No one goes to Chuck E. Cheese for the food. So this is clearly an eatertainment play; almost like a Dave & Buster's for kids.
— Danni Santana
The parent company of Chuck E. Cheese may be returning to the public markets it left five years ago, but the future of the kiddie pizza chain should feel very different than the version acquired by private-equity firm Apollo Global Management in 2014.
That’s because the chain –– a kids’ birthday party destination known for pizza and arcade games –– has been spending heavily to reinvent itself as the kind of place millennial parents want to go. That includes remodels costing as much as $575,000 apiece, with plans for 60 more this year, including more comfortable seating for adults, like bar stools and high-top tables, along with Wi-Fi.
“The remodels are focused on making it more comfortable for mom and dad,” Chief Executive Officer of parent company CEC Entertainment Inc. Tom Leverton said in an interview. “We need to persuade them they can have a good time at Chuck E. Cheese, too.”
CEC Entertainment, which runs Chuck E. Cheese and Peter Piper Pizza, announced Monday plans to merge with a so-called blank check company –– a shell company that raises money from investors to pursue unspecified acquisitions –– in order to go public on the New York Stock Exchange. The deal with Leo Holdings Corp. offers an alternative route from an initial public offering and values the company at about $1.4 billion. Leverton will continue to run the company, which will be renamed Chuck E. Cheese Brands Inc.
Apollo, which bought Chuck E. Cheese in February 2014 in a leveraged buyout, will not be selling any shares and will continue to be the largest shareholder with about 51 percent ownership of the company after the closing, expected in the second quarter.
The remodels, which are already in progress, will ramp up after the deal, and it will take about four or five years to do all restaurants, Leverton said.
Better Music, Wine
New stores have more muted tones and wood paneling, rather than the loud colors the chain was known for. And they’re intermixing songs from Taylor Swift and Justin Timberlake into the playlist so children’s music doesn’t get stuck in parents’ heads. Even the iconic animatronic characters are gone. In their place, there’s a light-up dance floor where a real-live Chuck E. Cheese comes out every hour.
During its years as a private company, the chain has also tried to improve its menu with higher-quality wine, more craft beer and adult-friendly pizzas like barbecue chicken and Cali Alfredo that has spinach and mushrooms.
The efforts have started to pay off: the company says it expects same-store sales for the parent company to rise 7.7 percent in the first quarter, a turnaround from the anemic growth of past quarters.
©2019 Bloomberg L.P.