Chuck E. Cheese bankruptcy casts shadow over hundreds of restaurant leases

In a move certain to send shockwaves across the commercial real estate market, the parent corporation of well-known arcade and pizza chain Chuck E. Cheese filed for Chapter 11 bankruptcy protection last week in order to have a “critical conversation” with its landlords and restructure its balance sheet.

The announcement by parent company CEC Entertainment casts a shadow over the future of more than 700 Chuck E. Cheese and Peter Piper Pizza locations across the country, already suffering from prolonged closures brought about by the COVID-19 pandemic.

As a part of its Chapter 11 filing, USA Today reported that CEC also compiled a list of 45 leases it “plans to reject,” which includes restaurant locations in California, Florida, Massachusetts, Ohio, and Oklahoma.

However, CEC announced that is has re-opened 266 company-operated restaurant locations – though subject to “ongoing negotiations with its landlords.” The company said that it expects to maintain ongoing operations in these locations “throughout the Chapter 11 process, providing dine-in, delivery, and carry-out services, hosting birthday parties during dedicated hours, and supporting fundraisers and events in the coming weeks and months.”

The company also said that it has filed customary motions intended to allow it  to “maintain operations in the ordinary course including, but not limited to, paying employees and continuing existing benefits programs, honoring guest gift cards, and upholding commitments under its franchising and licensing agreements.”

Meanwhile, the company clarified that US and international franchised locations “operate under separate legal and financial structures “and are not included in the bankruptcy filings.

In a statement, David McKilips, chief executive officer of CEC Entertainment, said that entering bankruptcy was necessary to allow the beleaguered pizza chain to recover from the financial impact of the pandemic. 

“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,” said McKilips.