Thursday, March 04, 2010

Forget Kids, Investors Can Go for Chuck E. Cheese

By Eric Jackson

RealMoney Contributor

3/4/2010 2:00 PM EST

Restaurants are always a productive place to put money. Their fortunes are independent of interest-rate moves and general macro factors, and while commodities play a role in terms of the raw food costs, they obviously aren't as correlated as stocks that are more directly tied to the commodities. And in the U.S., people like to eat ... and they like to eat out. Even in the dark days of the recession a year ago, parking lots in front of most restaurants remained full.

The restaurant sector comprises all kinds of niche flavors and price ranges. The chain I like most from a differentiation perspective is CEC Entertainment (CEC - commentary - Trade Now), the parent of the kids' chain Chuck E. Cheese.

Parents are constantly scratching their heads to understand how to entertain their kids. After a few trips to a stuffy restaurant with a couple of young kids who end up crawling around the floor under your table -- or, worse, running around the restaurant -- earning you dirty looks from other patrons, you won't be likely to return with the clan anytime soon. Likewise, when you find a comfortable place where the kids are happy, the parents will be happy and will gladly spend their money.

Kids love Chuck E. Cheese. It's like going to a state fair indoors ... and they serve pizza. What's not to like? You run around and you spend money on arcade-style games with the hopes of collecting enough tickets to get a prize at the end. (Sorry parents, just like at the fair, you'll need to spend hundreds of dollars to get even a medium-sized toy.) The food's basic -- pizza and wings -- but sufficient to satisfy the kids while all the other stimulation is going on.


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