Chuck E Cheese’s New Family

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Meet Chuck E Cheese’s new family – the family restaurant chain has been bought by Apollo Global Management, a global private-equity firm. A deal was confirmed for about $950 million on Thursday with a quick closeout to deter competitors and other offers.

Chuck E Cheese’s new family is diverse in its holdings. This is Apollo’s latest addition to their wide-ranging portfolio, which includes cruise ship operators, casinos to an indoor water park operator, Great Wolf Resorts, which they won in a competitive bidding war back in 2012.

Chuck E Cheese’s famous family chain began in 1977 at a single location. It was built focusing on special events and particularly birthdays. According to the Wall Street Journal, in recent years, the CEC Entertainment Group had begun struggling to draw in regular traffic, with profits falling in 2012 to $43.6 million. Chuck E Cheese’s new adopted family may be able to give it the refreshed opportunity it needs to get its cheese back.

The current family entertainment market has changed, drawing families to locations that offer more adult-friendly options and a wider range of activities for children. According to restaurant analyst Lynne Collier, “There are a lot more choices today than there were 10 years ago.”

Nolan Bushnell – The Original Cheese

Harkening back to its earliest days, the restaurant chain was originally founded by Nolan Bushnell, a co-founder of Atari, a video game-based company. Chuck E Cheese’s was a pet project of his while he was still working at Atari, when he realized that he was on the wrong side of the money-making equation. He had been selling coin-operated games for at the most, $2,000 each, where he calculated that their lifetime operations pulled in more than triple what Atari was selling them for.

As Bushnell told The Atlantic, “It didn’t take rocket science to [realize I was] on the wrong side of the equation.”

The old adage “location, location, location” was the turnkey to his pet project that would allow him to feature a large arcade with food being “almost as an ancillary service” that would draw the crowds into a location without trying to compete with his Atari job’s clients.

Bushnell was not a restaurateur when he opened the first location, but he was clearly strategic in the reasons he chose pizza as the base food in the Chuck E Cheese operations. The primary reason was that there weren’t “too many ways to screw it up. If the dough is good, the cheese is good, and the sauce is good, the pizza is good.” He knew intuitively that simple was better.

As for the famous Chuck E Cheese mouse mascot? His idea for the mascot originated at a trade show in Orlando, where it was never a mouse to begin with. He ran into a group selling wearable costumes and saw a coyote costume he decided could work as his animated mascot. His team, however, mistakenly thought the coyote was a rat – and thus the original name for his restaurant was Rick Rat’s Pizza.

That name didn’t scamper well over Bushnell’s marketing team, as they shot down the name immediately. As Bushnell recalled their words, “You can’t call a restaurant a rat place! People think rats are dirty. It’s not going to work.”

So he obliged to their advice, stating his one and only requirement – that the name had to be happy. And a week later, the team did come up with not happy, but triple happy: “Chuck E Cheese, you can’t say each one of those [words] without smiling.”

Now given the Apollo group’s new family stake in Chuck E Cheese’s operations, there may just be a little something more to chuckle about in the near future.

By Joscelyne Yu

The Atlantic
The Wall Street Journal

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