David McKillips, President and CEO of CEC Entertainment, discusses the ongoing Chuck E. Cheese brand refresh, new locations, updated play spaces and more.
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00:00With Red Lobster and TGI Fridays declaring Chapter 11 earlier this year,
00:04it appeared America's casual dining scene was largely a casualty of our evolving tastes.
00:12Then suddenly a shift and nostalgia was back with the return of Chi-Chi's, among others,
00:18the Mexican restaurant back 20 years after closing its doors.
00:22So, what's next in 2025?
00:25David McKillips is the CEO of Chuck E. Cheese, a place this guy grew up on.
00:30They have 400 plus locations in 45 states in 17 countries, which many people might be
00:36surprised to hear.
00:37David, thanks for joining us.
00:39Good to have you.
00:40What do you see in the category in 2025?
00:43You've been here through all that.
00:45Oh, I have.
00:46I've been here for five years.
00:47Dave, thanks for having me on and welcome to the brand new Chuck E. Cheese.
00:51We're in the process of just finishing a three-year journey of remodeling every single
00:56location.
00:57For 2025, we think families are going to be coming out and really enjoying.
01:01And we've had to change our business model to meet today's consumer who's been really
01:06strapped with high inflation and bills and less time to go out as a family.
01:10But we think we're really well positioned for growth in 2025.
01:13I want to dive deeper into that, David, but I am just curious, your sense of that casual
01:18dining category, given the amount of bankruptcies we've seen in the last year or two?
01:23Well, I think that with grocery prices now coming down and more value offers, both at
01:30QSR and casual dining, you're going to see a return back to families going out as a group
01:36and enjoying each other.
01:37So I think the category is well positioned.
01:40You know, for us, we're one of the largest pizzerias in the entire company, but we really
01:43don't sit in the restaurant space.
01:45We are much more a family entertainment and, you know, our competitive set, our eatertainments
01:51are what they call where families are going out, they're going to eat and play.
01:54OK, so let's talk about that remodel, the rebranding.
01:57Where does it start?
01:58What was move number one?
02:01Move number one was to do a tremendous amount of insights, which the company did.
02:05And we looked at what was most important to moms and kids.
02:08And it had to be bright and beautiful, clean.
02:11And obviously, we had to made it through the COVID years.
02:14We had to make sure that cleanliness was was so top of mind.
02:17And that's both as soon as you walk through the door, all the way into the kitchen, the
02:20bathroom, the game room.
02:23So that was really important.
02:24Then after the insights, we really looked at why are people coming to Chuck E. Cheese?
02:29And that's evolved over the years.
02:30But the number one reason is for parents and kids to play together and to have a celebratory
02:37moment together and just to come out and play games.
02:40In fact, the majority of our revenue that we drive here at Chuck E. Cheese comes from
02:44our gaming and entertainment.
02:46The last thing, which is a big part of our entire remodel strategy, is what you can see
02:51here over my shoulder is we moved into active play.
02:54You know, COVID, we learned a lot during COVID when we were shut down.
02:57The parents are saying, I want my kids to come out not just to play games and have a
03:01family time together, but they wanted active play.
03:04So we, this year, installed over 450 active play trampolines in every single one of our
03:10locations.
03:11And these are built for three, four, five-year-olds.
03:13You have to be under 56 inches.
03:14So they're built.
03:15So now we've got games, we've got new entertainment, and now we've got active play.
03:19Does that mean you and I cannot get on the tramp, David?
03:22Because I love a good tramp, but I'm a touch over 56.
03:26We can't go on there, but it's built for kids.
03:28In fact, everything that we do here at Chuck E. Cheese, we try to do through the eyes of
03:32a five, six, seven-year-old.
03:34And that's what we do.
03:35Our games are built where the cabinets are a little bit shorter to make sure that we're,
03:38you know, we're speaking directly to our guests and everything is laid out from our menu to
03:42our games to our entertainment for a wholesome, safe family experience.
03:46So David, as much as I talk about the casual dining scene, are you more a part of the experience
03:50economy, that shift that we have seen coming out of COVID?
03:54Absolutely.
03:55100%.
03:56So, you know, we look and act like a restaurant, but in reality, we are all about the experience.
04:01People are coming here to have these great moments, to celebrate the birthday, celebrate
04:05a special event.
04:06But now we've moved and evolved the business where we're looking at more of past structures
04:10and membership structures, you know, more so like the theme parks, and that's working
04:15really well for us.
04:16You mentioned food inflation, which was the biggest factor on our economy the last couple
04:21of years.
04:22And it did interesting things to the dining consumer led by the value wars in your category.
04:27Is that where you have to compete on a price point by keeping that food low priced?
04:33We do.
04:34So look, people come here for the games.
04:36They come here for the entertainment, but they stay for the food and we have scratch
04:39made pizza.
04:40It's absolutely a phenomenal product, but it's a premium product.
04:42So we had to look at our business model and our sales strategy.
04:46And that's what the introduction of our pass and that pass is basically an agreement with
04:51the consumer to say, you're going to come here and you're going to visit us more often
04:55and in exchange, we're going to give you valuable discounts.
04:58So we just didn't drop prices.
04:59We're very selective in terms of who we're awarding that discount to.
05:03So the more you visit, the more of a discount you you're able to get.
05:06So now we have a summer pass, a fall pass.
05:11Now it's moved into a holiday.
05:13And then we launched a 12 month membership where you get 20, 30 or even 50 percent off
05:17your F and B. That's driving value and that's driving visits.
05:20All right.
05:21The food will keep you coming back.
05:22I did grow up at Chuck E. Cheese, as I pointed out, brought my kids there 15 years ago.
05:29But I'll be honest, I don't have great memories of the food that was a long time ago.
05:33Has it been upgraded?
05:35It sure has.
05:36In fact, everything about this brand has been upgraded.
05:39This is the all new Chuck E. Cheese.
05:40When you walk in the door, it's bright, it's beautiful.
05:43We've got new entertainment.
05:45We've got you can see behind me now we took out the animatronics and we put in digital
05:50dance floors, floor to ceiling jumbotrons and all new CEC media networks.
05:55Then we looked at the menu.
05:56We have great pizza.
05:57It's scratch made every single day.
05:59We grate our own cheese.
06:00We're making our own dough every single day.
06:02It is it's a it's a wonderful menu.
06:05And then we looked at for the parents that are coming.
06:07We launched a grown up menu this this year.
06:09And that's, you know, incredible pizzas.
06:11You're talking about meatball and spinach.
06:14We've got something called the spicy piggy, which is which got spicy barbecue sauce and
06:18onions and and and pork.
06:21And it's it's something that our older guests love just as well.
06:25And of course, we got lots of treats.
06:26And that's what kids because this is a day of indulgence.
06:28You come out to Chuck E. Cheese.
06:29Hey, I like some treats.
06:30Get some jalapenos or some hot cherry peppers.
06:33I recommend the adults like you mentioned that animatronic band.
06:37It's led by the giant mouse that many of us grew up with.
06:41They got the hook.
06:43Well, we made a strategic decision, we looked at the insights and look, kids are growing up
06:46differently and they're digesting entertainment differently and they want new entertainment all the time.
06:51And that was part of our legacy.
06:53And it still remains.
06:54We've got three locations that still have the animatronics.
06:56We preserve them. We make sure that they're running beautiful and we've got a great show.
07:00But it was time for us to change and evolve our business.
07:03And we adapted technology.
07:05We now have these digital dance floors and the screens.
07:09We can have new content at Chuck E.
07:10Cheese every single day.
07:12In fact, every two hours you're seeing the latest music videos.
07:15We've got great content, interactive dance floors that the kids are running around and playing with.
07:20So, you know, kids are growing up digitally.
07:22They're growing up and they're looking at new content, bite sized content.
07:26That's how they're growing up.
07:27So we needed to meet that demand for the five, six, seven, eight year olds.
07:30And now we've got new content all the time.
07:32Yeah, they are young.
07:33But I was going to ask you, is this thing right here your biggest competition?
07:37Is it harder now to get kids off of their whatever their device is, iPhone, and get them to be active?
07:44It's it's it's not here.
07:46You know, we've embraced all kinds of different active play.
07:49I talked about trampolines.
07:50We are testing right now a brand new obstacle course in 50 stores, which has been a home run already.
07:55But then if you look at some of the games over my shoulder here, you know, they're interactive.
07:59It's not something that a phone or an Xbox or or anything else like that can replace at home.
08:04So this is something where you really have a unique experience.
08:07And what we have seen in our insights is this is this is the platform where kids and parents play together.
08:14All right. What about your international footprint?
08:16Many of our viewers might be surprised to hear you're in 17 countries.
08:21We've got a great presence in the Middle East and South America.
08:25We've got incredible franchises.
08:26That's 100 percent franchise capital light strategy for us outside the US.
08:31And we've got our target on Southeast Asia, China, Europe.
08:36There's some great markets that would really embrace a concept like a Chuck E. Cheese.
08:40All right. I understand you have a friend there,
08:42a special guest that might be able to pop on and make a quick cameo during this segment.
08:47And, you know, we are we do we love cheese.
08:49So who you got?
08:51Well, I've got Charles Entertainment Cheese.
08:53He is the greatest mouse in entertainment.
08:56So it's Charles.
08:59Hey, Charles, I've been calling him Chuck all these years.
09:01Do I have it wrong?
09:03You got it. It's Chuck E. Cheese.
09:05A lot of people don't know his middle name is Entertainment.
09:07So he is the original mouse in entertainment and
09:10has the ability to entertain 30 million people that come through our doors every single year.
09:16It's been it's been a great year.
09:17We're really happy.
09:18We just printed our eight straight month of positive same store sales.
09:22So what we're doing is really clicking with the consumer.
09:25We're providing value, great entertainment,
09:27and we're really excited about the new year as well.
09:29And Charles is looking good.
09:30And that Santa hat just a couple of weeks away from Christmas.
09:33I really appreciate it.
09:34David McKillop, CEO of Charles Chuck E. Cheese.
09:38Good to see you, my friend.
09:39Thanks, Dave.
09:40All right. Take care.