Chuck E Cheese Case Study A Chuck E Cheese Case Study: The Struggle for Constant Relevance Today and the Utilization of a New Marketing Strategy By: Melinda Knudtson Principles of Marketing Lindenwood University Dr. Judy Eberhark Chuck E Cheese Case Study Purpose: In this case study I will be examining the Chuck E Cheese family dining and entertainment chain and the current situation. I will dive deeper into the new marketing strategy involving market segmentation and how the company plans to appeal to a new audience group, stay relevant, and increase profits. From the context of information I present within this case study is the result of my thorough examination and my analysis of abundant research studies, surveys, questionnaires and annual reports from 2010 to 2024. I even examined 1st hand the resturaunt chain by surfing around on the company website. Conversely, with the newly hired CEO, I will discuss some of my ideas and suggestions for the company and to increase profits. These sources include surveys, questionnaires, research papers and annual reports. Brief Overview: Many of us remember the iconic mouse from when we were children, some of us played there on a few occasions and some even had birthday parties there. Its hard not to recognize the establishment known as a place “where a kid can be a kid,” since their opening debut in 1977, but not without a few struggles over the years (Masunaga, 2021). Most recently ‘Chuck E Cheese’ filed for a Ch. 11 bankruptcy back in 2020 and, like many indoor dining establishments, are still picking up the pieces after the effects following the global pandemic. Now, Chuck E Cheese is looking to increase sales and are in the process of implementing a new marketing strategy, known as market segmentation. With this new strategy, the company hopes to switch their target audience away from children and towards the parents. The company is now trying to stay relevant in a world where kids are glued to their phones and parents can find their children Chuck E Cheese Case Study countless free game options, so what can Chuck E Cheese do to bring customers back into their stores? How can these companies begin to bring in customers when kids don't even play outside anymore? They hoped that their new CEO would know. Framing the Case: The new CEO, David McKillips, is faced with these challenges of trying to resurrect life into a dated business model, but this wasn't always the case. The company took off soon after the opening of their first venue in 1977, and within 10 years Chuck E Cheese had grown to have over 500 locations (Chuck E Cheese, 2024). It began with the “original concept [was] to combine dining with the feeling of being at a carnival,” according to founder Noland Bushnell, who also co-founded the Atari a few years prior (Gair, 2020). CEC has become best known to parents and their children for the awesome birthday parties, the ball pit, the tunnels, the mass of arcade games all to win as many tickets as possible. The survival of Chuck E Cheese this far is that they have constantly been able to adapt unlike many of their competitors, such as Discovery Zone, but the biggest problem has stemmed from the COVID-19 global pandemic (Gair, 2020). This is one reason for their current state of affairs; $1 billion in debt which costs the company 10% of total revenue to be spent on interest payments alone, totaling $29 million (Maze, 2020). Despite that, plenty of bondholders and buyers have been willing to invest in CEC, some willing to invest up to $100 million to keep from filing bankruptcy (Maze, 2020). In light of these facts, investors continue to find this company valuable, so there must be money left to be made. Chuck E Cheese Case Study Framing the Case: With the goal of becoming a profitable company once again, the board at Chuck E Cheese is going to implement a new marketing tactic. For the first time, the company is going to leave behind their advertisements geared toward children and focus on the neglected half of their customer base; the parents. Appealing to the parents has become their main focus since the company began its remodels and upgrading. With the focus on the parents, some of these updates include finding ways for parents to stay entertained while their children can play. CEC has updated their menu and added more diversity and added items that appeal to a more sophisticated palate (Fantozzi, 2021). The company has also undergone a full remodel inside and out, giving the venues a more modern and contemporary feel. They have expanded beyond the physical play places by adding frozen dinner items at your Kroger grocery stores and started to offer a birthday party package that you can do at home (Mansunga, 2021). According to various studies, including the US Family Dining Trends Market Report 2022, it states that although families favor restaurants, they are spending less money so parents prefer to dine at home and would rather buy something pre-prepared from the grocery stores (Mintel, 2024). Additionally, Chuck E Cheese has been adapting to the current trends in many other ways, for instance creating a menu with more variety and fresher options. The company even tried to be more accessible by selling takeout on apps like grub hub and Uber, but they were not selling under the name Chuck E Cheese. Instead, they sold under the name Pasquale's Pizza and Wings, which was a side hustle of the company in attempts to increase revenue (Gair, 2021). Were they ashamed to use the Chuck E Chuck E Cheese Case Study Cheese name? It has been seen countless times throughout the years that CEC is very adaptable and conscientious of current market trends and outlooks. Other company strengths include an iconic brand, resilient and adaptable, clean and safe locations, affordability, and very profitable games. As well as the removal of paper tickets and turned it all digital, which has saved the company $6- $7 million per year. CEC has also designed different play options, for instance an “All You Can Play” (AYCP for short) which allows kids to play for one set price as many games in a certain amount of time (Masunaga, 2021). They have added other game play options and discounts but have also created “Sensory Sundays” geared toward children with disabilities and have added a trampoline area (Chuck E Cheese, 2024). This company makes far more in profits than a regular dining restaurant (Wood, 2024). I believe that their new marketing strategy is very smart and vital to the company’s recovery. Assumptions: In this case study, I am basing my recommendations under the assumption that CEC will have the means, money, and time to follow through or enact my recommendations. I also assume that majority of people know the CEC brand and the assumption that employees are happy, morale is high, and that CEC treats them well, so not only do we have good employees that are excited to make the company better, but also that we have the correct number of employees needed at each location. Theat they are not shorthanded, nor overworking current employees. I assume that advertisements are currently all paid for and that the running of operations at each store in both FOH (front of house) and BOH (back of house) are running at optimal levels and Chuck E Cheese Case Study that the store is running effectively, efficiently, properly, and with little to no issues or problems. I also assume that Chuck E Cheese has no other pressing problems or concerns that need attention or that will affect this study or the outcomes (recommendations). Thus, the CEC company has been open with us and completely transparent and honest. Furthermore, I assume we know all the issues the company is facing and that nothing else could come to light or happen that would alter the outcome of the study and the effectiveness of my recommendations. Addressing Issues and Opportunities: It has been no stranger throughout this study that the new CEO is under immense pressure and has many challenges ahead of him. The first challenge was the initial financial problems of the company, which I assume was a major reason for hiring McKillips. While the second challenge became the pandemic in the 2nd quarter of 2020 soon after he was hired (Maze,2020). Now he is left with challenges like creating the menu and finding the right foods to add to it that will offer enough variety for the whole family and offer tastes that parents will want to try and want to come back for. Second, the new CEO will need to figure out how to adapt the company to the current trends, such as offering drive thru or online ordering (under their own company name) and adding other special features to their stores that continues to show their new target audience; the parents. Some external factors that will present challenges are that with inflation, people are scaling back on the non-essential spending habits (Mintel, 2024). Another will be how to engage the attention of the kids, and how to make CEC “cool” again. Chuck E Cheese Case Study Recommendations: If I were to offer Mr. McKillips a few suggestions, I would start by concentrating on the audience of the Market Segmentation strategy and on customer experience. That being said, I would improve the menu even further because, despite all the articles alluding to almost exclusive focus being on the menu (which I thought their focus was too much), it was clear after visiting the Chuck E Cheese website that the menu still needs major improvement. Especially if they hope to gain the parents' approval and desire to come back to the establishment. The CEC website showed items like salads and wings, but i believe adding some gourmet burger options, maybe some fish tacos, calamari, and pastas would do the trick. I would make the menu feel more like a bar and grill with its’ food options, then a slightly improved Chuck E Cheese menu. Next, upgrade the employee uniforms and music at the locations. A few of my favorite ideas aimed at increasing parents' desire include making a room that is just for adults, where they can sit back without any kids around and get some drinks and better music in the background. I am aware that CEC tried the alcohol option in the past and according to the LA Times only led to altercations (Masunaga, 2021), but I would still try to bring it back. I would incorporate adult game night or bingo night, where winners get cash prizes (and could be held in the adult only section), and I would utilize the stages currently in the CEC venues to play live bands (but with the amps not turned up so loud). Live bands could be geared towards parents and towards kids at different times. Still focusing on the parents, I would add comfortable seating options as they spend most of the time sitting down. To continue with the market segmentation strategy and in Chuck E Cheese Case Study addition to adult-themed events, I would have adult-geared promotions, like date night, happy hour or adult gathering discounts. Another addition inside the venues would be to bring back the tunnels. As a child, I wasn't huge on the games but enjoyed the tunnels and I think many kids in the same family experience this too. Therefore, if I was a child now, I would not be excited to go, although my brother would be, and as a parent you choose places where all your kids will have fun. If they all won't find a place fun, then chances are that family won't come spend money at your establishment. I would also expand on the at-home birthday party packages and, in the spirit of Chuck E Cheese, would have fun elements like bounce houses or games of some kind. The key is to focus on making a place where the parents would want to go sit or want to enjoy that delicious meal again, with the after thought of it being that the kids can have fun and play. If CEC can develop a plan where the kids become the afterthought, and the kids play becomes a bonus reason to go to their establishment, they will continue to thrive as a business. Conclusion: Considering the problems that Chuck E Cheese is currently facing, I believe they are on the right track and headed in the right direction with the utilization of the marketing segmentation strategy. It is without doubt in my mind that focusing on the people who pay for and drive to the venue will be the key to lasting success. Their strategic plan, which hopes to increase traffic through marketing to parents via TV and expanding their field market to drive in store spending by quickening the checkout process and increasing game offerings and incentives. Through their modernization of their venues and remodeling, CEC hope to bring more families through the doors each Chuck E Cheese Case Study night of the week. With the new CEO and his qualifications and previous experiences at other family entertainment companies like Six Flags (Chuck E Cheese, 2024), he offers new insights and a fresh perspective that will help the overall profitability of Chuck E Cheese. Now with him added to the CEC team, they will embark on a new chapter; one in which I believe they will be successful in. Chuck E Cheese Case Study References: CEC Entertainment, Inc. (2019). In sec.gov (No. 48–0905805). United States Securities and Exchange Commission. Retrieved March 25, 2024, from https://www.sec.gov/Archives/edgar/data/813920/000081392020000015/cecfy20 1910-k.htm#s1A49D519F06259899C483099E35E465B Chuck E. Cheese. (2024, January 29). Chuck E. Cheese: kids birthday parties, pizza & arcade games. https://www.chuckecheese.com/whats-new/ Client. (2021, August 12). U.S. restaurant Industry: Current state, Trends & Outlook -. https://www.gorspa.org/commiq-us-restaurant-industry-current-state-trendsoutlook/ Fantozzi, J. (2021, January 4). Chuck E. Cheese parent CEC Entertainment emerges from bankruptcy. Nation’s Restaurant News. Retrieved March 26, 2024, from https://www.nrn.com/family-dining/chuck-e-cheese-parent-cec-entertainmentemerges-bankruptcy Gair, L. (2020, July 15). Chuck E. Cheese Files for Bankruptcy After 43 Years of Business, but Who’s Surprised? Study Breaks. Retrieved March 26, 2024, from https://studybreaks.com/thoughts/chuck-e-cheese/ Masunaga, S. (2021, November 22). How do you make a 44 year old animatronic rodent appeal to today’s kids? Los Angeles Times. Retrieved March 26, 2024, from https://www.latimes.com/business/story/2021-11-16/what-happened-to-chuck-echeese Chuck E Cheese Case Study Maze, J. (2020, June 23). A look at the future of Chuck E. Cheese. Restaurant Business. Retrieved March 25, 2024, from https://www.restaurantbusinessonline.com/financing/look-future-chuck-e-cheese Mintel. (2024, February 26). US Family Dining Trends Market Report 2022. Mintel Store. https://store.mintel.com/report/us-family-dining-trends-market-report Wood, A. (Director). (2024). Restaurant Industry Trends Report 2024. In KPMG. KPMG LLP. Retrieved March 25, 2024, from https://kpmg.com/kpmgus/content/dam/kpmg/pdf/2024/report-restaurant-industry-trends.pdf
