Capstone Project

Introduction

Dave & Buster’s Entertainment, Inc., has shown a troubling inability to capture and create

value over the past several years. Its issues stem from an inability to retain customers after stores

have been open for just one year. Revenue streams appear fine, despite slowing growth, but the

firm’s entire growth is based solely on a honeymoon period where new stores make 10-20% higher

profits in first years. The current strategy of continuously opening new stores, roughly fifteen per

year, is unsustainable and the growing losses in comparable sales will catch up with the firm.

Dave & Buster’s Entertainment, Inc., needs to shift from continuous growth to reinvestment

in its current stores. The reinvestment plan needs to feature a multifaceted approach to bringing in

new customers and driving return visits. Several steps need to be taken in order to realign the

economic environment with its strategic mission to lower the price point for customers to enable

higher volumes of customers. The fact that the average customer is in the 69th percentile of income

in America is not in line with its goal to be a one stop shop for all entertainment.

Firm Strategy

Strategic Orientation

Dave & Buster’s Entertainment, Inc.’s (hereinafter “D&B”) slogan “Eat Drink Play and

Watch” fully describes its product focus. (D&B, 2019). D&B has designed not only a bar and

restaurant but has also fit in an arcade. A D&B location serves food and beverages, including

alcoholic beverages, and offers sports-viewing experiences and arcade style games. Its primary

product category is entertainment more so than dining.

The Texas based business operates one hundred and nineteen stores in the United States and

two in Canada; however, a consultant has been hired to consider more international locations in

the future. (D&B, 2019). D&B customers are primarily between twenty-one and thirty-nine years

old with a moderate lean towards men. Additionally, it also markets to families with children and

teenagers. The average household income of a customer is $75,000 which is roughly 19% higher

than the average American household income. (U.S. Census Bureau, 2019). D&B’s target

customer is one who is interested in video and arcade games.

D&B has asserted themselves in three different markets: a restaurant, a sports bar, and an

arcade. D&B asserts itself as better or at least comparable to any other option in any of the three

categories, but with the bonus that a customer can engage in all three activities in one location. Put

simply, D&B “provides a multi-faceted customer experience that cannot be easily replicated at

home or elsewhere without having to visit multiple destinations.” (D&B, 2019).

Business Model

D&B owns and operates its one hundred and twenty-one retail locations throughout the United

States and Ontario, Canada. Its revenues are earned through the four retail components of “Eat

Drink Play and Watch.” The majority of revenue is made by the Play segment consisting of

redemption, simulation, and virtual reality games. (D&B, 2019). D&B focuses on continuously

updating its roster of games with new and innovative options. Play accounts for 58% of total

revenue. 74% of play revenue is earned from redemption games which involve customers buying

credits in order to play and win redeemable tickets; the remaining 26% is earned through

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simulation and virtual reality games in addition to roughly 3% from billiards and bowling. Eat

represents the next largest share of revenues with 29%, while Drink, which is the full bar service

experience, represents the remaining 13%. Watch, the sports experience, does not directly account

for any profits.

Gaming alone accounts for 58% of D&B’s total revenues while food and alcohol account for

the remaining 42%. The entertainment side of the business is the driving force for profits. Food,

drink, sports, and special events are more of a draw to bring people into the store to purchase

tokens and play games than actual profit drivers in and of themselves.

Current Performance

Creating Value

While D&B has obtained revenue growth every year since 2014, the change in revenue shows

a troubling trend in their ability to create value. From 2014 to 2016 D&B experienced significant

growth as its revenue increased roughly 16% each year from $746 million to over $1 billion;

however, this high growth would not be sustained as it has lost 2-3% of that growth every year

since 2016, with the change in revenue only being 7.11% from 2018 to 2019. See Table 1 in the

Appendix.

Even though revenues have slowed over the past few years, D&B has been able to command

an increasing percentage of the Arcade, Food & Entertainment Complexes market. In 2014 it

commanded a 36% market share which has grown steadily to 55%. See Table 2 in the Appendix.

While this is significant market share growth, there is a caveat as the entire market appears to be

stagnating. Industry revenues grew 15.08% from 2014 to 2016 but have only grown 3.28% from

2016 to 2019. An ever-increasing market share in a stagnant or shrinking market provides less

future potential than the market share growth would appear to present. D&B has shown a

concerning inability to create value.

Capturing Value

D&B’s gross profit margin has been relatively flat since 2016 at 82%. See Table 3 in the

Appendix. Operating margins paint a bleaker picture as it has decreased from 14.98% in 2016 to

10.93% in 2019. See Table 4 in the Appendix. Earnings before interest and taxes (EBIT) provides

a good comparison for industry wide operating margins. The industry average EBIT decreased

from 13.8% in 2014 to an estimated level of 12.7% in 2019. (Roth, 2019). D&B was beating

industry averages in 2016 and 2017 as its operating margin was 14.98% and 14.54% respectively;

however, in 2018 there was a significant drop to 12.73% and another significant drop to 10.93%

in 2019. These numbers are well below industry average. There is also concern with D&B’s return

on assets. D&B showed growth from 2016 to 2017 when its return on assets increased nearly 2%

from 8.62% to 10.10%; however, the over the next two years it has significantly decreased to

4.23% in 2019. See Table 5 in the Appendix. Even without the decrease from 2017 to 2019, these

numbers would be troubling as they are consistently below industry average. D&B has shown a

concerning inability to capture value.

Internal Analysis

What makes D&B unique as a national chain is its ability to allow its customers to Eat Drink

Play and Watch all in one location. Its most important resources and capabilities must enhance that

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slogan. After performing a VRIO analysis, it is not surprising that the most important resources

and capabilities have to do with the Play segment of D&B which accounts for 58% of its profits.

Full resources and capabilities list and analysis are available in the Appendix. The five capabilities

and resources that are most critical for D&B’s success are: (1) its strong, recognized brand name

protected through multiple trademarks, (2) the unique customer experience of Eat Drink Play and

Watch, (3) the customized store layouts to optimize crossover between promoted activities, (4)

contacts with game manufacturers that allow D&B to create new, exclusive games, and (5)

exclusive amusement and entertainment options including redemption and simulation games.

The quadruple threat experience is paramount to D&B’s success. In order to be successful, D&B

has to market itself not just as an arcade, but as a restaurant, a bar, and a sports experience. This

starts from its brand name which, according to D&B, over 80% of casual dining customers

recognize as a dining and entertainment venue. (D&B, 2019). From 2016 to 2018 D&B increased

its marketing budget by over 20% in an effort to drive traffic into its stores. Protected within its

brand are also software programs, processes, recipes, and proprietary information that improves

its efficiency and customer experience.

All of the marketing drive is essential to bring customers through the door so D&B can hook

them in with its Eat Drink Play and Watch experience. There are very few competitors who bring

all four aspects into one location, so D&B has worked to leverage that capability. Significant

efforts have been made to research the perfect design for stores from the initial footprint of the

building down to the placement of food and drink carts, televisions, and the games. The games are

the hook for attracting customers as D&B cannot realistically compete just as a sports bar or a

restaurant. D&B has established strong connections with suppliers that allows them to establish a

competitive edge. Unique games that customers cannot play anywhere else, even for just a season,

helps to draw in interested parties. A consistent stream of exclusive games is essential for making

customers want to come back time after time.

Key Success Factors and Drivers of Change

The Industry

D&B operates mostly in the amusement arcades industry, NAICS Code 71312, but also blurs

into the full-service restaurant business, NAICS Code 722511, and alcohol establishments, NAICS

Code 722410. Arcade, food & entertainment complexes, as IBISWorld names it, is an appropriate

name for the industry. The primary business D&B engages in in the service of providing

amusement games for customers in addition to selling food and beverages. On a technical level,

D&B sells the tokens used to play the games, but that is not a useful product to discern as the

tokens are worthless without the games to play with them. D&B also provides the service of

providing viewing of sporting events and other gatherings, but all of the sports, food, and alcohol

is just a driver to the main service, which is the arcade, and even more broadly, entertainment.

D&B’s buyers are all individual consumers. The major demographic targeted are upper middle

class makes between the ages of 21 and 39; however, women in the same demographic are

consumers as well as teenagers and families with children. (D&B, 2019). D&B requires a supply

chain to provide food, drink, arcade games, and prizes. The food, drink, and prizes are all generic

items but the arcade games are designed and licensed which do provide a level of control and

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uniqueness as D&B is able to license certain products exclusively either for life or for a period of

time.

There are a growing number of direct competitors in the industry. D&B is competing against

other arcade providers, whether local or national brands. Nationwide competitors include Chuck

E. Cheese, Main Event, and Round1. Chuck E. Cheese, which caters to children, has 545 locations,

while Main Event and Round1, which also target adult clientele, currently only have 42 and 32

locations, respectively. (Fruhlinger, 2019). Several chains have been springing up where the focus

is food and alcohol, but with the availability of arcade games as opposed to the reverse for D&B

such as EightyTwo in Los Angeles and Barcade, which is now a national brand. (Sedacca, 2017).

Even more troubling than the more limited direct competitors are the nearly infinite number of

substitutes available. D&B considers itself in the vague category of “out-of-home entertainment”

which includes “movie theaters, sporting events, bowling alleys, sports activity centers, arcades

and entertainment centers, night clubs and restaurants as well as theme parks.” (D&B, 2019). D&B

also has to compete with casual dining restaurants and bars. As the price point for a night at D&B

is higher than many other activities, an even greater threat comes from in-home entertainment such

as video games, the internet, and movies and television shows. Many of the same arcade games

that can be played at D&B can be played at home on video game consoles or even on smartphones.

Another group of substitutes would be casinos. Casinos have the same attraction as the games and

drink prices may be very similar, but the prizes are not stuffed animals and candy but real money.

The arcade industry as a whole has suffered since the 1980s. In 1981 there were over 24,000

arcades in the United States, but that number shrunk to 2,500 by 2015. (Schulz, 2019). However,

despite the shrinking of the arcade market, there are over 166,700 locations “that contain or operate

arcade equipment.” (Schulz, 2019). The survivability of the arcade, food & entertainment

complexes, as D&B is a part of, is shown by the modest but positive average annual growth of

3.5% from 2015 to 2019. (Roth, 2019). IBISworld is unfortunately not as optimistic about growth

for 2019 to 2014 estimating that there will only be annual growth of 0.7%. The entire market

contains 6,904 enterprises with a miniscule annual growth of 0.2% indicating a lack of new

entrants and a slowly dying market.

Competitive Forces

The strongest competitive forces in the industry are the threat of substitutes and the rivalry

among producers. The Five Forces Worksheet can be found in the Appendix.

Threat of new entrants is only a moderate force in the arcade, food & entertainment complexes

market is mostly curtailed by the high cost of entry. In addition to needing floor space for arcade

games, new entrants would have to purchase the games which can cost several hundreds to tens of

thousands of dollars. (Schulz, 2019). New entrants also would require a license to sell food and

alcohol which can be a time-consuming process. Barring the issue of upfront capital for purchasing

games and legal fees for licensing, anyone could enter the market. Most games are commodity-

like as one arcade game is not substantially different than another, and for most games the licensing

is not unique to one business. There are no switching costs for buyers as a consumer can choose

to go to any location on any day.

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The bargaining power of buyers is a moderate to strong force in the industry. As already

mentioned, the games, food, and drink, are all somewhat undifferentiated and buyers can easily

switch between producers. There is no concern that buyers would not have easy access to

information about producers’ goods as that information should be readily available on the internet.

Buyers also only have a small ability to produce the goods for themselves. Food and drink can be

produced at home as can some forms of games, but many of the arcade games cannot be produced

at home other than purchased for home use. However, the bargaining power is limited by the

number of buyers being large and the fact that visits to D&B or one of its competitors would not

be considered a large, infrequent, or important purchase.

Not only are there a vast number of suitable competitors, there is a nearly infinite number of

suitable substitutes. In a broad sense, customers have a near infinite choice of establishments and

products to fill their entertainment needs, whether at home or out of the home. Other than some

select choices that would require a subscription, there are no real switching costs and a buyer can

choose to go to a movie theater as easily as they can choose to go to D&B. Because of the relatively

high cost of a night at an arcade complex, pricing has a substantial ability to push buyers to

substitutes. Among direct competitors, the same issues arise. There is a high cost to open an arcade

complex but there is little that a producer can do to differentiate itself based solely off of its

products. In a slowly growing market with strong substitutes, each producer cannot afford to lose

customers to a competitor.

Drivers of Change

The industry will be significantly impacted by technological changes in the foreseeable future

but will also face effects from economic and socio-cultural changes. Political issues should have

little impact on D&B and its competitors.

Video games have changed significantly since the 1970s when arcade machines began to

develop, and this technological growth has accelerated in recent years. Despite a decline in arcades

since the 1980s, video games have become even more popular, growing from a $104.8 billion

industry in 2016 to what is predicted to be $143.5 billion in 2020. (Imageholders, 2018). Over 45%

of the global video games market is now mobile gaming, which include those played on

smartphones and tablets. (Wijman, 2019). This data shows that there is still a market for video

games for firms that can harness it. Arcade complexes are no different. The major technology that

will need to be embraced going forward is virtual reality (hereinafter “VR”). Over the past few

years, more and more major video game producers have been making games for VR systems and

the market in 2017 was $11.35 billion. (Gaul, 2018). That market is expected to grow to $571.42

billion by 2015. (Gaul, 2018). Of that $571.42 billion, 68.10% is projected to be from the gaming

industry. While VR can be used at home, its systems lend themselves to arcade usage. In addition

to a VR headset, players can be fully engaged with peripheral gear that would be impossible or

cost prohibitive for individual customers to own. As Rob Fahey writes, arcades could provide a,

“‘full’ VR experience - with a custom controller (a gun, perhaps, or full-body

motion sensing suite), a multi- directional treadmill, and so on, is simply going to

be too expensive for most users - and even if prices collapsed, it's too big and

unwieldy to live in most people's apartments. Yet the entertainment potential of

such a fully-functional setup, running in parallel with a dozen other such suites so

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that a group of friends can explore a virtual world together, is enormous - and from

a commercial perspective, not even all that space-consuming.”

(Fahey, 2013).

Hand in hand with the technological changes are the socio-cultural trends. Instead of the

traditional arcade style games, people today are more interested in social experiences. A focus on

interaction with other people will shape the way new games are developed and arcades are

designed. Socially arcades still must compete with a stigma surrounding video games. Even though

over 1.2 billion people play video games worldwide there is still a stigma that may cause some to

avoid arcade complexes as they are felt to be childish or an activity for loners. (Schmidt, 2016).

Culturally, Americans are also changing the way they eat. People are eating out less and eating

fresher foods more often. (Wells, 2015). The restaurant portions of the arcade complexes will have

to update to continue to attract modern audiences.

Economic factors will also affect the consumer base for arcade complexes. The average

American family spent $3,226 per year on entertainment expenses in 2018, which is only a growth

of 0.7% from 2017. (US Bureau of Labor Statistics, 2019). Spending on arcade complexes would

be purely from disposable income so it would be susceptible to any changes to people’s salaries,

job security, and other market effects.

Key Success Factors

In order to survive in the arcade, food & entertainment complexes market, producers will have

to meet several challenges. Overall, each producer will need to establish itself as a better choice

over not only its competitors, but over the myriad of substitutes in the general entertainment

market. In order to do so, the producers will need to meet the socio-cultural, economic, and

technological changes head-on. The socio-cultural hurdle is the most overarching as in order to

succeed, a producer needs to appear to be as “cool” of a location for not only families with children

but also for adults to spend their precious free time and money. Producers can beat the stigma of a

childish appearance by harnessing new technologies that create a social experience and elevate

games beyond just an arcade. VR and other interactive games create a social experience for

grounds to engage with each other in a way that many older games do not allow. In order to

continue to succeed as more than just an arcade, these producers will need to continuously update

and modernize menus in order to attract millennial audiences. Simple bar food may not continue

to suffice as consumers demand fresher options. Despite needing to update to meet the times,

producers need to be significantly concerned about cost. With a plethora of substitutes and

competition, consumers have the power to choose any entertainment option that fits their budget.

If arcade complexes prices rise, it will drive more consumers to stay home or find a new source of

entertainment.

Diagnosis of Strategic Alignment

D&B has shown a troubling inability to both create and capture value. Over the past five years

revenue growth has halved, operating margins have decreased by one-third, and return on assets

has more than halved. While the ability to create value is a concern, the more glaring issue is the

significant inability to capture value.

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The only real misalignment between D&B’s strategy and the environment is the fact that the

average household income of a customer is $75,000 which is well above the average income for

an American family.

D&B has several resources and capabilities that should align with its strategy. It has the ability

to consistently update its game selection, it has the ability to purchase exclusive games from

suppliers, it has the ability to update its menu regularly to keep food options fresh, it has a strong

training program for new stores and an experienced management team, but despite all that there is

a misalignment in the fact that it lacks the capability to attract return customers. D&B desires to

be a one stop shop for all of a customer’s entertainment needs, but its resources and capabilities

are not meeting that goal.

D&B’s failure to capture value stems from its inability to deploy its resources and capabilities

in a way that causes customers to return. A lack of repeat customers is part of a growing problem

of losses in comparable store sales. In 2003 the average customer visited D&B four times a year

with many visiting multiple times a week, but that number has dropped to only two visits a year

for 2019. (D&B, 2003; Klein, 2019). Unsurprisingly, D&B no longer reports average customer

visits in its 10-K.

Over the past three years, comparable store sales have decreased at a growing rate. See Table

6. Comparable sales revenue has decreased at an alarming rate while D&B is being propped up by

its noncomparable sales which are the result of new stores being opened yearly. Fifty-five new

stores have been built since the last time D&B had positive comparable sales in 2016.

Noncomparable sales appear to be solid but unfortunately these numbers are propped up by what

D&B calls the honeymoon period. After the first year, D&B expects sales in new stores to drop by

10 to 20% into the second year. (D&B, 2019). Couple this drop with growing yearly losses in

comparable sales, the only stores really bolstering the revenue line are the newly opened ones.

Opening 15 or more stores per year is not a sustainable practice. D&B will run out of untapped

markets for profitable new locations. If it has not fixed its comparable sales problem before that

happens, it will be too late.

From 2016 to 2019, D&B has spent $81,294,000.00 on just pre-opening costs for new

locations. D&B needs to reallocate some of these funds away from opening new stores and into

improving existing locations and retaining customers. The new mobile application that D&B has

already spent resources developing can luckily help with this process. Shifting the company’s

strategic orientation from one of unfettered growth to reinvestment into its existing stores would

cause significant profit concerns as a comparison between the revenue growth and noncomparable

sales for 2017 to 2019 shows that without noncomparable sales, revenue has actually shrunk not

grown. See Table 7. While this would be a harsh reality to disclose on a 10-K, the reality is that

any store open for more than a year is slowly dying at an ever-increasing rate. In the very near

future, D&B will not be able to open enough new stores to in effect hide the decreasing revenues

from old stores.

D&B’s reinvestment plan into existing stores needs to feature a multifaceted approach to

bringing in new customers and driving return visits. Several steps need to be taken in order to

realign the economic environment with its strategic mission to lower the price point for customers

to enable higher volumes of customers. The fact that the average customer is in the 69th percentile

of income in America is not inline with D&B’s goal to be a one stop shop for all entertainment.

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The games in a D&B store are the least effected by a change in price. D&B purchases a game

or arcade cabinet and then the only cost going forward is routine maintenance. While the return on

the investment may take longer, there is a low risk of operating at a loss if the price per play on

the games is decreased. One of the first considerations should be to lower the price per play in

order to bring more customers in the door.

A pilot study should be set up in at least three stores, one in an area with a lower average

income, one near the median, and one well above the median. For six months, D&B can offer a

weekend special of 30% off all game tokens. If customer volume grows, the number of plays will

grow in addition to food and drink sales. D&B would not only have to track volume on the

discounted nights, but it also needs to track repeat customers to see if it has been able to retain

customer loyalty at the price point. If applied across the board in 2019, a 30% cut in amusement

revenues, not counting any increase in volume, would cost D&B less than $200 million in

revenues, but revenues would still be over $1 billion. While a pilot program is a safer option to

start, this could be applied company wide.

D&B also needs to expand on the Watch segment of its mission. Even in the 10-K, Watch

seems to be an afterthought. Other restaurant experiences like Buffalo Wild Wings provide the

same television viewing opportunities, of course without the arcade segment, but there is nothing

special about just having 40 televisions in a store. D&B needs to focus on creating a reason for

people to come and watch television at the stores. D&B talks about D&B Sports, but it needs to

commit more resources. Partnerships with professional sports leagues or with pay-per-view

events or dedicated viewing parties with special attractions would be one way to leverage these

already existing resources with a little more capital.

Another issue that D&B is lacking is with the social aspect that people are looking for in games.

One of its competitors, Main Event, has bowling lanes so it hosts bowling leagues which allow

large groups to gather. These large groups probably eat, drink, and play arcade games before,

during, and after tournaments. D&B needs to create new events to bring customers in to use the

existing assets. Trivia nights are a cheap way to do so. The only added cost is the trivia host, while

the prizes can be free plays for games or discounts on food or drink. The added volume would

cover more than the prize.

Results of the pilot study would be necessary to evaluate the ratio of customer growth to

revenue growth for food, drink, and amusement in addition to determining exactly how elastic the

market is in relation to a 30% drop in price. Even presuming that a 30% drop in amusement prices

causes a 5% increase in customers and thus a 5% increase in total sales, D&B would exceed current

revenues in 2023. This would be healthy, sustainable revenue growth as opposed to a slow death

for any store after one year. Once old stores are saved, D&B could begin expanding again and thus

increase revenues further. A graph is included below which forecasts revenues if the 30% drop in

amusement prices causes a 5%, 15%, 30%, or 50% increase in customer volumes. The date shows

that even a small increase is worth the 30% cut in price, but if the market is more receptive to the

pricing, in addition to other marketing initiatives, larger revenues can be reached even soon.

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Appendix

Year

Total Revenue

(in millions)

Percent

Change

2014 0.746

2015 0.867 16.22%

2016 1.005 15.92%

2017 1.14 13.43%

2018 1.265 10.96%

2019 1.355 7.11%

Table 1: Total Revenues for D&B from 2014 to 2019 showing the percent change in revenue

from 2015-2019. Sources: (D&B Revenue 2013-2020, 2020; D&B 2018).

Year

D&B Revenue

(in millions)

Industry Revenue

(in millions) Percent of Industry Revenue

2014 746 2088.7 35.72%

2015 867 2231.7 38.85%

2016 1005 2403.6 41.81%

2017 1140 2440 46.72%

2018 1265 2461.1 51.40%

2019 1355 2482.5 54.58%

Table 2: D&B Revenue as a percent of revenue for the Arcade, Food & Entertainment

Complexes in the US. Sources: (Roth, 2019; D&B, 2019; D&B Entertainment Revenue 2013-

2020, 2020)

$0.00

$2,000.00

$4,000.00

$6,000.00

$8,000.00

$10,000.00

$12,000.00

$14,000.00

2021 2022 2023 2024

Projected Revenue Growth (in millions)

5%

15%

30%

50%

10

Year

D&B Revenue

(in millions)

Total Cost of Products

(in millions) Gross Profit Margin

2016 1005 180.3 82.06%

2017 1140 196.672 82.75%

2018 1265 220.263 82.59%

2019 1355 233.311 82.78%

Table 3: Estimated Gross Profit Margin for D&B based on total cost of products as an estimate

for cost of goods sold. Source (D&B, 2019) (D&B, 2020).

Year

Operating Income (in

millions) D&B Net Sales (in millions) Operating Margin

2016 150.516 1005 14.98%

2017 165.772 1140 14.54%

2018 161 1265 12.73%

2019 148.079 1355 10.93%

Table 4: Operating Margin for D&B. Sources: (D&B, 2019; D&B, 2020).

Year

Net Profits

(in millions)

Total Assets

(in millions)

Return on

Assets

Industry

Average

2016 90.795 1053 8.62% 9.20%

2017 120.949 1197 10.10% 11.10%

2018 117.221 1273 9.21% 11.90%

2019 100.263 2370 4.23% 7.60%

Table 5: Return on Assets. Sources: (D&B, 2019; D&B, 2020; Roth, 2019).

Table 6: Comparable and Noncomparable sales. Sources:(D&B, 2019; D&B, 2020).

Table 7: Comparison of Revenue Change and Noncomparable Sales. Sources: (D&B, 2019;

D&B, 2020).

Year Change in Comparable Store Sales Number of Stores Pre-opening costs Noncomparable Sales Revenue Comparable Sales Revenue

2017 -0.90% 106 $23,746,000.00 $128,616,000.00 -$7,962,000.00

2018 -1.60% 121 $23,163,000.00 $163,250,000.00 -$15,250,000.00

2019 -2.60% 136 $18,971,000.00 $117,592,000.00 -$28,408,000.00

Year Revenue Change in Revenue Noncomparable Sales Revenue Revenue Growth - Noncomparable Sales

2016 $1,005,000,000.00

2017 $1,140,000,000.00 $135,000,000.00 $128,616,000.00 $6,384,000.00

2018 $1,265,000,000.00 $125,000,000.00 $163,250,000.00 -$38,250,000.00

2019 $1,355,000,000.00 $90,000,000.00 $117,592,000.00 -$27,592,000.00

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Resources and Capabilities

1. Unique customer experience of Eat Drink Play and Watch

2. Customized store layouts to optimize crossover between promoted activities

3. Ability to modify food options regularly

4. Exclusive amusement and entertainment options including redemption and simulation

games

5. Strong recognized brand name protected through multiple trademarks

6. Contacts with game manufacturers that allow D&B to create new exclusive games

7. Dedicated marketing department that is able to develop brand personality of being fun,

contemporary, and larger than life

8. Capability to leverage entertainment profits to reduce exposure to changing food prices

9. Strong employee training program dedicated to developing a high quality and consistent

customer experience

10. Strong management team with experience in casual dining, entertainment, and customer

centric operations

11. Proprietary information management system for efficiencies in operating and

administrative time and expense

12. Benefits program for hourly and salaried employees

13. Contacts with independent food product producers

14. Economies of scale discounts for purchasing amusement and traditional games

R/C Valuable Rarity Inimitable Organization Average

1 5 5 5 4 4.75

2 5 5 1 4 3.75

3 2 1 1 3 1.75

4 5 5 5 5 5

5 5 3 5 5 4.5

6 5 3 4 4 4

7 4 3 1 4 3

8 4 4 3 3 3.5

9 5 2 1 3 2.75

10 4 1 1 4 2.5

11 5 2 2 3 3

12 3 1 2 2 2

13 2 1 1 2 1.5

14 4 4 4 4 4

12

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Sources

Dave & Buster’s Entertainment, Inc. (2003) Form 10-K for the Fiscal Year Ended February 2,

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