At first glance, $1.3 billion seems like a lot to pay for a kiddie-birthday-party giant that has seen better days. So what will private-equity firm Apollo Global Management, which announced the merger this morning, do to recoup that kind of investment?
Here’s a possible answer: Send Chuck to Russia. And other former Soviet-block countries. At least, that's one scenario that occurs to Chris Christopher, who follows consumer behavior for IHS Global Insight.
"Those countries didn’t have very good restaurants, until the Berlin Wall fell down," he says. "And now that things are very open, and people have a little more spending money, they do dine out."
A private equity company could have the deep pockets and the flexibility to let Chuck try his luck abroad. And to anyone shopping for a U.S. restaurant brand to export, Chuck E. Cheese is a relative bargain.
Back at home, the company has seen its same-store sales fall in the last few years, even as the company has tried various updates. The trade publication Nation’s Restaurant News keeps a “top 100” list. In its most-recent rankings, Chuck E. Cheese fell from 91 to 99.
Editor Ron Ruggles, who has been reporting on the chain for 20 years, points out that the entertainment side of the enterprise— the giant mouse, the video games, that kind of stuff— has seen the competition get much tougher in recent years.
"So much entertainment is coming into the home now," he says. "It is difficult to offer something that’s different from what people can get."
So what distinguishes this pizza-slinging mouse from his competition? If nothing else, a storied past. What we learned about Chuck E. Cheese today:
1. He was buddies with Steve Jobs. Before venturing into the pizza-theater business, CEO Nolan Bushnell founded the video game company Atari. There, he was Steve Jobs' boss when Jobs worked for Atari as a technician. In Bushnell's latest book, "Finding The Next Steve Jobs," he advises entrepreneurs to think outside of the box when hiring, with interview questions such as: "What is the opposite of a table?" (Correct answer: "Nothing, as far as I know. Certainly not a chair.")
2. Perhaps "a kid can be a kid," but a rat can't be a rat. In his early days, Chuck E. Cheese was a New Jersey rat who smoked cigars. According to the New York Daily News, executives considered naming him "Rick the Rat," but changed course when a PR firm suggested customers might be put off from their pizza. In 2012, Chuck E. was officially made over into mouse...
3. ...a pop-punk mouse. He was most recently voiced by Jaret Reddick, lead singer of the band Bowling for Soup.
4. He's spinning off into store-bought shredded cheese. For customers who really like the pizza.
5. He hasn't always had run of the anthropomorphic-animal-with-a-pizza-arcade market. From the July 1982 edition of Fortune Magazine: Billy Bob Brockali, a "quizzical" bear, headlined at competing ShowBiz Pizza Place through the early 1980s. But Billy Bob and his parent company couldn't keep up. They declared bankruptcy in 1984, and merged with the mice in 1989.
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