Chuck E. Cheese plans to go public after merger

Dive Brief:

Queso, parent company of CEC Entertainment, and Leo Holdings, a publicly traded special-purpose acquisition vehicle, are merging, according to a press release. CEC Entertainment owns Chuck E. Cheese.
Following the close of the transaction, Leo plans to be renamed Chuck E. Cheese Brands and will be traded on the New York Stock Exchange.
CEC's current executive management team will continue to lead the company while Leo Holdings chairman and CEO Lyndon Lea will join the board as co-chairman. Queso's controlling stockholder, Apollo Global Management, will continue to be CEC’s largest shareholder with about 51% of ownership of the company after closing.

Dive Insight:

This merger seems to be coming at a good time, as CEC Entertainment CEO Tom Leverton hinted during the acquisition webcast that the company may also buy other family entertainment brands, some that might be aimed at new, older demographics for the company. Peter Piper Pizza, which it acquired in 2014, targets adults with older kids of about 10- to 16-years-old. Comparatively, Chuck E. Cheese is targeted to kids 2- to 12-years-old.

Eatertainment restaurants have been undergoing a bit of a revamp lately, and Chuck E. Cheese has been no different, investing in remodels and a revamped token and pay system. Dave & Busters underwent a transformation after declining same store sales peaked at a negative 5.9% in Q4 2017. The adult eatertainment chain has been revamping and trimming its menu and focusing on rolling out games related to popular movies, and its paid off — with revenue and same-store sales rising during Q4 2018.

Chuck E. Cheese focused on improving its offering after it realized that trampoline parks and bounce houses were opening up in cheap real estate abandoned by restaurants and retailers, taking away business, according to Restaurant Business. A few years ago it did away with its token system and created a Play Pass that uses timed play or points. It’s also been remodeling locations and improved its menu, Leverton said, which could give it a competitive edge.

These changes appear to be working. CEC has posted positive same-store sales over the last four quarters, with the company expected to report a same-store sales increase of 7.7% for the first quarter of 2019, according to the press release.

Leverton said the company may look into refining pricing to its Play Pass program and adjusting price depending on the weather or traffic. It currently has a price grid that takes into account cost of living in certain areas. The platform has also been a great way for the company to see which games are being played and how often. The company is looking into increasing ticket payout since it realized that parents tend to spend more when their kids win tickets.

Chuck E. Cheese also has plans to offer mobile ordering, WiFi in all locations, augmented reality games and mobile games as well as licensing of merchandise, Leverton said. Considering the chain has gained some positive momentum after several years under a new strategy, its future appears to be bright.