Wednesday, December 10, 2008

A Kids Restaurant Chain Risks It All (Stephanie Fierman)

Wow, Chuck E. Cheese has a problem.

The Wall Street Journal ran a half-page story in Section A yesterday that would cause any parent to run for the hills. While CEC describes itself as a place "where a kid can be a kid" and the cover of its 2007 Annual Report boasts "The Evolution of Fun," it appears that the actual stores have become a magnet for bad behavior and danger. Police all over the U.S. have been dealing with fights, guests carrying weapons and boozed-up brawls.chuck-e-cheese-stephanie-fierman.jpg

When a public official
describes his local Chuck E. Cheese as "something out of a Quentin Tarantino film," you know you have a serious problem. The picture at right shows the CEC in said politician's Milwaukee neighborhood - with an armed guard out front.

A simple glance at Google tells the Web 2.0 tale. Of 9 front-page search results for "Chuck E. Cheese," 5 are negative. Of 10 front-page results for "McDonalds," 0 are negative.

So where is the crisis management plan and what is the company doing about this problem? While the company's head of marketing describes the fights and problems as "atypical," the risk to a corporation is not always volume-based. Only one child or parent needs to die in one of these melees for CEC to get sued into the ether.

Not only is (a) taking aggressive action and then (b) broadly communicating your plan the "right thing to do," it ultimately protects the bottom line and shareholder value. Take the saddest, most base scenario: if the company gets sued over a child's death, it will be in far better stead with the courts - and the public - if it can show an active, consistent and good-faith effort to address this problem. Such an effort could very well include suffering a short-term revenue hit by closing the most troubled locations in the near 500-location chain. And continuing to serve alcohol in most stores is a recipe for disaster. What percentage of revenue coming from alcohol sales -
at children's birthday parties - is worth a legal debacle that effectively cripples the company?

I frequently refer to the
Tylenol poisonings in 1982 and J&J's decision to pull all U.S. product off the shelves even after it was determined that the company had no involvement in the tragedy. This may well be the best example in memory of a company taking the long view.

There is a range of choices CEC can take. At the lower end of the range, management needs to take action in its own backyard to resolve these issues. At the higher end, welcome Alderman Zielinski in as a valued advisor. Hold a press conference with him in Milwaukee where he ceremoniously padlocks his neighborhood location while you rightfully announce that no amount of money is worth putting people's lives in danger. Ask Zielinski to help you create a national "Having Fun Can Be Safe" campaign nationwide.

Wherever CEC lands on this spectrum, it had better act quickly. This is a case where a short-term view could be literally deadly for everyone involved.

A version of this post also appears at

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