The long and dizzying journey that led to the bankruptcy of Chuck E. Cheese

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If Elon Musk or Bill Gates were to open a restaurant full of the coolest new technology, the interest might be less than the attention Chuck E. Cheese captured when he first turned on his animatronics in 1977. 43 years that followed were an attraction in their own right, culminating in the family brand filing for Chapter 11 bankruptcy protection Thursday morning.

The past few years have not been a happy part of history. Once publicly owned, and sometimes a Wall Street darling, the brand intended to return to the equity market last year through a reverse merger. It was canceled long after negotiations, leaving the channel in limbo. Burdened with around $1 billion in debt and forced by dining room closures to forego the on-site entertainment experience that was its primary point of differentiation, the family-focused operation said it would use the break from pressure from creditors to regain a foothold.

It also offers the brand some potential respite from the bad publicity of recent weeks and years. As Chuck E. Cheese struggled to stay solvent during the pandemic by cutting staff and other costs, he forged ahead and paid hefty bonuses to his top executives, even as many C-suite restaurants voluntarily took pay cuts.

This was around the time Chuck E. Cheese came under fire on social media for launching a virtual concept called Pasqually’s Pizza & Wings. The hope was that Pasqually’s would increase in searches for pizza on third-party delivery service apps and websites such as DoorDash and PostMates. Critics accused the company of selling the same old Chuck E. Cheese pizza under a pseudonym to deliberately mislead consumers.

The concept has also appeared frequently in recent years in reports of fights between parents who visited the concepts with their children. Perceived slights towards young people often sparked an altercation, leading to promises to post security guards in some branches.

Today’s Louisiana bankruptcy attorney filing is not the first time a break from daily pressures has been needed. The concept was founded as Chuck E. Cheese’s Pizza Time Theater by Nolan Bushnell, the tech tinkerer who launched Atari after inventing Pong, or what is generally considered the world’s first video game. It was a module that consumers connected to their TV so that two players could scroll a white bar up and down to throw a blip-shaped ball back and forth to simulate a ping- pong.

Bushnell, who had worked in the amusement park industry, came up with the idea while still at Atari to pack a restaurant with arcade-style activities such as Skee-Ball, as well as Next-Gen of video games. The pizza would be sold to feed families and generate another source of income.

A fan of The Walt Disney Co., he also included animatronic characters that sang and danced on a dining room stage. He wanted a coyote to star in the mechanical show and planned to call Operation Coyote Pizza Time. But the automated figure that was created to fit Bill looked more like a rat than a coyote. The mascot was named Chuck E. Cheese’s and rebranded as a mouse rather than a rat.

The prototype was owned by Atari, but it bowed out to focus on video games. Bushnell bought the rights in 1978 for $500,000 and convinced fellow Atari executive Gene Landrum to resign with him. Bushnell was CEO and Landrum served as president of the new catering company.

They started building units in California. To jump-start development elsewhere, Bushnell struck a 280-unit, 16-state development deal with a successful Kansas hotelier named Robert Brock, the founder of Residence Inns. Brock loved his experience with the restaurant concept so much that he decided to start his own similar business, called ShowBiz Pizza Place.

Similarities between Pizza Time and ShowBiz have locked the two companies in legal skirmishes for years. Lawyers continued to be enriched by the legal fight until a $50 million settlement was reached in 1982.

By this time, video games and animatronic mice were losing their novelty, and entertainment technology had advanced significantly beyond Pong. Sales have dropped significantly for both food and pleasure concepts, presumably with competitors such as Bullwinkle’s. Yes, it featured an animatronic moose.

Pizza Time had sold itself to the public in 1981. As video gaming became a home business and the national economy collapsed, taking restaurant sales with it, Bushnell resigned as CEO in 1984 and The now-public company has filed for Chapter 11 bankruptcy protection.

In 1985, it was acquired by ShowBiz in a deal valued at $35 million. The combined operations became ShowBiz Pizza Time Theaters, the operator of restaurants all bearing the Chuck E. Cheese’s name.

A Steak and Ale veteran named Dick Frank was hired with much fanfare to turn the chain around as CEO. His success in engineering a rebound resulted in an increase in his annual salary to $1 million, which was believed to be a high mark for chain CEOs at the time.

These would prove the salad days of the pizza concept. Frank updated the concept attractions, reformulated the pizzeria, and renovated the stores with a design that made their interiors more visible from the outside. The company was renamed Chuck E. Cheese Entertainment Inc., which was later shortened to CEC, its current name.

Reinvigorated, CEC acquired the chain of 13 Discovery Zone entertainment units. It would acquire Peter Piper Pizza, a regional restaurant and gaming concept, in 2014.

But the concept would continue to struggle with obsolescence. He turned the character of Chuck E. Cheese into a rock star and phased out animatronic stage shows. In 2017, it attempted a revamp as Chuck E. Cheese Pizzeria & Games, with advancements such as an open kitchen and the replacement of game tokens with credit cards. The test never extended beyond a handful of units.

By then, private equity firm Apollo Global Management had purchased CEC from its public shareholders for $54 a share, or $950 million. About five years later, Apollo sought to bring the company back to the public markets by agreeing to a 2019 merger with Leo Holdings, a public company in which Apollo had a 51% stake. The case was settled last July.

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