Chuck E. Cheese is a mouse with money woes, thanks to the ongoing coronavirus pandemic.
CEC Entertainment, the kid-friendly pizza chain’s parent company, filed for Chapter 11 bankruptcy protection this week. The company also plans to permanently close about 34 locations while keeping 266 locations open. All totaled, the Irving, Texas-based CEC has 555 company-owned stores and 186 franchisee locations in 47 states and 16 foreign countries or U.S territories.
CEC has said it will continue reopening additional locations each week even as the pandemic worsens in a majority of states.
According to USA Today, the company, traditionally focused on dine-in, birthday parties and family events, has lost more than 90 percent of its revenue due to dine-in closures during the COVID-19 pandemic, even though it expanded off-premise offerings such as carryout, delivery, take-home party kits and meal kits. According to a court filing, the company fell behind on rent at hundreds of locations.
In a statement announcing the bankruptcy move, CEC said it will “use the time and legal protections made available through the Chapter 11 process to continue discussions with financial stakeholders as well as critical conversations with its landlords to achieve a comprehensive balance sheet restructuring that supports its reopening and longer-term strategic plans.”
“The Chapter 11 process will allow us to strengthen our financial structure as we recover from what has undoubtedly been the most challenging event in our company’s history and get back to the business of delivering memories, entertainment and pizzas for another 40 years and beyond,” said David McKillips, CEC’s chief executive officer, in a statement.
“I’m confident in the strength of our team and our world-class brands and look forward to more fully implementing our strategic plan as we put these financial challenges behind us,” he added.
A study by consulting firm Aaron Allen & Associates suggests Chuck E. Cheese isn’t the only chain in trouble. That study found that nearly two-thirds of publicly traded restaurant companies are at risk of bankruptcy. “Even with the injection of liquidity, it is not enough to cover what the losses are,” the study noted. “With the industry down tens of billions per month right now, it’s going to be hard to get back, even once restaurants are at full capacity.”
And returning to full capacity seems unlikely for restaurants in many states—such as Florida and Texas—that are already seeing a resurgence of COVID-19 cases.