Event-Oriented Arcade Chain Has Reopened 89 of Its 137 Venues
Dave & Buster's Entertainment is laying off thousands of employees and might be forced to file for bankruptcy protection as the event-oriented chain deals with the changing nature of social gatherings because of the coronavirus pandemic.
The Dallas-based company, known for its arcade games, food and drinks, has reopened 89 of its 137 venues in the United States, Puerto Rico and Canada that were temporarily closed because of government mandates. If the company isn't able to reach an agreement soon with its lenders, Dave & Buster's would have to file for Chapter 11 bankruptcy protection, according to a filing with the Securities and Exchange Commission.
Several other retailers are using the bankruptcy court to deal with the disruption caused by the pandemic, including another event-oriented chain and the parent company of Chuck E. Cheese, which is known for its animated rodent mascot and for hosting pizza-filled parties, and national gym operators Gold's Gym and 24 Hour Fitness. At least 25% of U.S. gyms could permanently shut by year’s end without federal aid because of losses stemming from the pandemic.
Dave & Buster's borrowed all its remaining funds under its revolving credit facility and negotiated an amendment to its existing credit facility granting relief through Nov. 1. If Dave & Buster's isn't able to secure additional waivers, executives say it "would have a material adverse effect on the company," and may result in filing a voluntary petition for relief under Chapter 11 of the U.S. bankruptcy code to implement a restructuring plan, according to its recent quarterly filing.
Dave & Buster's did not immediately return email and phone requests for comment.
The company has taken several steps to reduce operating costs and conserve cash, and is talking with landlords and other vendors to negotiate relief from payments under existing lease and trade obligations. Dave & Buster's permanently closed two locations in the second quarter, one in downtown Chicago and one in Houston, where they had leases expiring.
As of early August, Dave & Buster's has negotiated 92 rent relief agreements for venues as well as its corporate headquarters in Dallas. Generally, the agreements gave the company either full or partial rent deferral for three to six months. The company is losing about $3.3 million per week, according to its quarterly financial results.
Out of the venues that remain temporarily closed, Dave & Buster's expects 11 in New York and 16 in California to be among the last to reopen, said CEO Brian Jenkins, in a recent quarterly earnings call.
Combined, the New York and California stores represent about 25% of Dave & Buster's sales throughout its venues with several of those stores being among the top in terms of profitability, Jenkins said. To fully rebuild the business for the long haul, these stores will be a "very important" component, he added.
Dave & Buster's revenue declined 85% to $50.8 million during the second quarter compared to last year.
"We are now forecasting we will reopen all of our remaining stores before the end of December, barring any additional delays due to COVID-19 resurgence," said Jenkins.
Dave & Buster's has sent Worker Adjustment and Retraining Notification letters to alert at least 10 U.S. states of its plans to permanently lay off 2,326 employees because of the pandemic. However, most of the letters indicate Dave & Buster's does not plan to permanently close the locations.
"This worksite is not being permanently closed," said Kathryn Rainey, a senior director of human resources, in a letter to one of the states. "The company intends to rehire for the impacted conditions when COVID-19 pandemic and economic conditions permit."
Here's a state-by-state overview as of Sept. 18 of Dave & Buster's layoffs it has outlined to state governments:
California: Dave & Buster's told the state it planned to temporarily lay off 68 employees at its venue at 4821 Mills Circle in Ontario beginning in July.
Colorado: The company plans to lay off 234 employees at two of its locations in the state, including its Denver location at 2000 S. Colorado Blvd. and its Westminster location at 10667 Westminster Blvd. The layoffs go into effect Nov. 8.
Louisiana: Dave & Buster's plans to lay off 97 employees at its New Orleans location at 1200 Poydras St., with employees expected to be affected by the layoffs beginning Nov. 8.
Massachusetts: Dave & Buster's has told the state it plans to lay off 307 total employees beginning Nov. 8 at three of its locations, including 250 Granite St. in Braintree; 1235 Worcester St. in Natick; 271 Mishawum Road in Woburn.
Michigan: The company plans to lay off 311 employees beginning Nov. 8 at three of its locations, including 19375 Victor Pkwy. in Livonia; 45511 Park Ave. in Utica and 3660 28th St. SE in Kenwood.
New Jersey: Dave & Buster's plans to lay off 107 employees at 310 Willowbrook Mall in Wayne beginning on Nov. 8.
New York: The company has told the New York State Department of Labor it plans to permanently lay off a total of 804 employees, furloughed in mid-March by the pandemic, at six of its locations, including: 234 W. 42nd St. in New York; 2655 Richmond Ave. in Staten Island; 1 Crossgates Mall Road in Albany; 306 Hiawatha Blvd. in Syracuse; 1 Galleria Drive in Buffalo; 1 Miracle Mile Drive in Rochester. The New York layoffs become effective on Dec. 8.
North Carolina: Dave & Buster's has notified the state it plans to permanently lay off 229 employees due to the pandemic at three of its locations, including a mall location at 3320 Silas Creek Pkwy., in Winston Salem; a location at 11049 Carolina Place Pkwy. in Pineville; 1105 Walnut St. in Cary.
Oregon: The company plans to lay off 84 employees at 11860 SE 82nd Ave. in Happy Valley.
Washington: The company plans to lay off 85 employees permanently at its location at 1101 Outlet Collection Way in Auburn, Washington beginning Nov. 8.