#1215 – Social Entertainment Dines Out, Part 1

The explosion in developments and new openings in the Social Entertainment sector have been immerse in recent months. The interest in what has been defined as “Competitive Socializing” has only been disrupted by the upheavals that are impacting the “Eatertainment” sector. In the first of a two-part report on these developments, we look at the reality of falling revenues and the restructuring of the business currently underway.

AI Constructed Brief

The “Eatertainment” sector is facing significant challenges due to inflation and declining sales, with various chains like Dave & Buster’s and Topgolf reporting drops in same-store sales. Dave & Buster’s saw a 5% decrease earlier this year but rebounded with a 2.5% revenue increase in Q2 2024, supported by facility renovations and new openings. In contrast, Topgolf reported an 8% decline in same-store sales and is undergoing a strategic review, potentially leading to a spinoff from Callaway Golf due to its substantial debt load. Other players in the sector, such as Pinstripes and Chuck E. Cheese, are also adjusting their strategies to cope with softening consumer demand, with some chains exploring expansion and new concepts to enhance customer engagement. Despite these difficulties, there are signs of growth in specific areas, such as Bowlero‘s 18% revenue increase and the expansion plans of newer brands like ParTee Shack and Five Iron Golf. Overall, the sector is navigating a complex landscape of financial pressures and evolving consumer preferences, prompting a mix of consolidation, strategic reviews, and innovative approaches to attract patrons.

Full Stinger Report

Eatertainment Feels the Heat (Part 1)

The impact of inflationary conditions for the “Eatertainment” sector has been growing, especially considering reported drops in store sales from selected chains and bankruptcy protection being activated by others. The restaurant industry in general has been feeling the heat and has also been looking towards entertainment as a possible new trend to adopt as their own. One aspect of these trends has been the emergence, internationally, of the Competitive Socializing landscape. Speculation on the strength of some brands in the market, in general, is being brought under the microscope in the face of softening sales.

The rollercoaster of revenue generation was illustrated by the poster boy for “Eatertainment”. Dave & Buster’s suggested a 5-percent drop in same-store sales earlier in the year. The publicly traded company comprises the merged Main Event operation. D&B saw a considerable stock price drop during the months following the circulation of news regarding the drop in store sales. But, by September, the company countered this with an announced increase in revenue for the second quarter of 2024 – stating a 2.5-percent increase from 2023. The corporation reported a net income of $40m. The corporation was banking on the re-development of their facility business, seeing nine venues remodelled, including ‘Social Bays’ and redesigned gaming floors. All supported by an updated menu. The corporation also opened two new sites during the quarter. D&B has launched “Playce It” for locations in Texas, Georgia, Missouri, and California.

Another entertainment chain in the news is the Callaway Golf owned Topgolf operation, having reported a decline by 8-percent in same-store sales. With some 64 franchised sites internationally of the golf and F&B operation, the chain reflected concerns in audience retention. The Callaway Golf owners, in recent interviews, have admitted that the acquisition in 2021 of Topgolf may have been too much for the current operation, and hinted at the possible spinoff of the social entertainment chain. Confirming a full “strategic review” of the operation is underway – conceding that earnings for the operation were down. All this said, Callaway management also confirmed plans to expand the Topgolf operation by another ten facilities in 2025. Back in 2020, the TopGolf side of the business was valued at $2b.

The investment media was quick to jump on this development, and it was reported that TopGolf had an estimated $2.4b debt load (source Altobello), which was felt to make the acquisition of the operation, if spun off, unenticing – especially to speculated buyers such as Dave & Buster’s and Bowlero. This would see stock in the TopGolf Callaway Brands holding operation downgraded to “underperforming” by analysts – seeing its value fall during the period by 25-percent. Soon, news would be reported that, following evaluation of the research created, the Callaway operation was actively looking to spin off the TopGolf entity. The “Eatertainment” operation was revealed to be struggling in the current climate – yet, if a buyer or a management rollout was being planned, it has not been revealed.

TopGolf, comprising some 100 US locations, is not alone in offering a golfing, shooting range, F&B experience. There are several competitive copycat sites, as well as some standalone reinterpretations of the approach (examples include Back 9 Golf and Atomic Golf). There is also a growing surge of new F&B brands in the “Eatertainment” and social entertainment mix that are including golf simulator systems, or a dedicated “Sportainment” element to the mix, adding to the crowded waters and reinforcing the need for TopGolf, once separated from Callaway, to redefine its offering. In what the corporation has described as a “Pure-Play Venue-Based Golf Entertainment Business”, the board confirmed the separation of TopGolf from the core business in September. The split is hoped to create enhanced strategic focus and optimize the business building on the $1.8b revenue generated over the last twelve months.

The difficult conditions in the evolving market was also indicated by news from Puttshack, who announced the opening of their 19th facility overall for Edina, Minnesota, marking their 15th US location in
the 25,000-sq.ft. location in the Southdale Center. The nine hole mini golf course is empowered by the company’s proprietary ‘Trackaball’ technology. These is another example of the rollout of the “Eatertainment” brands expanding across the Western sector.

Another of those golf simulator social entertainment chains is Five Iron Golf and this operation announced what they called “the largest international golf league”, offering prize-competition across their locations internationally, with a prize trip to Dubai as one of the packages on offer. This event offers special Open Bar Party events in support of teams competing across their venues, and the drive is looking to maximise business, starting in September. The Stinger Report has already reported on Five Iron Golf and their investment in their 28-site operation, having seen a new flagship venue open in Dubai recently, comprising a large scale of entertainment from the venue. The ability to create applications that draw in the audience and increase guest retention during difficulty periods has seen several developments. For example, Babylon Park announced faster payments, new challenges, and more chances to win with its app.

The difficult conditions were indicated with Chicago WhirlyBall, the operator of five entertainment locations in the State, which has declared Chapter 11 bankruptcy protection after celebrating its 30th anniversary. Famous for ‘WhirlyBall’, combining basketball, lacrosse, and hockey, and bumper cars in a game, the sites include bowling and lasertag with F&B. During the previous months, the operation announced that they had shuttered their stores but were supporting previously booked events. In statements about the WhirlyBall operation, it was cited that the operation was still “operationally sound”, however, the impact of the current financial climate, on rent and other aspects of business, made continuing difficulty.

Initially, Pinstripes reported a strong April, seeing 0.4-percent rise in same-store sales for that quarter, for the bowling-and-bocce focused “Eatertainment” chain. The publicly traded company, however, saw stocks drop by 9-percent after news of margins decreasing across the chain of 17 locations – although the operation stated in an interview that they felt the market could accommodate up to 150 venues in the US, with dreams to expand internationally. All this following the 2023 acquisition with the special purpose acquisition company (SPAC) Banyan Acquisition Corp. Pinstripes’ CEO stated to investors, “We’re seeing some consumer softening that everyone’s seeing, but nothing drastic”. It was also revealed that 75-percent of their revenue comes from F&B. But, following previous buoyed reporting, the company would go on to reveal a decrease for same-store sales of 2.1-percent and a $10m net loss. The impact of this “softening” was later revealed, with the corporation looking to reduce overheads by $4m, with the CEO of the company confirming they are looking to cut staff across the chain.

New developments still continue unabashed in the “Eatertainment” sector. ParTee Shack, founded in 2021 as a mini-golf, karting and amusement combination of social entertainment and F&B, has announced plans to roll out two more locations in North Raleigh – taking leases on 19,000-sq.ft. and 17,000-sq.ft. locations at local malls. The locations are scheduled for a 2025 opening. One of the spaces to be occupied is a previous Petco store. In other news, Arnold Palmer Enterprises has signed a licensing deal with Tampa-based 23 Restaurant Services, the co-founder and Florida operators of Ford’s Garage, to create a dining and entertainment concept called Arnold Palmer’s CenterCup The first location will be in Gainesville, and 23 Restaurant Services already has signed a deal to open it in open-air lifestyle center, Butler Town Center.

Likewise in the UK, XP Factory, owners of the ‘Boom Battle Bar’ and ‘Escape Hunt’ operations, stated to the media a double-digit revenue growth in the first quarter of 2024. Using their new Oxford Street, London location as an example, the site that comprises social entertainment including axe throwing, karaoke and escape gaming, saw revenue increase by 11-percent, to around £36m in the 13 weeks leading up to March. Overall, the operation is seeing revenue rising to £57m, against the previous £22m.

Another positive presentation to the media came from Bowlero, with their fourth quarter results, seeing a revenue increase over the period of some 18-percent, to $283m in revenue, alongside reported same-store revenues increasing by 6-percent. At the same time, the operation added to its sites over that time. The company reported they had acquired 22 locations, including the ‘Lucky Strike’ locations, and the ‘Raging Wave’ waterpark. The operation is looking to continue its M&A strategy to establish its dominance in the market, building on its 350-bowling location operation across the States, reportedly serving 40m guests annually.

The growth of the big chains and developers in the sector was reflected with news that State of Play, the developers of the ‘Flight Club’ chain of social darts, started in 2017, was working on an aggressive US opening schedule through the signing of leases. This marks plans for their 10th site in the territory – The Stinger Report visited the Las Vegas store in March and covered the experience. The first US store is in Chicago, with new openings in Washington and Philadelphia opening at the end of 2024, with another site planned soon in St. Louis. Scaling nationally, the “social dart” brand with New York will see the flagship 10,000-sq.ft. facility opened in 2025.

The need to come up with a plan to address slowing business, and to increase revenue spend, has seen a plethora of approaches. Chuck E. Cheese Entertainment announced an ambitious plan to roll out a membership discount scheme. The scheme has a 12-month lock-in but offers a number of perks for groups. Questions were raised about the implications of this deal. The offer is incredibly enticing but would seriously impact the revenue from food and drink. Would this see an impact on the quality of the F&B, and additional impact on the machines due to increased utilization? This is a high-risk strategy towards generating recurring revenue.

This all part of a $350m investment in renovation projects across the company’s US and international chain of some 600 restaurants. This even includes the deployment of trampoline attractions – with one of the Canadian venues being the first to see this new diversification.

An investment is needed to cement the operation’s position, following the 2021 emergence from Chapter 11 protection. The CEC operation is even working on an experimental strategy to incorporate licensed food and toy items.

Speaking of CEC Entertainment and news was revealed that the operation was involved in operating a new concept – called ‘Fun Spot Arcade’, the first 3,000-sq.ft. facility has opened at Trumbull Mall in Connecticut. It was revealed that this brand-new concept cost some $140,000 to fitout the site. And has been described as a “all-new entertainment experience, designed for kids, teens and young adults”. The new venue was throwing its doors open in secrecy, until news of this brand-new and important development in the CEC operation – a literal test site – was broken by the Connecticut Scoop.

From the early observations, the new “state-of-the-art” technology being employed is a new eTicket platform called ‘Game Pass’, with all ticket points automatically saved to the platform. The Connecuitcut prototype venue comprises some 50 amusement pieces, aimed not just at children but also teenagers. How well this concept operates will be closely watched by the industry, especially as CEC repositions its business in the face of growing competition. This is the fourth venue based on the brand, with CEC operating smaller units based on the Fun Spot concept at hotel resorts’ game rooms, but this will be the first full standalone site. For the record, this chain is not to be mistaken for the ‘Fun Spot America’ venues of entertainment sites, or the New York based ‘Fun Spot Arcade’, or the ‘FunSpot Trampoline’ operation – CEC may need some work on their branding for this new concept.

The embracing of tournaments to drive mid-week sales was also reflected by the 2,400 UK pub chain Star Pubs, who announced they would be running free online darts tournaments across their venues – the events aim to drive customer engagement and sales in hospitality. The fact these are a free, online activated, process, speaks to the need by venues to stay relevant and generate repeat visitation.