How do you make a 44-year-old animatronic rodent attractive to children?


Chuck E. Cheese has seen a lot in 44 years. The rodent namesake of America’s premier children’s entertainment center and pizza chain has seen generations grow, gaming trends evolve, and video games move from the arcade to the home. He’s even seen his own image change, from a rat at the start of the company to a mouse after a rebranding campaign.

The fact that he is still there is a testament to the surprising perseverance of his employer.

Sitting in front of what appears to be an impressionistic version of Chuck E. Cheese, in a bowler hat and bow tie, David McKillips, managing director of Chuck E. Cheese’s parent company, CEC Entertainment, credits the longevity of the business to its adoption of technology. It’s an ideology, he said, that stems from its founder, video game titan Nolan Bushnell, of Atari fame.

“We continue to embrace innovation decade after decade,” McKillips said. “We no longer have ball pools. But we have the best video and arcade games and interactive dance parties.

CEC Entertainment President and CEO David McKillips plays an arcade game with kids attending the Chuck E. Cheese Beach Party Bash on Wednesday June 02, 2021 in Brandon, Florida.

The road has not been easy for Chuck E. Cheese, especially recently. In the past year and a half alone, there have been months of restaurant closings during the pandemic, the permanent closure of more than 30 establishments and one filing for bankruptcy. Yet his adaptive culture kept Chuck E. Cheese alive while some of his competitors died young.

The Animatronic Group performs on August 23, 2017 at Chuck E Cheese in Chicago's Lincoln Park.

The first Chuck E. Cheese opened in 1977 in San Jose, California, and quickly proved to be a success. The children’s play center and pizzeria with the distinctive animatronic animal group has grown, in part thanks to the growing popularity of video games, according to a 2017 case study published in the Journal of Business Cases and Applications.

The parent company of Chuck E. Cheese went public in 1988 and by 2005 Chuck E. Cheese had 500 branches.

But in the early 2010s, sales started to slow down, prompting a revamp of the main character himself in 2012. Chuck E. Cheese lost his chic ’90s fingerless gloves, baseball cap inside out and his shorts relaxed and took on a more rock appearance. with jeans and an electric guitar.

A rebranding did not solve all of the chain’s problems. In 2014, CEC Entertainment was acquired by private equity firm Apollo Global Management as part of an LBO. The company has invested in an effort to make its 577 restaurants more palatable.

A woman walks towards the entrance to a Chuck E. Cheese restaurant in San Bruno, Calif., Thursday, June 25, 2020.

Over the years, Chuck E. Cheese has changed their menu to include new types of pizzas, such as mushroom and fresh spinach pies and children’s desserts such as multi-colored unicorn churros. The chain has also tried to better attract adults by serving alcohol, a move that could boost sales but may also have led to an increase in altercations at its restaurants, according to the 2017 case study (“Consider The following description of the restaurant offered by a Milwaukee city councilor, he likens the local Chuck E. Cheese to “something out of a Quentin Tarantino movie … there’s booze and guns wielding,” the study.)

Unlike some of its counterparts in the competitive and rapidly evolving children’s entertainment industry, Chuck E. Cheese has strived to modernize its entertainment and operations.

The company has moved from its traditional paper tickets – costing between $ 6 million and $ 7 million a year in paper stock – to an electronic ticket platform. It releases Chuck E. Cheese song albums on Spotify and adds digital dance tracks.

Children and families attend the Chuck E. Cheese Beach Party on Wednesday June 02, 2021 in Brandon, Florida.

The company has also started to expand its business beyond its physical play areas. When the COVID-19 pandemic closed stores and home orders spurred demand for food delivery, Chuck E. Cheese opened a ghost kitchen called Pasqually’s Pizza & Wings (named after one of the members of the group of animatronic rodents).

Chuck E. Cheese frozen pizza is now available at Kroger stores, and parents can purchase birthday packages of balloons, pizza, party bags and cakes to celebrate at home. (Birthday parties at Chuck E. Cheese stores remain a big business – the company says they have 500,000 birthday parties a year in the United States)

A failure to keep up with trends is what ultimately led to the downfall of a contemporary of Chuck E. Cheese, Discovery Zone.

The indoor games business was at the peak of its game in the early 1990s. It was a Wall Street darling who grew from eight stores to over 300 and seemed ready for bigger things after getting the backing from successful video rental company Blockbuster.

Discovery Zone acquired its biggest rival and bought out franchisees. But revenues haven’t grown along with the company’s extensive network of sites. There were too many discovery areas close to each other – or small rivals – which only intensified the competition.

Parents were bored while their children played in the facilities, and the original concept of an indoor play area changed little throughout the life of the business, despite technological advancements and the advent of video games, making repeat visits less attractive.

The company also faced the daunting challenge of generating income during weekday school hours and expanding its customer base beyond young children. In the evenings, some Discovery Zones turned into nightclubs for teenagers or offered babysitting services in its stores.

In 1996, the company filed for bankruptcy (Chapter 11). Months later, the chain began to close dozens of stores. In 2001, after a period of 12 years, Discovery Zone completely closed its doors.

Chuck E. Cheese took advantage of his competitor’s difficulties. He bought 15 Discovery Zones at a time when trends were heading towards physical play such as zigzag SkyTubes and ball pits, McKillips said. These locations were combined with the Chuck E. Cheese menu and games and rebranded as Chuck E. Cheese.

But even as Discovery Zone faded, other competitors emerged. New family recreation centers appeared and in 2004 the first Sky Zone opened, sparking an almost two-decade boom in trampoline parks.

A 2019 attempt to go public with Chuck E. Cheese’s parent company collapsed again, and in June 2020 the chain filed for Chapter 11 bankruptcy after seeing prolonged store closures during the pandemic . Pre-pandemic competition had also emerged from other active gaming companies, including trampoline parks, laser marking facilities and Dave & Buster’s.

McKillips, who joined the company in January 2020, has spent much of his tenure dealing with the double chaos of the pandemic and financial restructuring.

“Market conditions are something we treat like any other family entertainment business,” he said.

The chain rolled out of Chapter 11 in December and still has over 500 Chuck E. Cheese restaurants around the world.

Part of the endurance, McKillips says, is the sympathy of Chuck E. Cheese himself, as well as his band mates such as Mr. Munch, who looks like a cross between McDonald’s Grimace and Barney’s BJ, the mustached chef. Pasqually and avian musician Helen Henny. The characters, he said, are recognizable by generations of children and are a constant amidst changing trends and attractions.

“It’s about the positivity that the characters bring,” he said. “Everything revolves around this celebration. These characters are having fun.


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