Four years after emerging from bankruptcy, Chuck E. Cheese is staging a comeback by revamping its offerings to appeal to a new generation. In June 2020, as some states began easing pandemic restrictions, CEC Entertainment, the parent company of Chuck E. Cheese, filed for Chapter 11 bankruptcy protection. It emerged from bankruptcy later with new leadership and relieved of approximately $705 million in debt.
Despite the challenges posed by the pandemic, the company faced the ongoing task of engaging children and their parents in an era dominated by digital devices. To address this, Chuck E. Cheese invested over $300 million in recent years to adapt to changing consumer preferences, a move that has begun to yield positive results.
CEC Entertainment, which encompasses Pasqually’s Pizza & Wings and Peter Piper Pizza, has experienced eight consecutive months of growth in same-store sales, as reported by CEO Dave McKillips. Although not publicly traded, the company shares its financial performance with bond investors.
According to Reuters, CEC Entertainment’s annual revenue increased from $912 million in 2019 to around $1.2 billion in 2023, despite having fewer Chuck E. Cheese locations open. Presently, the chain operates 470 U.S. locations, down from 537 in 2019.
Maintaining this growth presents challenges, as the restaurant industry contends with changing consumer behaviors and rising costs. Chuck E. Cheese must also compete for the attention of children and parents in a media landscape characterized by fragmentation.
Since its inception in 1977 by Atari founder Nolan Bushnell in San Jose, Chuck E. Cheese has become a cherished part of many childhoods, renowned for its pizza, birthday celebrations, and animatronic mouse mascot and band.
Following its emergence from bankruptcy, Chuck E. Cheese underwent a transformation, resulting in a modernized appearance for its current locations. The traditional animatronics, SkyTube tunnels, and physical tickets have been replaced with trampolines, a mobile app, and large JumboTrons.
These changes were spearheaded by McKillips, a former Six Flags executive who assumed leadership in January 2020, shortly before pandemic-related closures affected all Chuck E. Cheese locations. By April 2021, the company secured $650 million in bonds, which have been utilized for restaurant enhancements.
McKillips highlighted the need for significant improvements, stating, “The company was capital-starved for many, many years. It had not been remodeled. It had not been touched.”
In 2014, Apollo Global Management privatized Chuck E. Cheese. Subsequently, CEC Entertainment attempted to go public in 2019 through a merger with a special purpose acquisition company, a deal that was ultimately abandoned without explanation.
The infusion of new capital prompted a reevaluation of the Chuck E. Cheese model, leading to the removal of the iconic animatronic band featuring Charles Entertainment Cheese and his companions.
“We pulled out the animatronics. It was a hot debate for many legacy bands, but kids were consuming entertainment in such a different way, you know, growing up with screens and ever-changing bite-sized entertainment,” McKillips explained.
The chain also revamped its menu, upgrading to scratch-made pizzas, and partnered with Kidz Bop as its official music collaborator. Additionally, Chuck E. Cheese formed alliances with popular children’s brands like Paw Patrol, Marvel, and Nickelodeon for its games.
Moreover, trampolines were introduced as a new attraction, with Chuck E. Cheese incorporating them into 450 locations by December. Unlike the previous SkyTubes or ball pits, customers now pay an additional fee to use the trampolines.
After investing $350 million in remodeling Chuck E. Cheese locations, McKillips declared the completion of this process, emphasizing the need to enhance the overall customer experience.
Reintroducing the brand to customers, particularly adults who remember the Chuck E. Cheese of their youth, has been a key focus for the company. The birthday business, a vital marketing tool, struggled post-pandemic but has since rebounded to pre-pandemic levels.
As consumer spending declined across the restaurant industry, Chuck E. Cheese responded by launching a tiered subscription program over the summer, offering unlimited visits and discounts on food, beverages, and games. This initiative aimed to encourage families to visit more frequently, with subscription prices starting at $7.99 per month.
McKillips noted the success of the subscription program, stating, “In 2023, we sold 79,000 passes. This year, we sold close to 400,000 passes during the same time period.” The company later introduced a 12-month membership, which has already garnered over 100,000 subscribers.
Looking ahead, McKillips envisions expanding the Chuck E. Cheese brand beyond its restaurant locations through licensing agreements and potential entertainment partnerships. Plans include exploring opportunities for a game show, leveraging the company’s YouTube channel, and developing Chuck E. Cheese’s presence in various media formats.
“My dream would be to have a feature movie,” McKillips expressed, underscoring the company’s aspirations for future growth and innovation.
