Game on: Sega revamp for GameWorks taps Arena concept

Nation’s Restaurant News, Nov 28, 2005 by Lisa Jennings

GLENDALE, CALIF. — Attempting to breathe new life into the 8-year-old GameWorks video-game-restaurant brand, Sega Entertainment USA Inc. this month completed the purchase of the 17-unit chain’s assets and disclosed plans to revamp and expand its foodservice component.

Sega was one of the founding partners of GameWorks LLC, now based in the Los Angeles suburb of Glendale. The brand was initially created by filmmaker Steven Spielberg as a cutting-edge video arcade of sorts with a snack bar, which later was expanded into a restaurant and bar. Southern California-based Universal Studios and Spielberg’s DreamWorks SKG also were partners in developing GameWorks, but the chain filed for Chapter 11 bankruptcy protection from creditors in March 2004.

Officials at the time blamed high rents, but the reorganization allowed the company to renegotiate leases. Sega Entertainment, which was formed earlier this year, spent roughly $10 million to buy out Universal Studios and DreamWorks. The move, officials said, is part of a strategic plan by Japanese-based Sega Corp. to expand its electronic-games business in the United States.

With GameWorks as one brand within its portfolio, Sega Entertainment will serve as a platform for the possible introduction of other entertainment-restaurant concepts that have been successful for Sega in Asia, said Clint Manny, the new U.S. division’s senior vice president for sales and marketing.

While much of GameWorks’ regional staff was retained in the buyout, three of the brand’s former executives–including former president and chief executive Ron Lam–have left the company to launch their own venture, Trifecta Management Group, based in Agoura Hills, Calif. Trifecta will be announcing the development of several new restaurant and entertainment concepts in early 2006, Lam said.

Sega Entertainment named Coca-Cola veteran Ben Kitay president and chief operating officer, with Akitoshi Ogawa, former general manager of Sega’s flagship indoor amusement park Joypolis in Tokyo, as executive vice president of operations and marketing.

GameWorks was founded in 1997 in Seattle. The focus initially was on the latest large-scale, physically interactive video arcade games, with pizza and other items served on the side from an in-arcade snack bar. The foodservice component went through several evolutions as the company grew, first as GameWorks Grills, later as Jax Grill or, in some outlets, Hopscotch Grill, offering a broader menu and full bar with signature cocktails.

Fourteen of GameWorks’ 18 U.S. units have restaurants and bars, and locations in Guam and the Dominican Republic also have foodservice operations. A GameWorks branch is scheduled to open soon in Mexico.

In May, Sega began converting the restaurants at five GameWorks locations to the new Arena Sports Bar & Grill, a concept that allowed the company to appeal to family-oriented sports fans with giant plasma televisions and sports-related video games.

Manny said the company expects to have the rest of the units converted to the Arena concept within the next year. Sega also is looking for locations to open stand-alone Arena Sports Bar & Grill restaurants, he added. The plan is to open three to five of those units per year.

Pat Hart, vice president for food and beverage, who also held that position before the buyout, created a menu for the Arena concept that features pastas and steaks as well as the standard sports bar fare of potato skins, mozzarella sticks and spinach dip. A top seller is the baby back rib platter, $16.99 for a full rack, Manny said. The average check per person is about $19.

Sega also invested an estimated $3.5 million in new games for GameWorks. A stored-value card system is used in which cash-acceptance devices add value to the cards’ electronic strips, and the games deduct credits. The system, used since GameWorks’ inception, eliminates the need for game tokens or coins.

About 14 percent to 18 percent of revenues come from group sales, Manny said, and Sega is aiming to position GameWorks as a prime destination for corporate office parties, bar mitzvahs and bachelor parties.

Sega Corp.–bought in 2004 by pachinko giant Sammy, one of the largest makers of slot machines, to form Japanese parent company Sega Sammy Holdings–also is looking at other Sega brands as potential exports to the United States. Candidates in Asia range from the youth-oriented Sonic Town, which offers food, to Bee, a pool-and-darts-theme restaurant and bar aimed at a nightclub crowd. Manny said it’s too soon to say which brands might someday make their U.S. debuts.

The entertainment-restaurant segment has taken a hit in recent years with the advancement of home video game entertainment systems–including those developed by Sega–which have caused gamers to stay at home to play.

However, as in Sega’s entertainment-restaurant concepts in Japan, the new and improved GameWorks will adopt technologies to enable network game play throughout the chain, allowing guests to compete with other players both in the same venue and at locations across the country, Manny said.

“That will bring back the social aspect, and that’s an element you can’t find when you play at home,” he said. “Now it’s a social thing to go have lunch or go have a beer with friends and play these great games.”

Networking also will be a feature of uWink Media Bistro, a new entertainment-restaurant concept under development by Nolan Bushnell, founder of Atari Corp. and Chuck E. Cheese’s Pizza Time Theater.

Using personal tabletop video consoles for gaming and food ordering, uWink Media Bistro will showcase digital entertainment developed by sister company uWink Inc. Bushnell intends to open the restaurant by February in the Los Angeles area.

Around the same time, former GameWorks chief Lam of Trifecta is expected to unveil several new restaurant and entertainment concepts with various partners across the country.

One is a high-end restaurant and bowling alley in Cleveland to be called Corner Alley, which will include the Trifecta-developed Fourth Street Bar & Grill concept.

Though Lain said he was not ready to release details, the company also is working on a family restaurant with “a bit of entertainment” to open in Southern California early next year, as well as a barbecue restaurant that he said is being developed in partnership with a noted Los Angeles chef.

Working with Lam at Trifecta is Mike Auger, GameWorks’ former executive vice president of operations, who spearheaded the development of its foodservice concepts, and Bruce Nussbaum, GameWorks’ former executive vice president of corporate development and general counsel.

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