Pizza Wars
Author
Mike Pharaoh
It’s a story about pizza, ambition, and a bit of backstabbing. Two visionaries set out to turn pizza into an experience—and in doing so, kickstarted a full-blown Pizza War. But as the battle raged on, only one of them could claim victory, even if it came at a cost.
In the late 1970s in San Jose, California, Nolan Bushnell, the co-founder of Atari, had the opportunity to pursue his passion project: a pizza restaurant. Even before starting Atari, he envisioned a place where kids and families could enjoy the video games he created in a theme park-like environment. Inspired by the success of Disney, he aimed to create a similar experience.
The first Chuck E. Cheese’s Pizza Time Theatre was established in 1977. The following year, when Nolan Bushnell wanted to expand his pizza empire, the parent company of Atari, Warner, refused because they were against the idea of pizza. In response, Nolan purchased the rights to his concept from them for $500,000 and left Atari. He also convinced their COO to join him on this unconventional venture. Together, they began expanding across America through franchising.
They met a guy who ran some hotels across middle America: Robert Brock. The founding duo granted Rob exclusive franchising rights to open 16 Chuck E. Cheese’s locations. The franchising company they established was called “Pizza Show Biz.” You might see where this is going…
Rob opened his own Chuck E. Cheese’s restaurant, but he was secretly planning to outdo it. He wasn’t satisfied with the animatronics at Chuck E. Cheese’s, which were built into the walls. He wanted to create a bigger and better attraction – a full band of animated animals playing show tunes on stage. He consulted animatronics specialists, cut ties with Nolan, and declared a “Pizza War”. As if that wasn’t enough, he took the name “ShowBiz Pizza Place” with him. Rob opened the first ShowBiz Pizza Place in 1979, less than a year after meeting the others, ending their partnership and friendship.
Nolan sued Rob for breach of contract. In response, Rob countersued Nolan, claiming misrepresentation. The legal battle extended into the early 1980s and was ultimately resolved out of court. As part of the settlement, Rob agreed to pay Nolan a portion of his ShowBiz Pizza profits for the next decade. This began the official Pizza Wars between Chuck E. Cheese and ShowBiz Pizza Place.
Rob and Nolan were in an intense battle for supremacy in the arcade pizza business. Everything was going well until Rob made a financial mistake. To gain an advantage, he took Chuck E. Cheese public. Unfortunately, this decision resulted in a loss of $15 million in the first two years. Investors sold off their CEC stocks, leaving Rob with significant losses.
The debt that Chuck E. Cheese had accumulated was insurmountable. He was forced to file for bankruptcy, which seemed like the end for Chuck E. Cheese. However, a glimmer of hope appeared in the form of ShowBiz Pizza. Robert Brock descended from the heavens on the back of a banjo-wielding bear, holding legal papers. Brock purchased Chuck E. Cheese for an undisclosed amount and defied fate.
Rob effectively won the war by converting all of his ShowBiz Pizza locations into Chuck E. Cheese establishments after the latter had been winning the popularity contest before going bankrupt. This move allowed Rob to double his current offering and become the king of the rats.
Chuck E. Cheese is still around today, although it has undergone some changes and is now owned by Monarch Alternative Capital, a global investment firm. It is no longer publicly traded on the stock exchange. Nolan Bushnell, who is 81 years old, currently serves on the board of directors of a robotics software company in Utah. He recently published his second book about the future of education and co-founded a startup focused on hosting gaming tournaments using blockchain technology.
