On Christmas Eve, the six-unit food-and-games chain GameWorks Inc. sent a tweet to its 1,200-some followers, announcing its complete shutdown.
“Thank you for all the love over these past decades. We hope you remember us fondly and wish you all the best. July 1996-December 2021.”
The closure of the chain is not necessarily the story of another pandemic casualty. Nor has Gameworks ever been the biggest chain. At its peak it reached just 15 locations. Yet its story is the latest example of just how hard it is to kill a restaurant chain.
Restaurants can survive because their brand names often mean something. They have assets in the form of open locations that can generate cash. And investors are often willing to take bets on those assets, even when they’ve failed multiple times.
A surprisingly small number of chains have completely ended operations since the outset of the pandemic nearly two years ago—the biggest, by far, being the buffet concept Souplantation and Sweet Tomatoes. Most of them were sold out of bankruptcy or for super-low prices.
As such, it is news when one actually does call it quits, even one as small as Gameworks.
The chain has survived multiple bankruptcies, different ownership groups, out-of-court restructurings and tens of millions in losses.
The company had apparently planned a Hail Mary of sorts in 2020, filing for a $15 million initial public offering. Federal regulators, however, declared the IPO “abandoned” in November after it went more than a year before becoming effective.
Gameworks was founded in 1997 as a joint venture between Sega and DreamWorks. Among those with creative input in the chain was Steven Spielberg.
Dreamworks, however, sold its portion of the business in 2001. The concept filed for bankruptcy in 2004 and Sega acquired full control of the chain, hoping to launch it as an adult Chuck E. Cheese’s, or Dave & Buster’s, more or less.
That never happened. The company filed for bankruptcy and was sold to a group of investors the next year. Those investors sold Gameworks to the esports tournament company Oomba, which had planned to turn the company into an anchor for esports.
It may be best known, apparently, for its Seattle location as a scene in the game The Last of Us Part II.
The chain seemed to stabilize its sales by 2017, with $2 million in average unit volumes—though that is small considering its locations are 20,000 to 35,000 square feet and include revenue from its games. The next year it was sold to one of its lenders, ExWorks Capital, which hoped to invest behind the chain and get it growing again.
“Entertainment is a huge space,” Philip Kaplan, the chain’s CEO, said at the time. “There’s $100 billion in entertainment revenue out there.”
The losses continued, however. According to SEC filings it lost $9.2 million in 2018 and $10.6 million in 2019, off just $29.3 million in total revenue. It lost $9.2 million in the first six months of 2020, when the pandemic hit.
Gameworks “funded these losses through a combination of cash flows from operations in seasonally strong months, drawing on a line of credit extended by ExWorks … and convertible notes issued to management, directors and other insiders of the company and their related parties.”
Gameworks is not necessarily a company sucked dry by bad owners. Many of them took bets on the chain as a potential entertainment or esports destination or both. But the pandemic was hard on “eatertainment” concepts, especially those that weren’t exactly profitable beforehand. In the end, the company just ran out of quarters.