The family entertainment chain known as Chuck E. Cheese is making a major comeback since exiting bankruptcy and spending over $300 million on the next generation.
Back in June 2020, right as certain states were lifting their pandemic lockdowns, the pizza arcade’s parent company CEC Entertainment filed for Chapter 11 bankruptcy. It emerged from this months later with new leadership, freeing itself from nearly $705 million in debt.
Even after COVID subsided, the company struggled to figure out how to entertain children and parents in the age of smart devices. In recent years, the company has spent over $300 million to tackle this challenge.
Trampolines, a revised pizza recipe, and the removal of animatronics have become some of the biggest changes made under CEO Dave McKillips.
CEC Entertainment, which also includes Peter Piper Pizza and Pasqually’s Pizza & Wings, has seen eight months of same-store sales growth, according to the CEO. While the company isn’t publicly traded, it discloses its financial results to its bond investors. Its annual revenue grew from $912 million in 2019 to nearly $1.2 billion in 2023, according to data from Reuters. This is with fewer open locations for Chuck E. Cheese. The chain has 470 U.S. locations, down from 537 in 2019.
Since Nolan Bushnell, the founder of Atari, first opened the original location in 1977 in San Joe, Chuck E. Cheese has become famous for its birthday parties, pizza, animatronic mouse mascot and band.
Trampolines, A Mobile App, and JumboTrons
After exiting bankruptcy, the Chuck E. Cheese chains underwent a huge makeover, giving today’s locations a different look. Physical tickets, SkyTube tunnels, and animatronics are gone. Rather, trampolines, a mobile app, and JumboTrons serve as the replacements.
McKillips, who was a former Six Flags executive, made these changes. He joined the company in January 2020, mere months before lockdowns temporarily shuttered all of its locations. In just over a year, by April 2021, the company managed to raise $650 million in bonds, which it has spent on its restaurants.
“The company was capital-starved for many, many years. It had not been remodeled. It had not been touched,” he said.
After pulling out the animatronics because of the new ways kids were consuming entertainment, the chain redid its menu, upgrading to scratch-made pizzas. It also partnered with Kids Pop for music, and brands like Paw Patrol, Nickelodeon, and Marvel for its games.
Growth, McKillips said, is coming from activity-based businesses like rock-climbing walls and trampoline parks.
The company first tested the trampolines in Brooklyn and then in Miami, St. Louis and Orlando. As of December, 450 Chuck E. Cheese locations now have kid-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 lasted roughly another decade.)
Subscriptions Galore
A focus on reintroducing customers, including adults, to the brand has been at play in recent years. Although birthday parties struggled in the wake of the pandemic, it’s back at pre-pandemic levels.
And as Chuck E. Cheese started seeing the pullback in consumer spending that hit many restaurants last year, from McDonald’s to Outback Steakhouse, the chain had to come up with a way to appeal to the value-oriented customer.
Chuck E. Cheese launched a two-month tiered subscription program that offered unlimited visits and discounts on food, drinks and games. The membership encouraged families to visit more often than the typical two or three annual visits. The subscription starts at $7.99 a month, with additional tiers at $11.99 and $29.99 that promise steeper discounts and more games played.
“In 2023, we sold 79,000 passes. This year, we sold close to 400,000 passes during the same time period,” McKillips said, referring to 2024. “This shows that the value consumer will seek and will spend if they’re getting great return on their spend.”
In the fall, the company followed up on the success of the passes with a 12-month membership and has already sold more than 100,000 of them.
Future Expansion
In addition to 30 licensing deals for everything from frozen pizzas to apparel, Chuck E. Cheese is also exploring different entertainment partnerships that would make its mouse mascot a starring character, according to McKillips.
And that’s not all. The company has looked into the possibility of a game show. It has a prolific YouTube channel, with videos focused on its characters, not its pizza or games.
Plus, Chuck E. Cheese himself has six albums available on streaming platforms, and his band plays live, choreographed concerts.
“My dream would be to have a feature movie,” McKillips said.