Four years after emerging from bankruptcy, Chuck E. Cheese is staging a comeback, following a significant transformation to introduce its games and pizza to a new audience.
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.
Even after the pandemic waned, the company encountered another challenge: adapting to entertain children and their parents in the era of iPads and smartphones. To address this, the company invested over $300 million in recent years, and this investment 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 discloses its financial performance to 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.
Sustaining this growth poses challenges, as the chain, like all restaurants, must attract customers who are dining out less frequently due to rising costs. Chuck E. Cheese also needs to capture the attention of children and parents in a competitive media landscape.
Established by Atari founder Nolan Bushnell in 1977 in San Jose, Chuck E. Cheese has evolved into a cherished childhood destination, renowned for its pizza, birthday celebrations, and animatronic mouse mascot and band.
Following its emergence from bankruptcy, Chuck E. Cheese and its outlets underwent a revamp, resulting in a modernized appearance for today’s locations. The traditional animatronics, SkyTube tunnels, and physical tickets have been replaced with trampolines, a mobile app, and floor-to-ceiling 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 company’s prolonged lack of capital investment, 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, but the deal was abandoned without clarification.
The influx of new funds prompted a reevaluation of the Chuck E. Cheese model, including its iconic animatronic band featuring Charles Entertainment Cheese and 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, transitioning to scratch-made pizzas, and partnered with Kidz Bop as its official music collaborator. Additionally, Chuck E. Cheese forged alliances with other kid-friendly brands like Paw Patrol, Marvel, and Nickelodeon for its games.
Moreover, trampolines were introduced as a key addition. McKillips noted, “We found one glaring opportunity for us … active play.” The family entertainment sector’s growth is largely driven by activity-based businesses such as trampoline parks and rock-climbing walls.
Initially trialed in Brooklyn and subsequently in Miami, St. Louis, and Orlando, trampolines are now featured in 450 Chuck E. Cheese locations as of December. Unlike the past SkyTubes or ball pits, customers must pay an additional fee to use the trampolines. (Ball pits were phased out in 2011, while SkyTubes remained for about another decade.)
Having invested $350 million in remodeling Chuck E. Cheese outlets, McKillips affirmed that this process is now complete.
“We needed to fix the product. The product is fixed,” he stated.
Reintroducing the brand to customers, particularly adults familiar with the Chuck E. Cheese of their own childhoods, has been a key focus.
McKillips emphasized the need to engage a new generation of children, stating, “You come in around three years old, you leave around eight or nine and you don’t come back for 15 years. We had to go and speak to a whole new generation of kids, and we were off-air during Covid. We had to build all that.”
For instance, Chuck E. Cheese’s birthday business, a significant marketing tool, faced challenges post-pandemic but has since rebounded to pre-pandemic levels.
As consumer spending declined across the restaurant industry last year, Chuck E. Cheese sought to appeal to value-conscious customers. In the summer, the chain launched a two-month tiered subscription program offering unlimited visits and discounts on food, beverages, and games. The subscription, starting at $7.99 per month, with additional tiers at $11.99 and $29.99, encourages families to visit more frequently than the typical two or three annual visits.
“In 2023, we sold 79,000 passes. This year, we sold close to 400,000 passes during the same time period,” McKillips noted, referring to 2024. “This shows that the value consumer will seek and will spend if they’re getting great return on their spend.”
Subsequently, the company introduced a 12-month membership in the fall, which has already exceeded 100,000 sales.
McKillips envisions broader horizons for the chain and its mascots beyond the restaurant confines.
“There’s another cute mouse down in Orlando that does this pretty well, so I see us in the same way, but we’re just getting started right now,” McKillips remarked.
In addition to 30 licensing agreements spanning frozen pizzas to apparel, Chuck E. Cheese is exploring diverse entertainment partnerships to elevate its mouse mascot as a prominent character, as per McKillips.
Furthermore, the company is considering ventures such as a game show. It maintains an active YouTube channel featuring character-focused content rather than pizza or games.
Chuck E. Cheese himself has six albums available on streaming platforms, and his band performs live, choreographed concerts.
“My dream would be to have a feature movie,” McKillips expressed.
