Will Chuck E. Cheeses Survive?

I’m not leading this story with the headline “Chuck E. Cheeses files for bankruptcy,” as it seems to be taken incorrectly by some. Unfortunately, I’ve found that many “readers” on both Facebook and Twitter refuse to actually click on the stories and read them. This modern trend of just reading headlines and forming deep opinions based solely off that tiny piece of information is frustrating and crazy, but nothing that I can change in our society. I guess we’ll see if anyone bothers to read all this, since it is kind of a wall of text.

Yes – the iconic Chuck E. Cheeses has formally filed for bankruptcy – but lets read the story and CEC’s statement before hitting the panic button and jumping off of the roof.

Before quoting the article though, note that bankruptcy is not the same as “closed for business forever.” Many brands have survived the process, which allows them to restructure and save some of the jobs, or come out better than they were previously. No, they don’t save all of them – but some is far preferable to none. Yes, the situation right now is unique for modern society, but again, let’s not panic, as that won’t do us any good.

Now to the important parts regarding Chuck E. Cheeses – let’s look at their statement:

 The Company expects to use the time and legal protections made available through the Chapter 11 process to continue discussions with financial stakeholders, as well as critical conversations with its landlords, to achieve a comprehensive balance sheet restructuring that supports its re-opening and longer-term strategic plans.

Translation: Chapter 11 gives them a chance to renegotiate funding so that they can get better deals on their rent (rent being one of the largest monthly expenses for most arcade businesses).

CEC franchised locations operate under separate legal and financial structures and are not included in the Chapter 11 filings.

While it does not state how many of their locations are franchises, it’s a bit more than a handful. These locations will perform and survive (or close) on a case-by-case basis. Chances of them dropping the CEC name, especially now, is extremely low.

As of June 24, 266 company-operated Chuck E Cheese and Peter Piper Pizza restaurant and arcade venues had safely re-opened, in accordance with all CDC, federal, state and local guidelines. Subject to ongoing negotiations with its landlords, the Company expects to maintain ongoing operations in these locations throughout the Chapter 11 process…The Company also plans to continue opening additional locations each week, steadily bringing more employees back to work.

This part above is essential enough that I added emphasis. Should be pretty clear that CEC is not KO’ed yet.

The Company has filed customary motions with the Bankruptcy Court intended to allow CEC to maintain operations in the ordinary course including, but not limited to, paying employees and continuing existing benefits programs, honoring guest gift cards, and upholding commitments under its franchising and licensing agreements. The motions are typical in the Chapter 11 process and CEC anticipates that they will be heard and approved in the first few days of the Chapter 11 cases.

Again, this is typical, and CEC seems to be trying to do well by their employees. We’re not looking at some kind of Enron situation here, so don’t expect CEC to become a relic like Hollywood Video, unless they don’t change the problems that led them into the debt situation that they currently face. Given that it is a more kid-focused place, I imagine that they need to be more rigorous in cleaning things up than a standard FEC.

Of course, the worry right now is the “second wave” and a potential “second shutdown.” The potential of a 2nd shutdown is a concern as governments grapple with how to get things under control; If it happens, then there is little you can do about it. Some places have also chosen to stay closed if they are able to; Running a route is a real challenge since it isn’t manned to be able to conduct frequent cleaning (I recommend setting up several hand sanitizer stations in those instances).

Will there be a another shutdown happen? I don’t know. By what I can tell from looking at the current numbers, a vast majority of states are on the decline, while threefour states in particular have been an issue (California, Arizona, Texas, Florida). There is fear that other places will begin to increase too, but it’s important to keep in mind that hospitalizations and deaths are different than cases. States have also been taking more focused actions; here in Utah, they’ve identified areas where outbreaks are worse, and have been targeting messaging to reach those parts of the community in an effort to bring infections down. The most positive news out of all this is that deaths are currently on the decline in most states (note you have to click state-by-state on that one). There is also this good medical video that makes the same point, with analysis from a medical professional. Hopefully that’s the trend that continues until it’s at zero, but it can also change at any time.

For our industry’s part, I’ve not heard of a single location that hasn’t been taking every reasonable measure that can be thought of to help keep things clean and safe. If you own and operate a location like I do, then this is the foremost thing on your mind, day-in and day-out. We live in the same society that the rest of you do. We have friends; We have family. We don’t want to get sick and we don’t want to spread it around. I do know a few people personally who caught it, a couple of them had strong cases although didn’t end up hospitalized; A couple of others said they felt fine apart from minor symptoms. So, we’ve been doing all that we can to find a way to do business while keeping things clean & safe.

Many manufacturers have been taking action to adapt. Several have begun producing hand sanitization stations, as mentioned on the blog previously. LAI Games launched an interesting player survey called The Player’s Voice: Arcade Survey that is meant to help locations better adapt to changes in behavior. We recently mentioned that Touch Magix is integrating a pandemic video into their videmption titles.  UNIS also just posted this video of a new disinfecting system called Sani-Care:

Granted, I totally get that the the general public won’t be at ease until there are zero deaths from this or there is an effective vaccine. The question becomes, can a business survive in these conditions, particularly a high-physical contact & social environment? By my personal experience in operating my arcade since I was able to re-open on May 1st – yes. May was super rough, as my revenues were down about 70%. June however, has been a big improvement, where now we’re more around 50% down. This has been enough to keep my head above water, which combined with an Economic Disaster Recovery Loan, means I am not contemplating closing down due to lack of funds any time soon. I’ve also had several regulars return on a frequent basis, which has been a help.

I have also spoke with several manufacturers recently, who fortunately were in good standing before this all took place. Yes, it is possible that the longer this goes on without them being able to sell product that their fortunes can turn. This is also where I think they are wise to branch out a little bit, such as Bandai Namco coming up with official, themed barstools, or the aforementioned PPE/disinfectant products.

Will Chuck E. Cheeses and other chains survive? I believe so – I certainly hope that they find a way out of the woods with the rest of us. Things will certainly look a little different when the dust finally settles, but when that happens, people will still want to be entertained in unique ways. That isn’t going to change, so the question is: Who will still be around, and will they have used this experience to improve?