CEO Wants to Take Combined Company to 'New Heights Domestically and Globally'
Dave & Buster's Entertainment, an experience-based restaurant chain with games and arcades created in the early 1980s, is readying itself for "a fresh new look" in the coming years after completing a nearly billion-dollar acquisition that brought a rival brand into its fold.
Dave & Buster's CEO Chris Morris laid out details during an earnings call of its expansion plans months after the Dallas-area company completed the $835 million acquisition of its one-time rival, Main Event Entertainment. In all, the newly combined companies have more than 200 locations in the United States, Canada and Puerto Rico, with executives seeking to grow the businesses to be a leader in the fast-growing family entertainment business in North America.
"It's been several years since we last updated our brand image through the design of our facilities," Morris, who took the helm of Dave & Buster's as its CEO after the company acquired Main Event, told investors in the company's earnings call Tuesday.
"Over the next several years, we intend to remodel our fleet to better position our brand for long-term sustainable growth," said Morris, who served as president and CEO of Main Event for four years prior to the Dave & Buster's acquisition. "Our remodel program will involve more than just a new image. In addition to a fresh new look on the outside and inside of our stores, our plan is to make certain adjustments for improved operational execution, guest engagement and hospitality and an expanded entertainment product offering."
Dave & Buster's Eyes Expansion After Closing $835 Million Deal for Main Event
Morris told investors the proposed makeover is in the planning stages, with the company expected to follow "a test-and-learn model" as it moves forward with its plans to maximize return on capital for investors. Globally, Dave & Buster's expects to continue to grow its business and take both the Dave & Buster's and Main Event brands to "new heights domestically and globally," he added.
For Dave & Buster's, which reported a net profit of $39.1 million, or 80 cents per share, for the fourth quarter 2022 that ended Jan. 29, 2023, compared with net income of $25.7 million, or 52 cents per share, for the fourth quarter 2021, this means continued capital spending on its store fleet. In the fourth quarter, the company invested $70.2 million in capital additions and opened one Main Event in Beaumont, Texas.
The two brands are slightly different but have similar goals in providing a hospitable place to find food and entertainment. Dave & Buster's brings in guests wanting to eat, drink, play arcade games and watch sports and other televised events at its nearly 150 locations, which have average footprint of 40,000 square feet. Main Event, which has about 50 U.S. locations that average 55,000 square feet in 17 states, targets younger customers and families, offering bowling, laser tag, arcade games and virtual-reality experiences.
For fiscal 2023, Dave & Buster's has already opened one new Dave & Buster's in San Juan, Puerto Rico, and two Main Event-branded stores in Little Rock, Arkansas, and Tucson, Arizona. Another Main Event is scheduled to open in Lexington, Kentucky, this week.
In all, Dave & Buster's plans to open a total of 16 new stores during this fiscal year, including 11 Dave & Buster's locations and five Main Event locations. The company also plans to relocate its Dave & Buster's in Vernon Hills, Illinois.
With four openings underway in the first quarter, executives told investors they expect two additional openings in the second quarter and the remaining six openings in the back half of fiscal 2023. The Vernon Hills relocation is scheduled for the fourth quarter of 2023.
Exceeding Targets
Dave & Buster's executives told investors the acquisition of Main Event is saving millions of dollars in costs, with the two Dallas-area companies expected to have a number of synergies.
From consolidating its store support centers and benefiting from a shared supply chain, the combined company is ahead of schedule in terms of its estimated $20 million of savings in the first two years of its shared operations. Morris told investors on Thursday, "We have now implemented all the initiatives necessary to achieve $25 million of annualized cost synergies, exceeding our original target by $5 million."
Dave & Buster's moved into a new office for its headquarters in early 2022. It wasn't clear how Main Event's corporate functions in a Dallas-area suburb would fit into the Dave & Buster's office. The company has not responded to an interview request from CoStar News about the details of the planned consolidation.
Another item on the company's radar: Special events.
The special events business is becoming a bigger component of Dave & Buster's business model with executives seeing a return back to 2019 levels. This is important, executives say, because food and beverage margins skew higher than that of amusement and brings an important — and profitable — component back to its operations.