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International Guild of Hospitality & Restaurant Managers
CEC Entertainment, Inc., incorporated in 1980,
is engaged in the family restaurant/entertainment center business. The Company
owns and operates Chuck E. Cheese's restaurants in 39 states and
Chuck E. Cheese's restaurants are typically located in shopping centers or in
freestanding buildings near shopping centers, and generally occupy 8,000 to
14,000 square feet in area. Chuck E. Cheese's restaurants are typically divided
into three areas: a kitchen and related area (cashier and prize area, salad bar,
manager's office, technician's office and restrooms) occupy approximately 35% of
the space, a dining area occupies approximately 25% of the space and a playroom
area occupies approximately 40% of the space. The dining area of each Chuck E.
Cheese's restaurant features a variety of comic and musical entertainment by
computer-controlled robotic characters, together with video monitors and
animated props, located on various stage settings. The dining area typically
provides table and chair seating for 250 to 375 customers.
Each Chuck E. Cheese's restaurant typically contains a family oriented playroom
area offering approximately 45 coin- and token-operated attractions, including
arcade-style games, kiddie rides, a toddler play area, video games,
skill-oriented games and other similar entertainment. Most games dispense
tickets that can be redeemed by guests for prize merchandise such as toys and
dolls. Also included in the playroom area are tubes and tunnels suspended from
or reaching to the ceiling (SkyTubes) or other free attractions for young
children, with booth and table seating for the entire family. The playroom area
normally occupies approximately 60% of the restaurant's customer area. A limited
number of free tokens are furnished with food orders. Additional tokens may be
purchased. These tokens are used to play the games and rides in the playroom.
The Chuck E. Cheese's standard franchise agreements grant to the franchisee the
right to develop and operate a restaurant and use the associated trademarks
within the standards and guidelines established by the Company. The franchise
agreement offered by the Company has an initial term of 15 years and includes a
10-year renewal option. The standard agreement provides the Company with a right
of first refusal should a franchisee decide to sell a restaurant.
The franchise agreements governing existing franchised Chuck E. Cheese's
restaurants require each franchisee to pay to the Company, in addition to an
initial franchise fee of $50,000, a continuing monthly royalty fee equal to 3.8%
of gross sales; to the Advertising Fund, which is an independent fund
established and managed by an association of the Company and its franchisees to
pay costs of system-wide advertising, an amount equal to 2.65% of gross sales;
and to the Entertainment Fund, an independent fund established and managed by
such Association to further develop and improve entertainment attractions, an
amount equal to 0.2% of gross sales. The Chuck E. Cheese's franchise agreements
also require franchisees to expend at least 1% of gross sales for local
advertising. Under the Chuck E. Cheese's franchise agreements, CEC is required,
with respect to Company-operated restaurants, to spend for local advertising and
to contribute to the Advertising Fund and the Entertainment Fund at the same
rates as franchisees.
The Company added 30, 31 and 24 Company-operated Chuck E. Cheese's restaurants
in 2001, 2000 and 1999, respectively, including restaurants acquired from
franchisees. The Company anticipates adding approximately 32 to 36 new
restaurants in 2002 through a combination of new restaurants and the acquisition
of existing franchise restaurants.
In 2000, the Company initiated a Phase III upgrade program, which generally
includes a new toddler play area, skill games and rides, kiddie games and rides,
sky-tube enhancements and prize area enhancements with ticket counting machines.
The Company completed Phase III upgrades in 28 and 105 restaurants in 2000 and
2001, respectively, and plans to complete Phase III upgrades in 110 to 120
restaurants in 2002. CEC has expanded the customer areas of 84 existing stores
since 1995, including stores with increased seating capacity due to an enhanced
showroom package. In 2001, the Company expanded a total of seven stores. The
Company plans to continue its strategy of expanding the customer areas and
seating capacity of selected existing restaurants in 2002. The customer area of
expanded stores, other than stores with increased seating capacity due to an
enhanced showroom package, is typically increased by an average of 1,000 to
4,000 square feet per store.
In 2001, the Company opened a full-service casual dining restaurant named TJ
Hartford's Sports Grille aimed at a broad demographic target offering
medium-priced food, including alcoholic beverages, in a relaxed, upscale
entertaining atmosphere. The Company plans to open another similar restaurant
during 2002.
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Disclaimer:
The data included within the Financial section is solely for information
and does not construe a recommendation and/or endorsement by IGHRM or its
members to invest funds with any of the companies listed. You are strongly urged
to obtain professional advice with qualified individuals or corporations for any
investments of funds.