puppetdude
02-17-2007, 02:55 PM
I know there have been various accounts of how the whole Showbiz Pizza Place/Creative Engineering, Inc. relationship was born and ended. But it may be interesting to hear the story as told by my father, Melvin A. Fechter who was my sidekick, business partner, and best friend through all those years.
My dad is now 86 years old and in good health mentally and physically. In fact, he has just finished writing a book titled, "The Watchword", which is being sold on line at Lulu.com.
These are his memories of the days of wine and roses as he wrote them yesterday for someone he has been conversing with on-line about his life:
Dear Gary,
Here, really, is a skeleton of a rundown on ShowBiz Pizza Place, Chuck E. Cheese, Creative Engineering, Inc., and another company you have never heard of: Brock Hotel Corporation (headed by Bob Brock, both Bob and his hotel company now deceased, although at the time of the events BHC with about 40 or 45 hotels was traded on the NY Stock Exchange). The following is entirely from my recollections. I will do no research for it but will try to be careful that there can be nothing significantly inaccurate.
Nolan Bushnell, of whom you have probably heard, was the founder of the original Chuck E. Cheese restaurants (to distinguish that chain from the CEC chain today). About 1979 he had, I think, about seven restaurant/entertainment centers going using the concept of selling pizza and entertaining kids with mechanically and electronically animated characters, plus a game room. The restaurants. and of course Bushnell's investors, were losing money. They were nevertheless confident the concept was sound but just had not yet taken off. The animation and music, let's say, was pretty "cheesy."
Enter Bob Brock (with his Topeka, Kansas, company BHC). He loved the concept. Bushnell represented to him, or he thought Bushnell represented to him, but the writings were not crystal clear, that he was the only one -- excluding Disney, which was not available -- who could provide such animation for restaurants. BHC entered into a contract with CEC to build 50 (I think was the number) CEC restaurants as a franchisee.
Enter Creative Engineering, Inc., headed by Aaron with 80% ownership, with my wife and me owning the other 20%. Aaron, the end of 1979, his birthday December 22nd, was then turning 26. We had no knowledge of BHC at that time although Bushnell had approached Aaron with an offer to buy CEI -- an offer Aaron rejected. My understanding was the offer was $1,000,000.
CEI had been founded in 1975 on a nickel and two spits, but things had gone well for us. Meanwhile, 1977, I graduated from law school. In November 1979 we (CEI) were exhibitors (the dominant exhibitor of perhaps 500 to 1,000) at the IAAPA convention in New Orleans - the New Orleans Convention Center. We rented (and paid for) half of a large separate hallroom across from the main exhibit area, but no one rented the other half, and we got to use it all. I don't remember the exact dimensions, but knowing pretty well the size of our exhibits, I would estimate it was about 75 feet wide and about 150 feet long. At each end we had a show, different shows, and in between we had rows of seats, which either were reversible or could easily be turned around without causing disorder. Altogether, I would guess, there were more than 200 seats. We would show one show and then the other, and the seats stayed well occupied. We also had a small room on the outside to discuss business, and also had an animated character outside in the hallway, much like Fatz, inviting people in to see the show. Remember, animation in those days except at Disney parks was virtually unknown. You might say we stole the convention.
Bob Brock had already commenced building his first restaurant under his contract with Bushnell (CEC). He did not attend the New Orleans convention, but some of his employees did. They urged him, before he proceeded any further with Bushnell, to see what the kid from Orlando was doing. Bushnell discouraged it. Meanwhile, Aaron and I (CEI) had bought, or stolen, a monster of a building in downtown Orlando. What a mess! 37,000 square feet, two stories, masonry, leaky roof, disintegrating plaster and termites, but plenty of room to grow in and fix up as we found the money. Brock came down to see us, paid no attention to the plaster and termites falling in his lap or the rain drops on his head, and liked what he saw. He felt Bushnell had deceived him. He left and met us only a few weeks later (I think it was) with a contract in hand at another convention we were exhibiting at, I think in Las Vegas. We haggled over some of its terms, a rather informally prepared document of ten or twelve pages, but after four or five hours, pretty well came to an understanding of what was intended. Among the assistants with Bob Brock was Tom Corcoran, a young fellow about five or ten years older than Aaron. Both Bob and Tom were attorneys. Bob left Tom in charge of wrapping up the details, signing for BHC and getting our signatures.
(Gee! This letter is getting to be much longer than I had intended it to be, but as some writer once said, "I just don't have enough time to write this briefly.")
Meanwhile, Aaron and I had acquired some understanding of the deal Bob Brock was obligated to under his contract with CEC. We wrote into our deal with BHC that BHC alone would be liable if his deal with us violated his deal with Bushnell. Our interim deal was titled a Pre-Incorporation Agreement, Brock reneged on his deal with Bushnell on the statement that Bushnell had misrepresented the facts to him, unilaterally canceled his franchise agreement with CEC, and switched to our show for the first restaurant, already under construction.
It took five or six months to wrap up the details of our deal with BHC. Brock sent an attorney to Orlando to negotiate with us head to head. His name -- I think I recall correctly -- was Larry Robinson. The upshot of our negotiations was the formation of ShowBiz Pizza Place, Inc., a License and Sales Agreement between SPP and CEI under which we provided shows as restaurants were built, a Shareholder's Agreement for SPP, and one other agreement, I think, under which we provided new software for the shows in the ShowBiz restaurants. ShowBiz Pizza Place was to be owned 80% by BHC, and the other 20% by the Fechters, mostly Aaron. Aaron, my wife Essie and I, and one other representative of CEI would be among the directors of SPP (but of course we were still a minority). For rapid expansion SPP would require a considerable credit line; BHC agreed to guarantee its obligations. A key provision of the Shareholder's Agreement was that any vital alteration in ShowBiz's operation would require ratification by 90% of the shareholders. (The Fechters owned 20%.) The total capitalization of ShowBiz Pizza Place, Inc. was $10,000.00 -- in other words, two more spits. BHC, as I said, undertook to provide ShowBiz with the necessary credit line. The essence of CEI's deal with ShowBiz was that we would provide our products and services for cost plus 10%, and that ShowBiz would use no animation except ours. Since BHC owned 80% of ShowBiz, all ShowBiz accounting was done at BHC's offices in conjunction with BHC's accounting. They did send copies of reports to the Fechters, and of course we attended all directors' meetings.
ShowBiz Pizza Place (SPP) and Chuck E. Cheese (CEC) immediately entered upon a madcap, competitive race to see who could open the most restaurants, claim the best sites, faster. Meanwhile, Bushnell (CEC) brought suit against BHC for breach of contract. It got to be quite a headache. I recall Aaron and me called to a hearing or depositions as far away as Los Angeles. But BHC's accountants thought BHC and ShowBiz were making money so fast they practically had their own mint. Brock felt he had hit big big time and moved the company offices from Topeka to Dallas (Irvine, if I recall correctly). He was tired of his litigation with Bushnell and agreed to a settlerment deal with CEC that, if completed, would have represented maybe $50,000,000 in franchise fees or agreed damages.
Meanwhile, CEC found that it was losing money hand over fist. It went into bankruptcy, Chapter 7 (as I recall), and was down to selling its assets -- the equipment of its closed restaurants, and some restaurants that managed to stay open -- plus the value of its settlement agreement with ShowBiz. The last, the settlement agreement, was by far, I am quite sure, the most significant of its assets. CEC as a going legal entity, however, closed up shop. It ceased to exist. I'm not sure of the exact date, but I'm pretty sure it was before, probably well before, 1985.
Soon after BHC moved to Texas, it found that its in-house accountants were all wet! It wasn't making money hand over fist at all! It started looking for all the money it was supposed to be making, and found that it too was losing money! (This was at a time that interest rates had reached 17% - 18%, and BHC was on the hook for plenty in ShowBiz's debts.)
I don't at least at the moment recall the exact sequence of events here. Bob Brock decided his best hope for salvation lay in (1) buying up the CEC assets but mostly the settlement agreement (which was an enormous ShowBiz obligation); and (2) getting rid of the Fechters (businesswise although throughout it all he and Aaron remained good friends) so that he could restructure it and sell it to another company that had entered the picture -- an English company, which I believe was called The Hallwood Group.
Anyway, to get rid of us, BHC immediately bought 50% of the Fechter interest in ShowBiz, giving BHC the 90% ownership they needed to restructure. CEI also made a deal with ShowBiz to terminate the License and Sale Agreement and other agreements. Hallwood bought ShowBiz and immediately invested another $50,000,000.00 to turn it around. He hired a young fellow named Dick Frank, a restaurant guy from Steak and Ale, I believe, who understood what was needed to turn the ShowBiz restaurants around. He has done a good job. ShowBiz quickly went public in its own name, and the Fechters sold their remaining interest to shut themselves of the matter. Of course, we came out fine.
ShowBiz tried to make a new deal with CEI to give them exclusive rights to the Rock-afire Explosion. They were not willing, however, to guarantee us anything that we felt we could live with. They wanted exclusive rights but were unwilling to guarantee purchases. Our relationship completely terminated. ShowBiz wanted exclusive rights to whatever animation they were using. They had exclusive rights to the CEC characters since they had bought all CEC assets. Dick Frank, who by that time was running ShowBiz, did not feel that the rank and file Joe who brought his children to ShowBiz cared much about the quality of the animation and the shows delivered, and, regrettably, I fear, he was probably right. It required real aficionados to appreciate the animation and the quality of music we were producing. The Rock-afire Explosion indeed was expensive. With our 10% mark-up, our sales price hovered in the range of $125,000. -- from about $110,000 to $130,000. We produced a total, I believe, of more than 300 for ShowBiz, plus incidental services.
Since ShowBiz was then using CEC characters and the CEC name was no longer in use, ShowBiz decided to change its name to Chuck E. Cheese (or some similar name), and so it is known and traded on the New York Stock Exchange to this day.
That's about the sum of that story. Bushnell likes to feel that his is the company that survived. But that's not at all the story. His company bellied up. ShowBiz never bellied up. It is the company that survived, but later found it expedient to change its name to CEC.
To complete the story, Bob Brock was probably still worth a few million when he sold ShowBiz to the Hallwood Group, but died a few years later -- penniless, I have been told. He was about five years younger than I. His assistant Tom Corcoran has done very well for himself. I have been told that he now heads one of the largest chain of franchised restaurants in the United States. Bob Brock and Tom Corcoran throughout remained good friends with Aaron.
Oh, yes, you asked also about my book. You can pull up a lot of info from
www.lulu.com/content/670769 (http://www.lulu.com/content/670769)
If you click on the dust jacket cover, you will be able to enlarge it and get a good idea of the scene. The book cover was created by Jenn Waitt, who is very active in fan activities relating to Chuck E. Cheese and Showbiz Pizza Place and helps Aaron with numerous artistic projects. Also, two readers have given reviews of the story.
Best regards,
Mel
My dad is now 86 years old and in good health mentally and physically. In fact, he has just finished writing a book titled, "The Watchword", which is being sold on line at Lulu.com.
These are his memories of the days of wine and roses as he wrote them yesterday for someone he has been conversing with on-line about his life:
Dear Gary,
Here, really, is a skeleton of a rundown on ShowBiz Pizza Place, Chuck E. Cheese, Creative Engineering, Inc., and another company you have never heard of: Brock Hotel Corporation (headed by Bob Brock, both Bob and his hotel company now deceased, although at the time of the events BHC with about 40 or 45 hotels was traded on the NY Stock Exchange). The following is entirely from my recollections. I will do no research for it but will try to be careful that there can be nothing significantly inaccurate.
Nolan Bushnell, of whom you have probably heard, was the founder of the original Chuck E. Cheese restaurants (to distinguish that chain from the CEC chain today). About 1979 he had, I think, about seven restaurant/entertainment centers going using the concept of selling pizza and entertaining kids with mechanically and electronically animated characters, plus a game room. The restaurants. and of course Bushnell's investors, were losing money. They were nevertheless confident the concept was sound but just had not yet taken off. The animation and music, let's say, was pretty "cheesy."
Enter Bob Brock (with his Topeka, Kansas, company BHC). He loved the concept. Bushnell represented to him, or he thought Bushnell represented to him, but the writings were not crystal clear, that he was the only one -- excluding Disney, which was not available -- who could provide such animation for restaurants. BHC entered into a contract with CEC to build 50 (I think was the number) CEC restaurants as a franchisee.
Enter Creative Engineering, Inc., headed by Aaron with 80% ownership, with my wife and me owning the other 20%. Aaron, the end of 1979, his birthday December 22nd, was then turning 26. We had no knowledge of BHC at that time although Bushnell had approached Aaron with an offer to buy CEI -- an offer Aaron rejected. My understanding was the offer was $1,000,000.
CEI had been founded in 1975 on a nickel and two spits, but things had gone well for us. Meanwhile, 1977, I graduated from law school. In November 1979 we (CEI) were exhibitors (the dominant exhibitor of perhaps 500 to 1,000) at the IAAPA convention in New Orleans - the New Orleans Convention Center. We rented (and paid for) half of a large separate hallroom across from the main exhibit area, but no one rented the other half, and we got to use it all. I don't remember the exact dimensions, but knowing pretty well the size of our exhibits, I would estimate it was about 75 feet wide and about 150 feet long. At each end we had a show, different shows, and in between we had rows of seats, which either were reversible or could easily be turned around without causing disorder. Altogether, I would guess, there were more than 200 seats. We would show one show and then the other, and the seats stayed well occupied. We also had a small room on the outside to discuss business, and also had an animated character outside in the hallway, much like Fatz, inviting people in to see the show. Remember, animation in those days except at Disney parks was virtually unknown. You might say we stole the convention.
Bob Brock had already commenced building his first restaurant under his contract with Bushnell (CEC). He did not attend the New Orleans convention, but some of his employees did. They urged him, before he proceeded any further with Bushnell, to see what the kid from Orlando was doing. Bushnell discouraged it. Meanwhile, Aaron and I (CEI) had bought, or stolen, a monster of a building in downtown Orlando. What a mess! 37,000 square feet, two stories, masonry, leaky roof, disintegrating plaster and termites, but plenty of room to grow in and fix up as we found the money. Brock came down to see us, paid no attention to the plaster and termites falling in his lap or the rain drops on his head, and liked what he saw. He felt Bushnell had deceived him. He left and met us only a few weeks later (I think it was) with a contract in hand at another convention we were exhibiting at, I think in Las Vegas. We haggled over some of its terms, a rather informally prepared document of ten or twelve pages, but after four or five hours, pretty well came to an understanding of what was intended. Among the assistants with Bob Brock was Tom Corcoran, a young fellow about five or ten years older than Aaron. Both Bob and Tom were attorneys. Bob left Tom in charge of wrapping up the details, signing for BHC and getting our signatures.
(Gee! This letter is getting to be much longer than I had intended it to be, but as some writer once said, "I just don't have enough time to write this briefly.")
Meanwhile, Aaron and I had acquired some understanding of the deal Bob Brock was obligated to under his contract with CEC. We wrote into our deal with BHC that BHC alone would be liable if his deal with us violated his deal with Bushnell. Our interim deal was titled a Pre-Incorporation Agreement, Brock reneged on his deal with Bushnell on the statement that Bushnell had misrepresented the facts to him, unilaterally canceled his franchise agreement with CEC, and switched to our show for the first restaurant, already under construction.
It took five or six months to wrap up the details of our deal with BHC. Brock sent an attorney to Orlando to negotiate with us head to head. His name -- I think I recall correctly -- was Larry Robinson. The upshot of our negotiations was the formation of ShowBiz Pizza Place, Inc., a License and Sales Agreement between SPP and CEI under which we provided shows as restaurants were built, a Shareholder's Agreement for SPP, and one other agreement, I think, under which we provided new software for the shows in the ShowBiz restaurants. ShowBiz Pizza Place was to be owned 80% by BHC, and the other 20% by the Fechters, mostly Aaron. Aaron, my wife Essie and I, and one other representative of CEI would be among the directors of SPP (but of course we were still a minority). For rapid expansion SPP would require a considerable credit line; BHC agreed to guarantee its obligations. A key provision of the Shareholder's Agreement was that any vital alteration in ShowBiz's operation would require ratification by 90% of the shareholders. (The Fechters owned 20%.) The total capitalization of ShowBiz Pizza Place, Inc. was $10,000.00 -- in other words, two more spits. BHC, as I said, undertook to provide ShowBiz with the necessary credit line. The essence of CEI's deal with ShowBiz was that we would provide our products and services for cost plus 10%, and that ShowBiz would use no animation except ours. Since BHC owned 80% of ShowBiz, all ShowBiz accounting was done at BHC's offices in conjunction with BHC's accounting. They did send copies of reports to the Fechters, and of course we attended all directors' meetings.
ShowBiz Pizza Place (SPP) and Chuck E. Cheese (CEC) immediately entered upon a madcap, competitive race to see who could open the most restaurants, claim the best sites, faster. Meanwhile, Bushnell (CEC) brought suit against BHC for breach of contract. It got to be quite a headache. I recall Aaron and me called to a hearing or depositions as far away as Los Angeles. But BHC's accountants thought BHC and ShowBiz were making money so fast they practically had their own mint. Brock felt he had hit big big time and moved the company offices from Topeka to Dallas (Irvine, if I recall correctly). He was tired of his litigation with Bushnell and agreed to a settlerment deal with CEC that, if completed, would have represented maybe $50,000,000 in franchise fees or agreed damages.
Meanwhile, CEC found that it was losing money hand over fist. It went into bankruptcy, Chapter 7 (as I recall), and was down to selling its assets -- the equipment of its closed restaurants, and some restaurants that managed to stay open -- plus the value of its settlement agreement with ShowBiz. The last, the settlement agreement, was by far, I am quite sure, the most significant of its assets. CEC as a going legal entity, however, closed up shop. It ceased to exist. I'm not sure of the exact date, but I'm pretty sure it was before, probably well before, 1985.
Soon after BHC moved to Texas, it found that its in-house accountants were all wet! It wasn't making money hand over fist at all! It started looking for all the money it was supposed to be making, and found that it too was losing money! (This was at a time that interest rates had reached 17% - 18%, and BHC was on the hook for plenty in ShowBiz's debts.)
I don't at least at the moment recall the exact sequence of events here. Bob Brock decided his best hope for salvation lay in (1) buying up the CEC assets but mostly the settlement agreement (which was an enormous ShowBiz obligation); and (2) getting rid of the Fechters (businesswise although throughout it all he and Aaron remained good friends) so that he could restructure it and sell it to another company that had entered the picture -- an English company, which I believe was called The Hallwood Group.
Anyway, to get rid of us, BHC immediately bought 50% of the Fechter interest in ShowBiz, giving BHC the 90% ownership they needed to restructure. CEI also made a deal with ShowBiz to terminate the License and Sale Agreement and other agreements. Hallwood bought ShowBiz and immediately invested another $50,000,000.00 to turn it around. He hired a young fellow named Dick Frank, a restaurant guy from Steak and Ale, I believe, who understood what was needed to turn the ShowBiz restaurants around. He has done a good job. ShowBiz quickly went public in its own name, and the Fechters sold their remaining interest to shut themselves of the matter. Of course, we came out fine.
ShowBiz tried to make a new deal with CEI to give them exclusive rights to the Rock-afire Explosion. They were not willing, however, to guarantee us anything that we felt we could live with. They wanted exclusive rights but were unwilling to guarantee purchases. Our relationship completely terminated. ShowBiz wanted exclusive rights to whatever animation they were using. They had exclusive rights to the CEC characters since they had bought all CEC assets. Dick Frank, who by that time was running ShowBiz, did not feel that the rank and file Joe who brought his children to ShowBiz cared much about the quality of the animation and the shows delivered, and, regrettably, I fear, he was probably right. It required real aficionados to appreciate the animation and the quality of music we were producing. The Rock-afire Explosion indeed was expensive. With our 10% mark-up, our sales price hovered in the range of $125,000. -- from about $110,000 to $130,000. We produced a total, I believe, of more than 300 for ShowBiz, plus incidental services.
Since ShowBiz was then using CEC characters and the CEC name was no longer in use, ShowBiz decided to change its name to Chuck E. Cheese (or some similar name), and so it is known and traded on the New York Stock Exchange to this day.
That's about the sum of that story. Bushnell likes to feel that his is the company that survived. But that's not at all the story. His company bellied up. ShowBiz never bellied up. It is the company that survived, but later found it expedient to change its name to CEC.
To complete the story, Bob Brock was probably still worth a few million when he sold ShowBiz to the Hallwood Group, but died a few years later -- penniless, I have been told. He was about five years younger than I. His assistant Tom Corcoran has done very well for himself. I have been told that he now heads one of the largest chain of franchised restaurants in the United States. Bob Brock and Tom Corcoran throughout remained good friends with Aaron.
Oh, yes, you asked also about my book. You can pull up a lot of info from
www.lulu.com/content/670769 (http://www.lulu.com/content/670769)
If you click on the dust jacket cover, you will be able to enlarge it and get a good idea of the scene. The book cover was created by Jenn Waitt, who is very active in fan activities relating to Chuck E. Cheese and Showbiz Pizza Place and helps Aaron with numerous artistic projects. Also, two readers have given reviews of the story.
Best regards,
Mel