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Is Chuck E. Cheese’s the Blockbuster Video of the Eatertainment Industry?

Chuck E. Cheese’s same store sales have been on a long-term decline for years. Overall comparable store sales have declined by more than one-quarter (-26%) since 2003.

CEC comparable store sales

The decline is totally due to a decrease in food and beverage revenues, which have declined by half per store (-52%), whereas entertainment revenues have increased by one-quarter (+26%). CEC is no longer the dining destination it once was.

CEC food & beverage salesIn early 2014, CEC was acquired by Apollo Global Management (APO), a Wall Street private equity firm. One of their first moves to improve the 38-year-old chain’s sales was to upgrade the menu to cater to “adult tastes” by introducing new pizza with fresh made from-scratch thinner crusts with “23 fewer calories than a regular slice of pizza” and flavors like BBQ chicken and Cali Alfredo and new whole wheat wraps. Now they’ve come out with a limited time special mac ‘n’ cheese pizza available only through the end of the year. They’re even experimenting with expanding their extremely limited beer and wine selection (you want red or white?)

mac n cheesy copy

Greg Casale, the head chef at CEC, tells the press that a desire to attract Millennial mothers is behind the menu change. “Her kids know it’s a fun place to go, but Millennial moms want to provide that great experience without sacrificing for themselves,” he says. “Before she was a mom, she was going to places like Panera and those concepts. She wants something that fits into her millennial lifestyle.”

Chef Greg has the right idea, to make a visit to CEC more appealing to the parents and removing their visit veto factor. I’ve never talked to a single parent who hasn’t put a visit to CEC in the dreaded category. But Chef Greg, I really don’t think you get it. That mom you said was going to Panera before she was a mom is still going to Panera. And she’s going to a lot of other restaurants in the same order-at-the-counter fast casual style as Chuck E. Cheese’s including Zoë’s Kitchen, Chipotle, Jason’s Deli, Noodles & Company plus all the expanding fast casual pizza chains including Pie Five, MOD Pizza, Maddio’s, Blaze Pizza, Chipotle-owned Pizzeria Locale and many others. And many times she’s going with her children.

Chef Greg, you really need to get out of the kitchen and check out the fast casual restaurants that Americans, including mom and her kids, are loving and eating at on a regular basis. That mom isn’t ordering a mac ‘n’ cheese pizza for herself or for her kids. For mom it’s probably a whole-wheat thin crust pizza, many times with healthy toppings, such as all veggies, and for her kids she’s watching the calories and looking for a well-balanced meal. And 2015 has brought on her desire for clean food without any artificial ingredients, especially for her kids.

Chef Greg, when you check out those other restaurant chains, make sure you check out the Future Foodies kids menu Noodle’s & Company offers. Kids get to pick their entrée, drink and two sides. And all the food has no artificial flavors, colors, sweeteners or preservatives. Many of their kids’ meals meet the nutritional criteria of the Kids LiveWell program that many moms know about.

Chef Greg, if you have any doubt about moms desire to see their children eat healthy and nutritious food at restaurants, just check out this photo of the Moms Rising movement. You’ll notice they’re all those Millennial moms your company so desires to attract and they’re campaigning for nutritious and healthy restaurant food for their children. getting soda out

Chef Greg, Chuck E. Cheese’s is stigmatized from all the horrible food it offered parents (and their children) in the past. Your new menu is still so in the past. It’s a 2005 menu in 2015. If you want to change your image and attract those Millennial moms, you need to radically change your food offerings to match their 2015 expectations based on all the other restaurants they visit and their contemporary sophisticated food preferences. Stigmas are not removed with incremental changes.

Chef Greg, you need to do your research, and when you do, you will find many of those Millennial moms are foodies and sharing foodporn on social media. If they do take a photo of your mac cheesy pizza and post it on social media, I’m pretty sure it will get a label along the lines of ‘yuck’.

Aaron Allen, global restaurant consultant at Aaron Allen & Associates, has this to say about Chuck E. Cheese’s, “It’s the Blockbuster video of the restaurant industry,” referencing the video rental chain that was eventually undone by streaming video and the Internet.

Greg Chef, if you don’t want Allen’s prediction to come true, you need to upgrade CEC’s menu to one moms will love and one they will want to feed their children. Get real!

Posted in children's entertainment, Chuck E. Cheese's, eatertainment, Food & beverage, Location based entertainment, Millennials, restaurant | Comments Off on Is Chuck E. Cheese’s the Blockbuster Video of the Eatertainment Industry?

Webinar: How Digital is Disrupting the Entertainment Landscape

Myself, Kevin Williams of KWP,  and Kevin Bachus, Senior VP of Entertainment and Game Strategy at Dave & Busters, will be presenting an IAAPA webinar, How Digital is Disrupting the Entertainment Landscape, at 1pm EDT this Wednesday, September 23rd. Although the webinar is normally open to only IAAPA members, we have made special arrangements for our Leisure eNewsletter and my blog readers to also be able to join in. You can sign up to join the webinar at:

If you are not an IAAPA member, then when it asks for your membership number, insert: 923, the special access code for our readers.

Kevin and me will be two of the presenters at the upcoming October 13-15 Foundations Entertainment University in Dallas, Texas. The information we will present in the webinar is only a small part of the 3-days of information that is presented at Foundations by us and other industry experts. There is still time to register to attend this platinum standard of education in the community-based entertainment and leisure industry that is now in its 13th year. To learn more and register, click here.

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It’s no longer about targeting the middle class

Back at the end of the 20th Century when indoor family entertainment centers (FECs) first took off, they targeted the middle class as their primary customer. Society has changed a lot since then. Due to growing income inequality, the disproportionate rising cost of non-discretionary items such as health care, housing and education and other factors, the middle class has shrunk and the number of discretionary dollars the remaining middle class has to spend at leisure venues has shrunk as well. The middle class is no longer the target market of choice for location-based entertainment (LBE) of all types, including what are broadly termed as family entertainment centers (FECs).

Today, in the second decade of the 21st Century, high-income households that can best be described as affluent constitute the overwhelming share of the potential market for LBEs. They are the consumers who need to be targeted to succeed in today’s leisure landscape.

The graph below shows 2013 household entertainment, dining and alcoholic drink spending at community-based leisure venues (CBL) for the five different quintiles of household income. As the graph clearly illustrates, the affluent, high-income households with incomes above $95,000 account for the lion’s share of spending. They spend more on community-based entertainment than the entire 80% of lower income households do. If we look at the middle and fourth quintiles, those with incomes between $35,000 and $95,000 with average incomes of $60,000, who might be defined as the middle class, those 40% of households together only spend 2/3rds (66%) as much as the affluent households do.

food alcohol & entertainment by income quintile

The top quintile of income, the affluent households also spend almost as much (89%) that the other 80% of households together spend on dining and drinking at local restaurants and bars.

Now here’s something that is really enlightening. Total household spending at local restaurants and bars is 22 times the amount spent on community-based entertainment. That is one of the reasons why the new upscale social restaurant-entertainment venues are so successful. They target the upper socioeconomic who account for most of the spending and they not only go after a share of their entertainment spending, but also a share of their food and beverage spending as well. Heck, just capturing 3% of affluent households’ spending at restaurants and bars generates more revenue than capturing all of their entertainment spending at local venues that don’t offer live events such as concerts, plays, etc.

Defining affluent households in broad terms with a single income threshold is a little misleading. A single person needs less income than a family of four to meet her/his non-discretionary spending needs and still have adequate non-discretionary dollars to spend at CBLs. Here’s a more realistic breakdown of 2013 affluent incomes by household size:

  • Singles – $66,000+
  • Household of two – $93,000+
  • Household of three – $115,000+
  • Household of four – $132,000+
  • Household of five – $148,000+

Now, if you want to attract the affluent market, you have to design to meet their expectations, values and tastes. You can’t design for the middle class and expect to do very well at attracting affluents. That’s sort of like saying since Denny’s serves steak or Long John Silvers serves fish, it will attract the same customer that eats steak and fish at a McCormick & Schmick’s restaurant. Most of the affluent households will be college graduates who have more refined values and tastes. It’s all about serving up the entertainment, the food and beverage and the hospitality at a higher level than what it takes to please the middle class.

And believing that the entertainment is all you need to attract affluents is a big mistake. Even the entertainment has to be served up in a more upscale fashion in order to attract the affluent market.

Affluents make decisions of where to frequent based on the décor and atmosphere of the facility, the quality of food and beverage, the level of hospitality – the quality of every aspect of the entire experience. And they are willing to pay a premium for what they rate as a premium experience. And if it doesn’t meet the higher level of experience they want to have, they will just stay home or do something else. There’s nothing genetically wired in higher income humans that says they have to bowl at some so-so facility, eat mediocre food and beverage or ride go karts with torn seats.

And what becomes a win-win when you design and operate a CBL for high income, college-educated affluents, is our company’s research shows you will still get a share of the middle class when they can afford to come.

Posted in Alcohol & bars, Consumer expenditures, eatertainment, Entertainment, Food & beverage, Location based entertainment, Out-of-home, Target markets | Comments Off on It’s no longer about targeting the middle class

FECs and LBEs now facing new competition

Our company has been conducting extensive research about how digital entertainment and social media are shrinking FEC and location-based entertainment (LBE) venues’ market share of both leisure time and discretionary spending. We have been reporting our findings in both our Leisure eNewsletter and in presentations. Now along comes another form of competition to LBEs.

The other day I had a chance to visit the new Scheels 220,000-square-foot sporting goods store that recently opened in the Overland Park, Kansas area of the Kansas City metro. You might call the store a mega-big box sporting goods store at its 5-acre size. It is the latest addition to Scheels’ 25-store chain located in 10 states.

Unlike a typical sporting goods store or department store, Scheels has a collection of entertainment venues in addition to its sports and sportswear. And the entertainment is FREE!

The free entertainment includes a huge 16,000 gallon aquarium, a 65-foot operating Ferris Wheel, photo opportunities, a wildlife mountain, shooting galleries, a soft-containment play unit for children, mini-bowling, laser shot shooting and sport simulators for golf, soccer, hockey, baseball, football and basketball. There are also two fully animated, talking US Presidents.

Scheels free entertainment copy

And in addition to the free entertainment, there is a deli and fudge shop serving gourmet soups and sandwiches, Starbucks coffee and specialty drinks, 24 flavors of homemade fudge and 18 flavors of gelato (these you have to pay for).

So just think about it. You have a 5-year old girl and a 10-year-old boy and you’re looking for somewhere to go with them one night or on the weekend. Go to a family entertainment center or go to Scheels? I have a feeling both mom and dad would pick Scheels where the kids can be entertained at no cost, the parents can get their Starbucks fix (I’m still suspicious that Starbucks adds some special additive substance to their coffee) and maybe do a little shopping as well.

Scheels is not alone in non-entertainment businesses attracting people with entertainment. It’s a major trend in retail called retail-tainment or experiential retail. Today to get buyers away from their screens and online retail and out of their homes, you need to offer more than just stuff to buy. You need to offer them an experience. Just think about places like Build-a-Bear, the Disney Store or the Apple store. It’s an experience to go there. Scheels has just raised the bar higher with their pure free entertainment offerings.

It’s not just retailers who are becoming experiential. The major mall and lifestyle center developers understand that to drive traffic past their stores, they need to also offer an experience and entertainment. And many are now programming FREE entertainment into their projects, whether it’s a free children’s play area or movies on the lawn at night as just two examples.

This is raising the bar for FECs and LBEs of all types. With expanding free attractive options for entertainment and experiences, FECs and LBEs now need to offer something even better, something with Higher Fidelity in terms of the overall experience, if they expect people to show up and actually pay for it.

Posted in Disruption, Entertainment, FEC, High Fidelity, Location based entertainment, Out-of-home | Tagged , , , , , , , , | Comments Off on FECs and LBEs now facing new competition

Daily fantasy sports coming to family entertainment centers

Fantasy sports is not exactly something you would associate with a family entertainment center (FEC). That is about to change in the near future with the acquisition of Major League Fantasy (MLF) by Latitude 360, a multi-restaurant-bar-attraction FEC. MLF is a rapidly growing player in the daily fantasy sports industry. Latitude 360 will let players use iPads to conduct their daily fantasy gaming on MLF’s platform, with the chance to win real money while watching their players play in real-time in their HD Sports Theater. This will make Latitude 360 the first restaurant-tainment chain to offer live in-venue fantasy sports books. MLF’s fantasy sports will also be available online when players are not visiting Latitude 360.

latitude-360-HD sports-theater-fantasy sports 

The acquisition of MLF puts Latitude 360 in the unique position to grab a significant piece of what is expected to be a $6 to $10 billion-dollar market by the end of 2016.

Fantasy sports is a game where participants act as owners to build a team that competes against other fantasy owners’ teams based on the statistics generated by the real professional sport individual players or teams. The Fantasy Sports Trade Association estimates that in 2015, fourteen percent, or over 36 million Americans age 12 and over play fantasy sports.

When most people think of fantasy sports players, they typically think of out of shape, math-centric men with plenty of free time and below average on the social-scale. However, fantasy sports players are just the opposite. Fantasy sports players are younger, better educated, with higher household incomes and more likely to have fulltime employment:

  • 66% male
  • Average age: 37
  • College degree or More: 57%
  • Have a household income of $75k+: 47%
  • Have full-time employment: 66%
  • Average annual spending per fantasy player: $465 of which $257 is spent on daily sports fantasy

Latitude 360 includes everything from a Dave & Buster’s-style arcade, an upscale bowling center, comedy room, dance floor, cigar room, dine-in movie theatre and an upscale bar and restaurant. With centers in Indianapolis, Jacksonville and Pittsburgh, the company plans to open locations in Albany, Boston, Chicago, Minneapolis and New York City. Existing and new locations range between 36,000 and 67,000 square feet.

In-person MLS traffic should not only drive up food and drink revenue, but could result in more brand awareness and loyalty for Latitude 360. “We’re just giving them an added experience they can take home or on a trip with them and stay connected with us,” said Brent Brown, CEO of Latitude 360. “This is another way to be connected to our customers’ lifestyle.

With the potential acquisition of Major League Fantasy, we’re excited to incorporate the best fantasy sports experience into Latitude 360’s unmatched entertainment and dining experience. We at Latitude 360 see it as something our sports fan patrons will definitely enjoy when they come to visit our locations. They’ll know we’re giving them the best daily fantasy sports experience available anywhere, and our HD Sports Theaters are a perfect venue for the ‘360 Fantasy LIVE’ daily fantasy sports experience.”

The Unlawful Internet Gambling Enforcement Act of 2006 included “carve out” language that clarified the legality of fantasy sports gambling. The act makes transactions from banks or similar institutions to online gambling sites illegal, with the notable exceptions of fantasy sports, online lotteries and horse/harness racing.

The bill specifically exempts fantasy sports games, educational games, and other online contests that meet certain conditions. A participant’s team (if any) must not be “based on the current membership of an actual team.” Outcomes must “reflect the relative knowledge and skill of the participants and [be] determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events.” All prizing must be determined in advance of the competition and cannot be influenced by the fees or number of participants. Players pay a fee to enter a contest, draft a team and compete with friends or strangers.

Offering live fantasy sports is a really smart move by Latitude 360. It offers guests another anchor attraction in the new form of electronic entertainment that can be very social, adds another revenue source as well as drives additional food and beverage sales, which currently accounting for over 60% of Latitude 360’s revenues.

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Mother Facebookers high in FoMO

In our company’s May Leisure eNewsletter, we had an article on harnessing the power of FoMO (fear of missing out). Now along comes some data that indicates that FoMO may be strongest among mothers with children under 18. Nearly 9 in 10 (86%) of these mothers will be Facebook users this year according to eMarketer. And these mothers are heavier users of Facebook than the general population, checking the social network on average 7.4 times a day vs. 5.9 times for all Facebook users. And perhaps due to FoMO, those mother daily check-ins increased by 57% from just 4.7 in 2012.

Mothers have also gone mobile. In 2015, 67% logged onto the social network via a mobile phone, up from just 43% in 2013.

Mothers don’t want to miss out. Their more frequent Facebook usage means LBEs and FECs that target families need to have their social presence up to par to capture mothers and keep them and their families as customers.

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Americans still stuck in no-vacation land

Each year Skift, a travel research company, surveys Americans on their upcoming summer vacation plans. The first question they asked this year was “Are you planning on taking a vacation this summer?” The overwhelming answer this year was almost exactly the same as the one they got last year – about
62% of Americans said they wouldn’t be taking a vacation this summer at all. More than half said they couldn’t afford a vacation. Only about 16% said they are taking a long summer vacation, while about 23% said they are taking short breaks on weekends throughout the summer.

Summer vacations plans 2015 1

In addition, this year Skift also asked the question in a slightly different way: “How many days of vacation are you planning to take this summer?” And the answer was that 45% said none, and another 15% said less than one week. The number of Americans taking a long summer vacation was the same as with the first question – 15%.

Summer vacations plans 2015 2

The results from this survey of Americans’ vacation plans is consistent with Skift’s early 2015 survey that found that 41% of Americans said they didn’t take a single vacation day during the entire 2014 year.

The good news is that more Millennials are planning on taking (short or long) summer vacations this year than any other age group. Middle-aged Americans (35-60 year olds), mired in the overworked economy, are amongst the least likely to take vacations this summer.

Affluent Americans (those above $100K incomes a year) are the most likely to take summer vacations this year, while those in the lower income bracket ($50K and below) are the least likely to. Parents and their families are trying to take a lot more summer vacations than the non-parents according to the survey results.

Although it might seem logical that those taking fewer vacations would spend more on staycation out-of-home entertainment in their local communities, our company’s research finds just the opposite. Average household location-based entertainment spending on trips has been on the decline for years while there has not been any offsetting increase in non-trip location-based entertainment spending. The reason is probably two-fold. First, lots of families can no longer afford out-of-home entertainment. Secondly, entertainment spending is shifting to at-home and mobile screen digital entertainment. So people are now getting a larger share of their entertainment fix on digital screens with no need to leave their homes, what is called digital hiving.

For additional information about digital, read The rise of super Digital Hiving.

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Changes to the importance of work and leisure

The Worlds Values Survey is periodically conducted in almost 100 countries containing almost 90% of the world’s population. It is used by political scientists, sociologists, social psychologists, anthropologists and economists to analyze many topics including the importance of different life activities and subjective well-being.

We dug into the survey data to see if the Great Recession had any impact on how people in the U.S. value work and leisure. The following graph shows the percent of adults who consider work and consider leisure as rather important or very important in their lives.

Importance of work and leisure

As the graph clearly shows, there was a dramatic drop in the importance of work around the time of the Great Recession that has stayed low through last year. The importance of leisure went up.

When we looked at the ratings based on adults’ education levels, in the 2010-2014 survey, there was little difference based on educational attainment for the importance of work. But more adults with college degrees rated leisure as rather/very important (94.0%) than adults with lower levels for education (89.5%).

We will be taking a look at other countries in the future to see how adults there compare.

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Where does pizza at FECs and Chuck E. Cheese’s fall in the four pizza groups?

Chuck E. Cheese’s new owners, Apollo Global Management, aim to grow sales by pleasing grown-ups’ palates. They want the place where a kid can be a kid also to be the place where mom can get a cappuccino and dad can chow down on an artisan-style like pizza.

The chain’s push toward an adult-pleasing menu, including new pizza, comes as the pizza industry nationwide is raising the bar.

For example, this last November, Pizza Hut, the nation’s largest pizza chain, announced the most expansive brand update in the company’s half-century history including menu additions that mirror items seen at artisan pizza shops and at the new fast-casual players.

Michigan-based consultant Big Dave Ostrander says the pizza market is dividing into four distinct groups.

“I think that there’s going to be three big winners when it’s all said and done,” said Ostrander, a frequent pizza contest judge and presenter at Pizza Expos. “No. 1 will be the very highest quality providers, (restaurateurs) that just make a fantastic pizza. No. 2 is going to be the lowest cost provider, and we all know who they are.

“The third ones are the fast-casual types. Some of it is above average to very good,” he added. “The rest are going to be slugging it out for the same customers.”

That means more competition in the middle of the pack, where many consumers now place Chuck E. Cheese’s and most FEC pizza.

“I eat pizza a lot,” Ostrander added. “I haven’t eaten their [CEC’s] pizza in a long time. I don’t think they’d win gold, silver or bronze in the competitions I’ve judged.”

Of course, Ostrander hasn’t tried CEC’s new pizza. We’ll have to give it some time to find out whether Chuck E. Cheese’s has successfully repositioned their pizza to a competitive positive.

Most family entertainment centers are as far behind pizza trends as CEC was until their new menu. The new fast-casual pizza chains that are rapidly expanding into every market are quickly raising consumers’ expectation levels for pizza. These chains are assembling fresh-made, fresh-dough (choices typically include regular, thin-crust, whole-wheat thin crust and gluten-free), customizable pizzas right in front of customers in the same style as Chipotle’s front line, often delivering the final product in five minutes.

Fast casual pizza chains FECs

The preassembled frozen pizzas and par-baked pizza crust pizzas that many FECs continue to offer have now fallen to the bottom of the barrel in terms of quality in the minds most consumers. In fact, many of the frozen pizzas you can now buy in the supermarket are better. Consumers today also now expect pizzas to be prepared in plain sight, often in stone-hearth ovens for the gourmet pizzas, not behind closed kitchen doors (CEC is still behind the eight ball on this).

Most FECs need to wake up and get with it, or they will see drastic revenue declines no different than Chuck E. Cheese’s has seen over the years due to their behind the times, non-adult appealing pizza. In today’s out-of-home entertainment market, the food and beverage has become as important of an anchor attraction as the entertainment. Offering subpar food, including pizza, based on new contemporary expectations is now a detriment to success.

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Digital video & media increasingly consuming our leisure time

In this blog and in our company’s Leisure eNewsletters we have been documenting how at-home and mobile screen digital entertainment is increasingly taking both leisure time and expenditure market share away from location-based entertainment, including from family entertainment center venues. In that context, here’s some of the latest data on the growth of digital video viewing and changes to the use of other types media.

Adults in the US now spend five and one-half hours watching video each day. Total viewing time has grown by more than half an hour from 2011 to 2015 (4:56 to 5:31). While daily television time has declined by 20 minutes, time spent watching videos on digital devices—PCs, mobile devices, game consoles, over-the-top (OTT) and other Internet connected devices—has grown by almost one hour over the five years (0:21 to 1:16).

TIme spent with video media

The greatest growth in digital video has been on mobile devices, growing from 3 minutes a day in 2011 to 39 minutes in 2015, accounting for almost 2/3s (65%) of all digital video growth. With the launch of Meerkat on Twitter and Periscope, mobile is predicted to grow even more in the future.

Time spent with digital media video

Overall, US adults now spend 12 hours (12:04) each day with major media. That is almost a one-hour (0:53) increase since 2011. Digital media now consumes almost half of that total media time (5:38).

Time spent with video digital media

With the exception of mobile and other connected devices excluding PCs, time spend on all other types of media has declined. Mobile and other connected devices now account for 45% of all time spent on major media.

For an overview of the disruptive impact of digital media and entertainment on location-based entertainment and FECs, check out our company’s December 2014 white paper The Perfect Storm, LBE Disruption & Opportunity.


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