Pizza Time Theater Inc., the brainchild of Atari founder Nolan Bushnell that provided an unusual mix of video games, pizza and robot entertainers with names like Chuck E. Cheese, filed for protection under Chapter 11 of the U.S. Bankruptcy Act yesterday.
The Sunnyvale, Calif.-based company, whose dreams of providing family food and high-tech entertainment were marred by technical problems and mounting financial losses, asked for time to reorganize its finances rather than face liquidation by angry creditors, some of whom had already filed suit to force payment of their bills.
The company's approximately 250 owned or franchised Chuck E. Cheese Pizza Time Theater Restaurants will remain open during the reorganization.
Last week, the Bank of California declared the company in default on $50 million in bonds and ordered payment in full by the end of this week. The company had changed presidents earlier this week for the second time in less than two months. Bushnell resigned as chairman last month.
The bankruptcy proceedings do not affect the approximately 120 franchised outlets of the restaurant chain. Pat Hopf, head of the largest franchisee, Family Entertainment Centers in Rockville, which operates 14 Chuck E. Cheese restaurants in Maryland and Virginia, said, "There's no reason why it should affect the way we run our restaurants one way or another."
Hopf, whose firm has feuded with Pizza Time over several issues, said his restaurants had not received any services from the company and that "Pizza Time filing Chapter 11 does not have an adverse effect on Family Entertainment Centers because we've been expecting this for some time." He said he would assess the effect on customer traffic of the bankruptcy filing, but noted that Pizza Time has been the focus of a great deal of bad news recently, and the reorganization might allow the adverse publicity to die down.
Pizza Time's sales had grown to about $100 million annually after five years of operations. But the company said earlier this month that it expected to have a $16 million operating loss in the fourth quarter and write-offs of $35 million, on the heels of $7 million in losses in the previous two quarters.
The losses led to the resignation of Bushnell, and on Monday, Randall L. Pike, who had been president for less than two months, also stepped down. He was replaced by Henry C. Montgomery, a former executive of a computer software company, who joined Pizza Time as executive vice president and chief financial officer earlier this year.
Montgomery said yesterday that he hoped to build a management team to return the company to profitability under protection of the bankruptcy laws.
In a related development, Pizza Time said it had agreed to sell Sente Technologies, a subsidiary that makes video arcade games, to Bally Manufacturing Corp., one of the largest makers of such machines.