One of the most famous children’s entertainment places, Chuck E. Cheese, is a famous franchise brand for entrepreneurs.
Because of their popularity, you might’ve considered owning a piece of Chuck E. Cheese by being a franchisee.
It could be a good idea considering their fame, and they operate in many places, but their starting costs are quite high.
This article will go over Chuck E. Cheese’s franchise system, associated costs, and what they offer to their franchisees. We will help you determine whether it is a good choice to own a Chuck E. Cheese franchise or not.
About Chuck E. Cheese and Chuck E. Cheese History
Chuck E. Cheese is an American family entertainment center for children with arcade games, rides, shows, and pizza.
They were founded in 1977 with the aim of bringing entertainment, games, and pizza under one roof for children and families.
They have been franchising since 1981, and thanks to the experience of almost 4 decades, they have a strong support system for franchisees.
Now, the company operates on four continents at the same time, with over 450 active stores, the numbers have reduced since Chuck E. Cheese has been closing stores.
Franchise Model Table
| Cost Or Fees | Amount |
|---|---|
| Initial Investment | $1.17 million-$2.6 million |
| Franchise | YES |
| Franchising Since | 1981 |
| Franchise-Fee | $50,000 |
| Royalty-Fee | 3.8% |
| Liquidity | $1.5 million million |
| Estimated Outlets | 567 |
How Much Does It Cost To Open A Chuck E. Cheese Franchise?
The total cost to open a store depends on how many stores you want to open, where you want to open, and how big of a store you will have. Generally, the estimated total costs are between $1.17 million to $2.6 million.
This expected cost includes the $50,000 franchise fee, training costs, real estate lease costs, deposit, and all other related start-up costs.
Franchise Requirements
Chuck E. Cheese requires its franchisees to meet both financial and professional standards. You need to have a liquidity of between $1.5 million and $9 million and a net worth of between $2.5 million and $12 million, both depending on the number of stores you will open.
They require the potential franchisees to have experience in managing a business. It doesn’t necessarily need to be in Chuck E. Cheese’s industry.
Chuck E. Cheese Profit & Revenue
According to the latest report available, Chuck E. Cheese had $912.8 million in annual revenue in 2019. There is no information about the net profit, but the profit margin per store is 30% on average.
By this number, we can estimate that the net profit in 2019 for Chuck E. Cheese was probably about $273 million. The net profit is an estimation and might not reflect the actual number.
Overall Sales of Chuck E. Cheese
In 2019, Chuck E. Cheese had an average annual overall sales per store of $1.62 million.
How Much Does A Chuck E. Cheese Franchise Owner Earn?
According to the latest report, the average profit margin per store was around 30% in 2019. Even though they didn’t share the net profit numbers, we estimate that it was $486,000 annually. This number is also the average Chuck E. Cheese franchise owner’s salary.
| Financial Overview | Percentage of Revenue | Amount ($) |
|---|---|---|
| Individual Franchise Annual Revenue | 100% | 1620000.00 |
| Rent | 8.75% | (141750.00) |
| Insurance | 4.38% | (70875.00) |
| Salaries | 17.50% | (283500.00) |
| Franchise Royalty Fees | 4.38% | (70875.00) |
| Utilities | 1.75% | (28350.00) |
| Cost of Goods Sold (COGS) | 21.88% | (354375.00) |
| Labor (Variable) | 11.38% | (184275.00) |
| Total (Expenses) | 70.00% | (1134000.00) |
| Net Profit | 30.00% | 486000.00 |
Note: The displayed expenses are estimates based on industry averages and standard costs. Actual expenses may vary due to factors like location, business size, and market conditions. We recommend conducting detailed research or consulting with a financial advisor for a tailored financial analysis.
Payback Period of Chuck E. Cheese
With a total investment of $2,600,000 and a yearly profit of $486,000, we can find how long it will take to recoup the initial investment.
So, to find out how long it will take to earn back the initial investment:
Payback Period = Total Investment / Yearly Profit = $2,600,000 / $486,000 = 5.3 years
Based on these figures, it will take 3 to 6 years to pay back the initial investment for Chuck E. Cheese. This time period could be longer or shorter depending on your sales, revenue, and profit figures.
Training and Support
Chuck E. Cheese provides initial training where they teach the franchisee about operational policies, business management, and other important details. There is a brand manager and owner training, which includes hiring, store opening, menu and pricing structure, and global marketing campaign training.
There is also operational training included in the initial training. This training offers expense consultation, software management system training and provides guidance on improving performance and other related business operations.
Additionally, they offer ongoing support in real estate selection, pre and post-opening, market mapping, lease terms, inventory, training, and supply chain. Their support covers all the related business management topics.
Terms of Agreement and Renewal
The initial franchise agreement is for 15 years for the franchisees. If the franchisee wants to and the franchisor is satisfied with the franchisee, then a renewal is possible.
The renewal is for one additional ten-year period. The franchisee pays a renewal fee of half of the original franchise fee.
Obligations and Restrictions of Chuck E. Cheese
The franchisee must have at least one fully trained general manager who will spend full time at the restaurant, or the franchisee themselves must be present at the store full-time.
The franchisee must always obey the operational policies attached to the franchise agreement. The franchisee must follow all the amendments the franchisor can potentially make to the policies document.
The franchisee is obligated to sell all products and services to the franchisor’s satisfaction in terms of quality and specifications. Additionally, the franchisee can’t sell items or services the franchisor didn’t approve of.
Financial Assistance
Chuck E. Cheese doesn’t offer any kind of financial assistance, whether directly or indirectly. The franchisee is obligated to find all the necessary funding by themselves, traditionally through a bank loan.
Chuck E. Cheese Comparison
| Name | Franchise Fee | Royalty Fee | Initial Investment |
|---|---|---|---|
| Trampoline Park | $50,000 | 6% | $1.8 million-$4.4 million |
| Monkey Joe’s | $40,000 | 5% | $699,425-$1.4 million |
| Chuck E. Cheese | $50,000 | 3.8% | $1.17 million-$2.6 million |
Conclusion
Chuck E. Cheese is a five-decade-old American family entertainment franchise chain for children. They have over 500 stores on four continents with an established franchising system and a revenue of almost $1 billion.
Thanks to their extensive support to their franchisees, it’s fairly easy to get started and start making money, but the start-up costs are higher than the average franchise stores.
If you think you have the necessary financial and professional requirements, starting a Chuck E. Cheese franchise could be a lucrative opportunity.
FAQs
Is Chuck E. Cheese a franchise?
Chuck E. Cheese is currently a franchise. They offer a very detailed franchising system for their potential franchisees.
Do I need to have professional experience with Chuck E. Cheese to be a franchisee?
You don’t need to have a connection to Chuck E. Cheese currently or in the past to apply to be their franchisee. They might require you to have experience in the industry.
How much net worth do I need to have to apply to be a Chuck E. Cheese franchisee?
You need to have a net worth of at least between $2.5 million and $12 million, depending on the number of stores you want to open.
Who owns Chuck. E Cheese?
Chuck. E Cheese is owned by a private equity firm, Apollo Global Management. The firm bought its parent company in 2014 for $984 million.
Who founded Chuck. E Cheese?
Nolan Bushnell founded Chuck. E Cheese. He began working on his idea of an animatronic family restaurant in 1977.
Where is Chuck. E Cheese headquartered?
Chuck. E Cheese is headquartered in Irving, Texas, United States.
How many locations does Chuck. E Cheese have?
As of 2023, Chuck. E Cheese operates 568 corporate and franchised locations along with 122 Peter Piper Pizza restaurants.
Sources
https://en.wikipedia.org/wiki/Chuck_E._Cheese
https://www.sec.gov/Archives/edgar/data/813920/000119312508041943/dex1031.htm