The company spent $350 million to upgrade everything about the brand coming out of bankruptcy and its efforts seem to be gaining traction
It’s been five full years since the first confirmed case of the COVID-19 virus was reported in the United States. Much of the restaurant industry was decimated in the ensuing months while navigating disparate regulations and anxious consumers set.
Few were impacted as much as Chuck E. Cheese. Though the chain was nimble enough to leverage a virtual brand – Pasqually’s Pizza & Wings – it wasn’t enough to avoid bankruptcy, and the chain filed for Chapter 11 protection in June 2020. As we’ve learned time and time again, however, bankruptcy isn’t always a bad thing.
In this instance, it provided then-new chief executive officer David McKillips the ability to restructure the business and eliminate debt. Couple that with a $350 million investment to incorporate new games and activities, store designs, menu offerings, technology, and content, and Chuck E. Cheese is now well positioned for its second act.
“When I joined, the product was dated, and the competition was growing. Some of our units hadn’t been touched in a dozen years. COVID allowed us to pause on what we wanted to do and restructure. The bones have always been good, the brand is solid, but there hadn’t been investments, and deploying capital to overhaul the company became our priority,” McKillips said during a recent interview. “We went through one of the most aggressive transformations in the world.”
That meant remodeling every Chuck E. Cheese location and, to date, nearly 500 units have been upgraded with new features, from trampolines and dance floors to jumbotrons and digital ordering kiosks. The goal was to resonate with kids in the “2 to 12, but really 3 to 8” age group and move earnestly into an active play concept.
“That’s what the data and insights showed us that parents wanted – participatory and active experiences. We looked at everything through the eyes of a 5-year-old,” McKillips said.
Evolving into a more digital-centric space has also allowed the brand to remain relevant to this demographic because it enables fresh content changed daily, from a beach theme in the summer to Kidz Bop and Harlem Globetrotters-related content.
“Our move into having screen-based entertainment is so important because kids want the latest music and new content, and for us to have the ability to change their experience through digital entertainment is critical,” McKillips said. “How kids consume entertainment today is different from 45 years ago.”
The changes seem to be gaining traction. Though the chain’s sales are down by 3.3% since 2018, and its unit count is down by nearly 8% in that same period, 2022 to 2023 yielded a growth spurt – including a 6.7% sales increase, to about $370.1 million, and a 0.2% domestic unit count increase, according to Technomic Ignite data. McKillips said traffic has recently been positive, and the chain has also experienced eight straight months of positive same-store sales growth.
Now the challenge is to keep this momentum going, particularly when the competitive landscape continues to intensify with new eatertainment concepts – featuring everything from pickleball to darts to putt putt – popping up seemingly everywhere. McKillips said that competition, combined with consumers’ stretched dollars, is why Chuck E. Cheese intends on staying in its lane.
“There’s a tremendous amount of innovation in the category, which is exciting, but we are also in a time period where consumers have to make choices,” he said. “Forty-six percent of parents are cutting back on out-of-home entertainment. That’s concerning for us, but we’re disciplined on who we are and focusing on our core audience. It also makes us focus on delivering value back to consumer and our value proposition.”
Chuck E. Cheese, he added, spends a “tremendous amount” on advertising, especially in this value-driven environment. The company has launched a tiered Summer Pass, for example, offering 60 days of play for $49.99. It is also testing a 12-month membership, offering perks such as 20% off food and beverage orders for a set monthly price. Chuck E. Cheese also recently launched a birthday program – for $99.99, six kids can enjoy à la carte food and beverage and game play. Birthdays, McKillips said, is the company’s biggest marketing vehicle.
“Now that much of the work is done, we have to bring everybody back more often and that’s what these programs are designed to do. For years, Chuck E. Cheese was built on a visitation rate of one and a half times to two times a year and was usually a place only for major celebrations. We weren’t getting the everyday user,” he said. “Now we have multiple activities, more things for kids to do, and more value programs. We have gone into a multi-visitation sales strategy and we’re seeing positive signs.”
Remodels, multi-visitation sales strategies, content, and more. It’s a comprehensive overhaul, to be sure, but it hasn’t stopped there for Chuck E. Cheese. The company has also simplified its menu while adding a “grown-up menu” with pizzas “that a 5-year-old won’t eat,” such as the Spicy Piggy. The company continues to add active play features, such as playgrounds and obstacle courses. It is also testing a non-traditional format – think malls and resorts. And, McKillips is bullish on international expansion. His vision is to be a global company with a “footprint all over the world,” adding to its current 18 countries and territories.
With all this work, it’s no wonder the rumor mill began churning recently about whether the company was considering a sale. McKillips said there are no imminent plans to do so, or to go public again.
“Right now, we’re just focused on growing the business organically and growing internationally. Now we’re getting to the end of our investment and need to prove out the growth story,” he said. “This is a legacy brand with incredible awareness that just needed a little TLC. Kids are growing up differently, digesting entertainment differently, and it’s time for us to evolve.”
Contact Alicia Kelso at [email protected]
