Chuck E. Cheese is celebrating its comeback after bankruptcy

Four years after emerging from bankruptcy, Chuck E. Cheese is making a comeback because of a dramatic remodel to introduce its games and pizza to a brand 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 corporate emerged from bankruptcy under recent leadership, reeling from debt Approximately $705 million is exempt.

Even as Covid eased, the corporate faced one other existential threat: determining find out how to keep kids — and their paying parents — entertained within the age of iPads and smartphones. The company has spent greater than $300 million in recent times to handle this challenge – and the investment is beginning to repay.

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

CEC Entertainment's annual revenue increased from $912 million in 2019 to roughly $1.2 billion in 2023. in line with Reuters. 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 won’t be easy. Like all restaurants, the chain must win over consumers who’re eating out less due to rising costs. Chuck E. Cheese also must capture the eye of kids and fogeys in a fragmented media market.

Since Atari founder Nolan Bushnell opened his first location in San Jose in 1977, Chuck E. Cheese has change into 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 totally 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 got here from McKillips, a former Six Flags manager. He joined the corporate in January 2020, just months before lockdowns would temporarily close all locations. As of April 2021, the corporate 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 recent money prompted an open have a look at the Chuck E. Cheese model – including his iconic animatronic bandwith Charles Entertainment Cheese and his friends.

“We took out the animatronics. It was a hot debate for numerous long-established bands, but kids consumed entertainment in a really different way, you already 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.

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 get a good 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.

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 one prolific YouTube channelwith videos that concentrate on its characters, not pizza or games.

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

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