Keep the Party Going

In 2019, Cracker Barrel made a surprising investment in an emerging chain, Punch Bowl Social.

 

In many ways, Cracker Barrel and Punch Bowl Social were opposites. Cracker Barrel focused on suburban and borderline rural markets, emphasized breakfast fare and appealed to an older crowd. Punch Bowl Social, meanwhile, was in urban areas, emphasized American fare alongside innovative adult beverages and typically appealed to a younger demographic at later dayparts. 

 

But there was a slight similarity: each offered more than just food and beverage. Cracker Barrel locations featured charming retail sections, and Punch Bowl Social offered various games, earning itself a label as an ‘eatertainment’ chain.

 

At the time, ‘eatertainment’ was certainly trendy. Brands beyond Punch Bowl Social like Main Event and Top Golf were growing, and movie theatres were increasingly offering higher quality food and beverage menus to redefine ‘dinner and a movie’. This combination of food and entertainment was the newest trend to disrupt the industry.

 

Except it wasn’t new at all.

 

In the 1990s, ‘eatertainment’ was trending just as prominently, if not more so, than it was in the 2010s. Dave & Busters, founded in 1982, expanded in the 1990s, and brands such as Planet Hollywood, Mickey’s Kitchen, Rainforest Cafe, GameWorks, Bubba Gump Shrimp Co, Bugaboo Creek Steakhouse and ESPN Zone were launched, just to name a few. 

 

And let’s not forget Chuck E. Cheese, the original eatertainment chain that started its own pizza-and-video-games trend in the 1970s and then brought eatertainment to the industry forefront again in the late 1980s.

 

Chuck E. Cheese was founded in 1977 by Nolan Bushnell, a co-founder of the video game company Atari. The company brought together pizza and entertainment, with the hope that the restaurants would use and help expand video games and animatronics. It worked.

 

The brand grew fairly rapidly but started to struggle in the 1980s, entering bankruptcy in 1984. Competitor ShowBiz Pizza Place then acquired Chuck E. Cheese, but it wasn’t your typical deal. One chain was in bankruptcy, the other was teetering on the edge. 

 

“For all practical purposes, ShowBiz was on the brink of bankruptcy, and so you really had one bankrupt company buying another. It was amazing to me that the transaction actually got completed.”

-Richard Frank, Episode 105, Keeping the Party Alive, Part One

 

In 1985, after about a year of convincing, Richard Frank finally agreed to leave his position at Steak & Ale to help the company turn it around. The state of the company, in Frank’s own words, was “pretty dismal”. 

 

In many ways, Chuck E. Cheese’s challenges resembled those that many struggling restaurants face. Sales were falling, there were plenty of underperforming stores, the company had debt it was struggling to pay and the menu and service styles were due for upgrades. But there were also challenges more specific to the eatertainment aspect of the concept. Children loved the company, but parents didn’t. The games and forms of entertainment had become dated and weren’t as exciting as they once were. 

 

The long list of problems only led to an even more impressive turnaround. From shoring up the finances to upgrading the menu to replacing the games to moving all units under the Chuck E. Cheese banner, Frank and his team redefined the concept and set it up for growth with a new target audience. 

 

In what was perhaps the most controversial component of his turnaround, Frank wanted to set an age limit at Chuck E. Cheese: children under 18 were to be accompanied by a parent. Richard firmly believed that the best opportunity the brand had was with families, not the teenagers initially drawn in by the video games. It was thought that the age limit and new games would establish an environment that was more acceptable for moms. 

 

By the 1990s, things had improved. And as a testament to Chuck E. Cheese’s success, a growing number of brands followed in its footsteps, crowding up the eatertainment space. And the successful ones that stuck around were those that realized that eatertainment wasn’t just one or the other. Both the food and entertainment businesses had to be done well, and they had to be updated frequently.

 

“I think probably the biggest thing that people miss is the importance of having both a food and beverage and an entertainment component that's significant enough in terms of sales.”

-Richard Frank, Episode 105, Keeping the Party Alive, Part Two

 

Restaurants have long sought to differentiate through their experience, whether that be with the animatronics at Chuck E. Cheese and Bugaboo; the line worker at Moe’s Southwest Grill yelling ‘Welcome to Moe’s’; the Australian decor at Outback Steakhouse; the Chick-fil-A cashier saying, ‘My pleasure’; the rocking chairs on Cracker Barrel's front porch; the games at Dave & Busters; or the movie selection at Bubba Gump’s. Simply put, restaurants have found that it pays to offer more than just food. 

 

But like with food, there are trends with what consumers look for when dining out. In the 1990s, for instance, many eatertainment brands appealed to families. But those 90s kids who were fascinated by themed restaurants grew up to become millennials, and then they weren’t much interested in animatronics anymore. Instead, they were looking for trendy cocktail menus and interactive experiences. And children? They became more interested in tablets, phones and VR games than talking animal heads. So, perhaps its not surprising that Bugaboo disappeared in 2016, just as Punch Bowl Social was gearing up for an expansion. 

 

This dynamic sheds a light on the challenges of successfully running an eatertainment brand. Just like your typical restaurant, an eatertainment brand will need to evolve its menu and make adjustments. And while it’s crucial for standard restaurants to update their interiors periodically, these refreshes take on another level of importance at eatertainment brands, not to mention that they can be much more expensive after factoring in games. 

 

“And because that segment, that entertainment and food segment, is so capital intensive, where you’ve got to constantly be changing up the entertainment piece of the business, if you don’t really have enough topline, you can’t make the numbers work.”

-Richard Frank, Episode 105, Keeping the Party Alive, Part Two

 

Further, the eatertainment audience, especially for family-oriented concepts, can be a bit more challenging, as brands need to be fun and exciting for kids but acceptable to parents. These brands don’t have a ‘customer’ as much as they have a ‘group’ - the parents that make the decisions to visit and the kids that reap the benefits. Additionally, that audience is a bit more defined than your standard restaurant chain. For instance, Chuck E. Cheese’s decision to turn away teenagers to appeal to families is one most concepts don’t have to make.

 

“And then you had this customer base of not only kids and adults, which was challenging enough, but then you also had boys and girls, and you had young kids versus the 6-12, moving into the lower teens. So you had all these different customer profiles that wanted similar things but they were different.”

-Richard Frank, Episode 105, Keeping the Party Alive, Part Two

 

Lastly, and perhaps most importantly, history suggests that eatertainment concepts can be a bit more exposed to industry disruptions and marketplace shifts, and periods of struggle are common for eatertainment brands. In particular, some have been dangerously reliant on tourism or shopping. Planet Hollywood, for instance, declared bankruptcy in 2001 as tourism plummeted after the terrorist attacks on 9/11. It was Planet Hollywood’s second bankruptcy - something that isn’t too rare in the eatertainment space. GameWorks, for example, filed in 2004 and 2010.  

 

And, of course, there’s Chuck E. Cheese, which entered bankruptcy again in 2020, during the COVID-19 pandemic. Meanwhile, Cracker Barrel abandoned its investment in Punch Bowl Social in the early days of the pandemic.

 

The eatertainment model was again challenged, this time for its reliance on guests visiting locations as opposed to ordering takeout or delivery.

 

So, what can we learn from the history of this enduring category full of ups and down, and is it fair to say that running an eatertainment chain is harder than a typical restaurant? We talk to Richard Frank, the former CEO of Chuck E. Cheese, to find out. 

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