What Businesses Going Through Bankruptcy Can Learn From Chuck E. Cheese

In 2020, Chuck E. Cheese ran out of tokens. The pizza and entertainment company filed for Chapter 11 bankruptcy protection as the COVID-19 pandemic brought its in-person, interactive business model to a halt. Following complex legal procedures and a large number of filings, the company emerged, having shed $705 million in debt and improving its financial position.

Chuck E. Cheese´s Mall Aventura Plaza Trujillo.jpg
By Eteixido – Own work, CC BY-SA 4.0, Link

That’s good news for kids who miss playing Skee-Ball and earning prizes. Other companies going through bankruptcy can learn from Chuck E. Cheese and how they handled their proceedings. Here is what businesses going through bankruptcy can learn from the Chuck E. Cheese bankruptcy:

Restructure Your Business Model, Too

As Chuck E. Cheese took steps to restructure their finances, they also took vital steps to restructure their business model. In light of the pandemic, business leaders determined that it is no longer feasible to operate a high-contact, multiple-touchpoint experience alone. They decided to change their operating model and find new streams of revenue.

For example, the company now offers delivery birthday-party packages at home. A host can order pizza, goodie bags, tickets for future play, tableware and photo backdrops for fun at home. The company is also marketing half-birthday parties and other seasonal parties, like Halloween celebrations. The company also hopes to introduce contactless ordering and e-tickets to reduce touchpoints between employees and guests. A company facing bankruptcy should explore opportunities to shift focus and develop new income streams that may be sustainable for customers in the future.

Right-Size

The company included right-sizing as part of its bankruptcy plan. They said that it’s never their goal to close a location, but they decided to close 47 locations as part of their restructuring. They say they’re working with landlords and exploring all options to keep as many locations open as possible. Other businesses may benefit from right-sizing as a business strategy in light of the COVID pandemic.

Consider the Possibilities of Different Chapters of Bankruptcy

Chuck E. Cheese chose to file for Chapter 11 bankruptcy protection. However, multiple chapters of bankruptcy filing may be appropriate for a business that is struggling because of the COVID pandemic. Explore whether a Chapter 7 bankruptcy, Chapter 11 bankruptcy or Chapter 13 bankruptcy is best. There are different requirements and pros and cons for each type of filing. What is best for you depends on several factors relating to your business and your financial position.

Get Creative With Restructuring Options

Within each chapter of bankruptcy, there are a number of ways to proceed. Careful planning and addressing debt with the help of a team of experienced bankruptcy attorneys is critical to reaching a favorable result. Chuck E. Cheese employed a variety of tactics in order to arrive at a favorable financial position going forward.

The company negotiated for first-lien lenders to exchange their debt for equity in the reorganized company. Also, they used debtor-in-possession financing to raise capital and restructure liens and lending priorities. Companies considering bankruptcy should not stop planning when they choose a chapter for filing. Instead, carefully working through targeted strategies can help the company emerge in a strong position.

Play to Strengths

In its bankruptcy filing and business planning, Chuck E. Cheese is playing to its strengths. Chuck E. Cheese has strong branding with well-known characters, making merchandising and animated features possibilities in the future. Identifying and playing to strengths can help a company find a new and stronger direction after a bankruptcy filing. In addition to branding strength, the company is innovating for touchless ordering and electronic tickets. Also, they are moving from operating entirely on-premises to at-home options.

Chuck E. Cheese Bankruptcy FAQs

Did Chuck E. Cheese file bankruptcy in 2020?

Yes, Chuck E. Cheese entered bankruptcy in 2020. In the midst of the COVID-19 pandemic, the pizza and entertainment company filed for Chapter 11 bankruptcy protection. The company eliminated $705 million in debt and increased liquidity in order to continue operations in a stronger financial position.

Is Chuck E. Cheese going out of business?

No, Chuck E. Cheese is not going out of business nationally. However, up to 47 locations are closing1. Because of the COVID-19 pandemic, more than half the pizza company’s brick-and-mortar locations offered only carryout and delivery services. The company is shifting its business model to respond to the pandemic, including offering at-home options and reducing customer touchpoints.

Is Chuck E. Cheese closing down?

No, as of writing this post in April 2021, Chuck E. Cheese is not closing down. Although they are not closing completely, they have closed 47 locations permanently. The company filed for Chapter 11 bankruptcy protection in 2020. The bankruptcy occurred in the wake of the COVID-19 pandemic, with the company needing to restructure its business model and reduce debts.

Where did Chuck E. Cheese file for bankruptcy?

The Chuck E Cheese bankruptcy was filed in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division. The company’s headquarters is in Irving, Texas, with operating locations throughout the United States.

What is the Chuck E. Cheese bankruptcy case number?

The Chuck E. Cheese bankruptcy case number is 20-331631 (MI).

What is the Chuck E. Cheese restructuring?

The Chuck E. Cheese restructuring is a bankruptcy filing to address accumulating debt. The company eliminated $705 million in debt and increased liquidity through a Chapter 11 bankruptcy filing. As part of the restructuring, the company is changing its business model and working through a new executive board. The company used debtor-in-possession financing to raise capital, giving lenders a senior position for liens on assets.

What legal entities were part of the Chuck E. Cheese bankruptcy?

The Chuck E. Cheese bankruptcy included many different legal entities, including:

  • CEC Entertainment, Inc.
  • Peter Piper Texas, LLC
  • Peter Piper, Inc.
  • SB Hospitality Corporation
  • Queso Holding, Inc.
  • CEC Entertainment Listing

This is not a complete list. The full list of legal entities that are a part of the restructuring is available as part of the Chuck E. Cheese bankruptcy docket.

Sources:

1Aguilar, Matthew. (8 July 2020). Chuck E. Cheese Closings: Full List of Locations That Are Shutting Down. Retrieved 2 April 2021 from https://comicbook.com/irl/news/chuck-e-cheese-closings-locations-that-are-shutting-down/


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