That compares with the four largest pizza chains ranked by reported or estimated U.S.-systemwide sales in this year’s Top 100 report: Pizza Hut, $5.70 billion; Domino’s Pizza, $3.77 billion; Little Caesars Pizza, $3.10 billion; and Papa John’s Pizza, $2.50 billion.
NRN Top 200 research and CEC filings suggest that Chuck E. Cheese's 14 company and 21 franchised units outside the United States had estimated sales of about $49.1 million in fiscal 2013, representing 5.4 percent of the chain's estimated worldwide systemwide sales of $906.5 million. CEC representatives declined to share 2013 sales for Peter Piper’s 47 franchised restaurants in Mexico, but if they performed similarly to the chain’s U.S. franchised stores, they would have generated estimated fiscal 2013 sales of about $55.4 million, or 23.3 percent of the resulting estimated worldwide systemwide sales of $237.4 million.
Unitwise, Chuck E. Cheese’s ended fiscal 2013 with 542 domestic restaurants, including 508 company and 34 franchised locations, representing a year-over-year increase of 1.3 percent. Peter Piper’s domestic system ended the year with 94 stores, including 32 corporate and 62 franchised sites, representing annual growth of 2.2 percent.
CEC said Chuck E. Cheese’s had fiscal 2013 average annual sales per comparable store, for company restaurants, of $1.57 million, up from $1.55 million in fiscal 2012; and Peter Piper reported fiscal 2013 comparable U.S.-store sales of about $1.91 million. In comparison, the 12 pizza chains included in this year’s NRN Top 200 series, excluding Chuck E. Cheese’s, had average U.S. systemewide estimated sales per unit of $740,800, providing some idea of why Apollo Global was interested in CEC and why CEC was interested in Peter Piper, along with the latter's experience in Mexico and plans for growth.