Restaurant Business Cases

By pjain      Published June 13, 2020, 2:38 a.m. in blog Invest   

Chuck E Cheese Rise and Fail

CEC Timeline - Key turning Points

1977 Pizza Time Theatre concept San Jose - Founding by Atari's Nolan Bushnell

  • In the early ’60s wave of pizza commodification that brought Pizza Hut, Domino’s, and Little Caesar’s into homes across the country.

  • Expand the purview of video game arcades beyond more adult locations like pool halls to a child- and family-friendly venue.

  • Positioned as the first family restaurant to integrate food, cheap animated entertainment, and an indoor arcade.
  • Fondness for Disney-like animanitronics which were fully produced in-house by Pizza Time Theatre employees.

  • 1978 Bushnell bought all rights from Atari's parent Warner Comm for $500,000.

  • By late 1979, Pizza Time Theatre was known to have seven open locations, all in California.

  • Then Nolan grew outside CA by franchising.

  • In particular in a co-development agreement between himself and Robert Brock of Topeka Inn Management in June 1979. The agreement handed Brock exclusive franchising rights for opening Pizza Time Theatres in sixteen states across the Southern and Midwestern United States, while also forming a company subdivision, "Pizza Show Biz", to develop the Pizza Time Theatres.

Competition with Show Biz - Creative Engineering

  • Brock ditched Nolan as he thought Creative Engineering's animanitronics which he thought was better and formed Show Biz a copy of CEC concept.

  • Till middle 1980s both restaurant chains experienced increased success as the video game industry became more robust,[22] and, to maintain competition, both franchises continually modified and diversified their animatronic shows.

1983 Video Game Industry Crashed - CEC bankrupts, acquired by Show Biz

  • Not only did video games crash, arcades did as well, and restaurant-kid did worse.

By early 1984, Bushnell's debts were insurmountable, resulting in the filing of Chapter 11 bankruptcy for Pizza Time Theatre Inc. on March 28, 1984.

Showbiz then bought the foundering company, finalizing the purchase in May 1985 and recreating itself as Showbiz Pizza Time Inc

GROWTH era 1992 fully merged rebranding as CEC Pizza, International Expansion

  • 1999 CEC Entertainment has since acquired additional family entertainment center properties, including 13 locations of the now-defunct Discovery Zone
  • October 2014 bought xzall locations of Peter Piper Pizza but still operates under that name.

From its very origin, CEC understood there was no food kids wanted more than pizza—all kids, even the pickiest, weirdest ones. “Going to Chuck E. Cheese’s was a life event that cemented pizza as a party food for every kid growing up in the 80s and 90s,” says author and noted pizza scholar Scott Wiener.

  • International Expansion continued with major countries becoming - numbers as of 2019
    • USA 527, and offshore islands 16
    • Canada 10
    • Mexico 19
    • South and Central America 20
    • Mideast 21
    • India 1 - NOTE: none in Japan/China

2012 Declining Same-Store sales, 2014 Acq by PE Apollo

  • In February 2014, Apollo Global Management acquired CEC Entertainment, Inc. for $54 per share, or about $950 million.
  • In October 2014, under Apollo Global Management, CEC Entertainment announced that they would purchase their Phoenix-based competitor, Peter Piper Pizza from ACON Investments.

2019 IPO

  • 2019 IPO ?supposed to happen via a Reverse Merger with a shell.

2020 Covid-19 and CEC Bankruptcy

  • During the 2019-20 coronavirus pandemic, the restaurant began selling pizza through food delivery services under the name Pasqually's Pizza & Wings. While pizza sold under this name comes from the same kitchen as Chuck E. Cheese, the company claims that it has "thicker crust and extra sauce".

Why did CEC Bankrupt while Domino's Stock zooming up?

  • First of all DPZ is a very cost-effective concept - with very small shops - just enough to bake the franchised-dough/supplies and send out drivers. There is very little parking needed nor "customer service" as most is done now via apps - human operators are a rare expense now!
  • In contrast CEC has overhead of large rental spaces, aisles and kid-safety measures.

Pizza Party Center - leave cleanup to us!

By 1977 the pizza party was a staple of American childhood. But even casual sites like as Little Caesar’s demanded a basic level of polite behavior from children. By taking that restriction away, building a venue where kids get up from the table, run, shriek, and throw balls as they pleased during dinner, CEC created an unbeatable force—"where a kid could be a kid ®".

  • So by having a kid "safe" (stamps on hand) place to drop and later pickup kids, CEC had a winning concept, but WHICH NEEDED LOTS OF RETAIL Accessible place close to suburbia.

CEC is an Insane Kids Asylum

The noise is horrific, a sensory overload that makes sense when you learn that CEC founder Bushnell was first a co-founder of Atari, whose machines made a fortune for bar and arcade owners by getting drunk adults and teens hooked on that high-score thrill. He wanted a piece of the action, and saw an opportunity to sell the same flashing-light buzz to kids. Pizza was easy to make and easy to love, and an animatronic cabaret act added another level of ADHD distraction to keep kids entertained.

So the original San Jose, CA store was a neon-city with louder sounds.

Very long waiting times are standard, kids will burn the initial tokens forcing parents to spend and spend for more.

Kids know the birthday-friendly chain as a semi-lawless fun zone full of games, tokens, and all the soda their grubby little hands can steal. But for anyone over the age of 12, the pizza-and-arcade chain is a pit of neon desperation—a soul-destroying scream factory .

By the 2000s, matted robotic dogs and chickens singing “Twist and Shout” while tantrums over the Whack-a-Mole machine loomed. This in turn could lead to fights between kids and their parents.

After 30-plus years of advertising designed to whip kids into a frenzy, driving them to pester their parents into taking them out for pizza and Skee-Ball,

Death of Video Game Arcade as PSII, XBox dominate homes

The boom of home video console games and the rise of casual dining restaurants like the Cheesecake Factory that appeal to food-savvy kids without tormenting their parents, and CEC has been in a death spiral since 2009 on.

Lousy Mediocre floury and bland pizza

As other chains have perfected crisp, quickly delivered (30' or less) pies, CEC retains its mass produced, cheap floury uncooked pies.

Parents can't stand CEC

  • While market research shows kids pushing parents to go nearly every month, not just for their birthday parties, parents end up taking kids only 2-3 times a year. This cuts down on revenues.

Now the struggling company has decided to try something radical: sell parents on the idea as adult-friendly entertainment. CEC has rolled out more comfortable seating areas, free Wi-Fi, better beer and wine service, specialty coffee, and—this year—an upgraded, adult-friendly menu in an effort to lure in more customers.

Alcohol service is at the discretion of each individual store manager—while 70% of stores do serve beer and wine— some managers have revoked those privileges.

Bad publicity as Whole-Family Fights

  • At CEC got a bad YT rap where parents are more likely to get into a bare-knuckle brawl than enjoy a pleasant pie.

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