Wednesday, June 19, 2024 Jun 19, 2024
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On the Links With: How CEO David McKillips Led Chuck E. Cheese Out of Bankruptcy

Over a round of golf at Cowboys Golf Club, McKillips talks about tackling $1.1 billion of debt, investing $350 million into a turnaround, a now rumored $1 billion sale, and a Chuck E. Cheese game show.
| |Illustration by Anita Moti

Just a couple of feet off the 10th green at Cowboys Golf Club, the downhill putt is swinging right to left. I roll it on the line but leave it short—a cardinal sin in a golf scramble. Up steps David McKillips, the CEO of CEC Entertainment, a holding company headquartered in Irving that owns and operates Chuck E. Cheese, Peter Piper Pizza, and Pasqually’s Pizza & Wings. His roll looks true, but just kisses the lip on the high side, settling a few inches past the cup. We tap in for a par.

For McKillips, there haven’t been very many misses lately—that is, from his C-suite post at CEC Entertainment. After the company filed for bankruptcy in June 2020 due to the pandemic, McKillips, just months into the job, had to reorganize the company which had an unsustainable balance sheet and about $1.1 billion of debt. To do so, he raised $650 million in bonds and invested $350 million toward remodeling the 470 Chuck E. Cheese locations across the globe and remade how the company operates internally and externally. 

Early returns are starting to pay dividends as the company closed 2023 with more than $880 million of revenue. Its owners—no longer Apollo Global Management but rather several private equity firms that have gone from debt to equity positions—are reportedly seeking a sale that could fetch well north of $1 billion. McKillips is not involved in the day-to-day pushing of a sale but says, “Our owners are always looking at a way to maximize value, so they’re just putting out feelers. We’re always open to whatever opportunity may present itself.”

The sun is shining down on McKillips and me in May when we hit the links. We partner up for four holes at the Chuck E. Cheese Annual Charity Golf Tournament, which benefits The CEC Entertainment Foundation Fund. CEC Entertainment, the corporate arm, distributes about $1.5 million to partner nonprofits a year, and this year’s golf tournament raised $135,000. 

As we approach the 11th hole, which presents a straightaway 425-yard par four, McKillips recounts his upbringing in family entertainment. “I started at SeaWorld in Orlando cleaning up trash, and I just fell in love with the family entertainment business,” he says before driving his Chuck E. Cheese-stamped Callaway ball down the left side. “I thought it was so cool that you could get paid and just be around happy people. After I graduated from the University of Georgia, I moved to Philadelphia to work at Sesame Place, a theme park inspired by Sesame Street. Two years later, I took a job at DC Comics.”

It was there where McKillips really cut his teeth in family entertainment. As the VP of advertising and custom publishing, he represented the brands of Superman, Batman, Wonder Woman, The Flash, and Green Lantern. According to him, one of his most fun projects was working on the various NASCAR and Indy Car sponsorships DC had. “We worked with Jeff Gordon to create a paint scheme on his cars,” McKillips says as we make our way down the fairway. “It was Superman meets motorsports hero, and fast forward to today, Jeff is the chairman of Hendrick Motorsports, so at Chuck E. Cheese, I was able to strike a licensing partnership where we place these fantasy cars that are Chuck E. Cheese themed in our ‘Chuck E. Cheese Racing World’ smartphone game, throughout our digital and social content, and we activate promotional contests.”

After eight years at DC Comics, McKillips joined Six Flags, where he spent nearly 14 years. He worked up to become the president of Six Flags’ international development company and the SVP of international operations. “In that role, I learned from various leaders around the world about the most important thing in business leadership: communication,” he says. 

We approach the green after the tee shot on the 11th, with a 40-yard pitch shot upcoming, and McKillips recounts his first meeting with the Chuck E. Cheese team after joining a little more than four years ago. “I remember my first town hall,” he says after striking the ball to about 20 feet from the pin. “I’m coming from Six Flags, the largest regional theme park in the world; before that, DC Comics—the greatest superheroes in the world—and I came to CEC looking at a company with a lot of folks hanging their head a little bit. It was as if they didn’t feel like they were in a superlative place. They had just replaced their CEO, and there were moments of uncertainty mixed with some of their greatest fears. The first thing I wanted to do was elevate everybody.”

Instead, two months later, the pandemic changed everything. Two months after that, CEC filed the bankruptcy paperwork. “I was coming into a company with good financial chops; the balance sheet just couldn’t sustain something like COVID,” McKillips says. “But we were able to take a step back, use a debt for equity swap, and put together a new board.” 

After repositioning the company’s $1.1 billion debt, McKillips says the brand came out with about $375 million of debt. In April of 2021, CEC raised $650 million in bonds with a favorable interest rate of 6.75 percent refinancing and fully repaying the $375 million in debt it emerged from bankruptcy with. “I then took the $650 million to the board and said, ‘Let’s develop a strategy to really clean up this company.'” That’s exactly what McKillips and company have done. 

Chuck E. Cheese has invested $375 million to facelift its 470 venues. With only 90 left to renovate, the company will wrap up by the end of 2024. New technology, new games, and child-sized trampolines have all been installed in the venues. It’s a very interesting process, McKillips says, to renovate a nearly 50-year-old company that has welcomed more than 1 billion unique visitors in its lifetime. After all, the Chuck E. Cheese consumer is between the ages of three and nine. “We have to test a lot,” he says with a laugh. “Especially in our business where the life cycle of our kids is rapidly moving. The difference between a three-year-old and a nine-year-old is tremendous.”

On No. 12, McKillips stripes his drive on the par four up the left side; I follow. After a couple of pars on the first two holes of a scramble, a birdie is necessary. A fellow scramble teammate, a colleague of mine at D CEO, sticks the approach to within eight feet. As we make our way up the fairway, McKillips talks about Chuck E. Cheese’s latest news: It’s getting a game show.

“When you think about other entertainment companies, they’ve taken their characters outside their four walls,” he says. “And it’s time to bring Chuck E. Cheese out and monetize him with licensing, movies, animation, game shows, concerts, albums, and more. So, we’re working with Magical Elves, an unscripted production company, to create a game show. We don’t have distribution yet, but we’re pitching it to major streaming and linear networks. The idea is to create a life-sized Chuck E. Cheese venue where everything is gigantic. Our prize wall has things like real cars, not just the little die-cast cars. We’re essentially combining a ninja course and a Chuck E. Cheese and bringing it all together for a competition between families or individual adults. So this can be really transformative for the brand.”

We pour in the birdie putt on the 12th but par the 13th and round out the four holes at 1-under par. As we shake hands and walk off the green, the CEO previews what’s ahead for the Irving-based brand, which will open 13 new Chuck E. Cheese locations around the world in 2024.

“Our growth guidance for 2024 is mid-single digits,” McKillips says. “We’re always looking for M&A opportunities, but right now, we’re so focused on growing organically. We feel like we are just now returning to normal operations, and now it’s time to maximize the $350 million investment we made and become an active play brand, and that’s something we will lean into over the next three to five years.”


Ben Swanger

Ben Swanger

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Ben Swanger is the managing editor for D CEO, the business title for D Magazine. Ben manages the Dallas 500, monthly…