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Chuck E. Cheese's plan to convince America it's not 'stale'

Chuck E. Cheese's has a problem.

The average child wants to visit nearly every month, but adults, on average, are interested in going just three times a year, according to the company's internal research.

Because parents hold the keys to the car as well as the wallet, this is a big issue.

Chuck E. Cheese's mascots
Mark Sullivan | WireImage | Getty Images
Chuck E. Cheese's mascots

To help inject fresh sales into the 38 year-old restaurant and entertainment chain, Chuck E. Cheese's is attempting to change the way a generation of Millennials, who grew up going to the chain for birthday parties, think about it.

"We fully understand that some people think we'd gotten a little stale," said CEO Tom Leverton during a phone interview with CNBC. Its parent company, CEC Entertainment, is majority owned by private equity firm Apollo Global Management's investment funds.

Known for its dancing mechanic animal characters called animatronics, the chain has struggled in the past. The restaurant delivered a 1.4 percent decline in same store sales during fiscal year 2014, after reporting meager growth the year before, and declines in 2012 and 2011.

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Chuck E. Cheese's transformation strategy hinges on a new menu, more cleanliness and hospitality training — and new entertainment with music videos from artists like Taylor Swift. In the process, the chain hopes to sway the most important influencer of all, moms and dads.

"We need to get them to stop vetoing the trip," says Gregory Casale, its head chef.

To cater to adult tastes, Casale has added a new thinner pizza crust with flavors like BBQ chicken and Cali Alfredo and whole wheat wraps. He's considering modernizing the salad bar with items like edamame, hummus and feta.

In the Dallas/Fort Worth market, it's also testing specialty coffee, craft beer and sports on TV in addition to a "parent zone."

Leverton also plans to incorporate parents more into the experience—something millennial parents increasingly want—through games both generations can play.

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"They want to be part of the experience. In the past, you might have been able to cater to children and have mom and dad sit and read a book," he said.


CEC as Blockbuster?

Aaron Allen, global restaurant consultant at Aaron Allen & Associates, sees technology's rapid pace of change as a headwind for Chuck E. Cheese's.

"It's the Blockbuster video of the restaurant industry," Allen said, referencing the video rental chain that was eventually undone by streaming video and the Internet. "Animatronics were relevant and cool in the 1970's or 1980's, but they're creepy today," Allen added.

"It's just too capital intensive to modernize the games as quickly as tech moves…" he said.

During 2015, the company expects to spend about $30 million to enhance its games and maintain its Chuck E. Cheese's and Peter Piper Pizza locations.

At least for now, the plan is showing signs of progress.

Same store sales grew 3 percent during the second quarter. Still, its parent company is operating at a net loss—to the tune $9.9 million in the second quarter from $12.8 million a year ago, according to its unaudited financial results.