- WHITE PAPERS
Chuck E. Cheese executives again expressed disappointment over its quarterly financial report released Thursday, but are optimistic about the company's direction and its plan for 2013.
The Q3 numbers included a 2.3 percent decrease in comparable same-store sales compared to the same period last year.
However, Michael Magusiak, president and CEO, said the numbers were trending upward. During Q2, for example, comps were down 3.3 percent. Also, for the first four weeks of Q4, comps are up 0.7 percent.
"You can look at October and be encouraged," he said.
The company is also encouraged about its marketing strategies moving into 2013. Magusiak said there is a direct correlation between the reduction of TV media weight in the beginning of the quarter and slower sales. The company has learned from that mistake and is reversing course, he said.
In the first four weeks of Q3, TV media weight was reduced by 50 percent. For the most recent 13 weeks, it is down 25 percent compared to the previous year.
"In retrospect, we believe we reduced the media weight levels too deep. And secondarily, our branding needs to be complemented with concept innovation and value messaging," Magusiak said. "We now believe we have a strong 2013 marketing plan."
That plan entails four components: providing guests with an excellent product; messaging that targets both kids and moms with the objective of increasing guest traffic; the implementation of new pricing and coupon strategies to enhance the value proposition for all guests; and significantly enhanced operations to improve service levels and experiences for all guests.
Magusiak noted that Chuck E. Cheese is in its second year of its new pizza recipe, which includes a fresh, never frozen, crust and higher quality ingredients such as 100-percent natural mozzarella cheese. Additionally, the chain now has boneless chicken wings to complement its traditional wings, and this year it has introduced new cheesy breadsticks, gluten-free pizza and gluten-free cupcakes.
From a facility perspective, CEC will invest approximately $41 million in expenditures for existing stores that will impact approximately 123 locations. Broken down, this money is being used for 25 expansions, five major remodels and 93 game enhancements.
"We anticipate our existing store capital plan will range from $26 million to $28 million per year over the next three years and will impact 120 to 150 stores per year," Magusiak said. "This is a reduction of approximately $13 million to $14 million per year."
CEC's marketing plan for 2013 was created because of the strategies that didn't work in 2012. It includes an increase in media buy by approximately 25 percent compared to this year, with a message that targets kids and moms.
The kids' message will be built on strong brand advertising and reasons to visit stores, as well as birthday party ads.
"The moms messaging will be comprised of a powerful creative rooted in emotion and complemented by a value message," Magusiak said. The plan will be complemented by a strong digital presence and the introduction of a completely redesigned website this month that will include a new commitment to guests titled "Our Promise."
CEC's value proposition strategy is outlined on the chain's new menu boards that were installed in all company stores in October. The boards showcase reduced pizza prices and lower price points for value deals of pizza, drinks and tokens. On the entertainment side, CEC is slightly reducing its number of tokens in token packages.
"We believe this revised pricing gives us a strong base to market good, every day value," Magusiak said. Additionally, the company is revising its coupon offers and discounting various offerings such as salads and sandwiches. Coupon offers, Magusiak adds, provide guests with more flexibility to meet their specific needs.
The coupons will be broadly distributed through the Chuck E. Cheese website, other digital channels and Sunday newspapers. The company will also support its value messaging through TV, digital and in-store advertising.
The final piece of CEC's 2013 strategy involves operational improvements based on results from marketing research involving both brand users and nonusers and conducted earlier this year. Specific objectives include recognition of first-time guests; ticket splashes every hour; and enhanced cleanliness standards.
"When we take a step back from the business, there are a few things we're excited about in 2013. We've seen improvements in our sales trends since we initiated the (mom) campaign," Magusiak said. "We also have a strong digital campaign for next year that, combined with our TV plan, we think will give us a strong base."
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