Chuck E. Cheese, a U.S. restaurant chain with nearly 600 locations, is reportedly exploring a potential sale at a time of growing interest in entertainment-branded real estate.
CEC Entertainment, the parent company of the popular children's party and entertainment venue that has a mouse mascot, has begun working with investment bank Goldman Sachs on an auction process, which could attract buyers ranging from private equity firms to rival Dave & Buster's, according to a Reuters report, citing "people familiar with the matter." CEC Entertainment and Dave & Buster's Entertainment did not immediately respond to media requests from CoStar News.
Chuck E. Cheese is telling would-be buyers it expects to generate $1.2 billion in revenue and $195 million in earnings before interest, taxes, depreciation and amortization this year, according to Reuters. Goldman Sachs also did not immediately respond to an interview request from CoStar News.
There's been an investment rush in recent years to develop kid-friendly entertainment venues that also cater to adults, said Bob Young, executive managing director at Dallas-based retail real estate brokerage Weitzman. Young closely follows the industry but is not directly involved with Chuck E. Cheese or Dave & Busters.
Chuck E. Cheese was founded in the late 1970s as what was then an innovative concept bringing pizza, games and entertainment under one roof.
"Chuck E. Cheese isn't a new concept," Young told CoStar News. "But it had the appearance of being way ahead of its time as it relates to entertainment and dining then."
The appeal for parents to take a break and grab a slice of pizza while their children are entertained in a contained environment makes it a family destination, Young said.
"From pickleball to ax throwing, there's a clear flight to entertainment real estate, and I could see there being interest in taking Chuck E. Cheese to its next iteration," Young said.
Chuck E. Cheese, founded by Nolan Bushnell, the co-founder of video game maker Atari, has evolved in the past few years, adding trampoline parks and dance floors to some of its locations.
Along with Chuck E. Cheese, CEC Entertainment has more than 120 Peter Piper Pizza venues in its real estate portfolio — both operated by the corporate entity and its franchisees — spanning 47 states as well as 17 countries and territories. Three years ago, CEC Entertainment exited Chapter 11 bankruptcy, in which it shed dozens of locations through lease rejections.
Dave & Buster's, another chain known for its games and arcades, has been expanding its U.S. presence after buying rival Main Event in an $835 million acquisition last year. In all, the combined company has more than 200 locations in the United States, Canada and Puerto Rico.
Dave & Buster's, based in the Dallas area, has been conducting sale-leaseback deals on the Main Event real estate. Dave & Buster's reached a sale-leaseback deal with "an institutional real estate investor" for the real estate of four Dave & Buster's stores generating $85.8 million in proceeds in the third quarter.
CEC Entertainment is based in Irving, Texas. Its headquarters building was recently sold to a new investor with the help of the U.S. bankruptcy court. The North Texas office building, which is roughly about 50% leased, sold at a steep discount to its latest appraisal value.