Dave & Buster's, the beloved haven of arcade games and greasy delights, is quietly orchestrating a revolution. While the market fixates on their "choppy" quarter-to-date performance and calendar shifts, a deeper dive into their Q4 2023 earnings call transcript reveals a subtle yet potent strategy – a strategy that could propel them to their audacious $1 billion adjusted EBITDA target.

The company's CEO, Chris Morris, exudes an almost evangelical zeal when he details their six organic growth initiatives. Among them, two stand out: strategic game pricing and the transformative remodel program. These are not mere operational tweaks; they represent a fundamental shift in how Dave & Buster's interacts with its core customer base, leveraging the inherent power of play and a newfound comfort with strategic price increases.

Strategic Game Pricing: A Missed Opportunity No More

Let's start with the arcade, Dave & Buster's throbbing heart. Historically, the company has been remarkably passive when it comes to game pricing. Prices have remained stagnant for decades, seemingly impervious to the whims of inflation or regional economic variations. This inertia, while perhaps a boon to nostalgic gamers, represented a significant missed opportunity.

Morris acknowledges this past passivity, stating frankly that the company "didn't even have the ability to have variable pricing across regions." This is a stunning admission for a company with 223 stores spanning diverse economic landscapes. But the past is prologue. Dave & Buster's is now aggressively testing and implementing strategic game pricing, adjusting both absolute prices and introducing regional differentiation.

The results are compelling. Stores with the highest price increases have experienced the most positive sales impact, and crucially, without a corresponding drop in guest satisfaction. This suggests a potent combination: customers, it seems, are readily accepting higher prices while still perceiving strong value.

Morris, buoyed by this early success, remains steadfast in his belief that a 10% price increase over time, as articulated during their Investor Day last June, is achievable. This translates to a potential revenue uplift of $130 million to $220 million annually, assuming a conservative average annual entertainment revenue of $1.3 billion to $2.2 billion.

The Remodel Revolution: A Blueprint for Success

Now, consider the remodels, Dave & Buster's boldest bet. This isn't just about slapping on a fresh coat of paint and calling it a day. These remodels represent a meticulously calculated effort to reshape the entire guest experience, seamlessly weaving together entertainment, food & beverage, and technology.

The flagship remodel in Friendswood, Texas, serves as the blueprint. Here, the results are nothing short of astounding. Sales have surged by double-digits compared to the prior year and a staggering 30% compared to 2019. But the magic lies in the details.

Entertainment revenue is up, fueled by new attractions like the social bays, which are also driving higher food and beverage attach. Special events revenue has jumped a remarkable 45%, a testament to the remodel's group-friendly design. And perhaps most importantly, Net Promoter Scores have soared by 15 points, reflecting a demonstrably enhanced guest experience.

Morris emphasizes that these impressive results are not driven by a deluge of incremental marketing dollars, but by "news to talk about." The remodels, in essence, are generating their own buzz, creating a self-perpetuating cycle of trial and renewed interest.

Emboldened by Friendswood's success, the company is accelerating its remodel program, with 40 to 45 stores slated for completion by the end of fiscal 2024. This aggressive rollout, however, remains tempered by a "strict stage gate process" ensuring that each remodel hits the target return threshold.

The Playbook: Play and Profits

Here's the key takeaway: Dave & Buster's is embracing a new playbook, one where play and price increases are not mutually exclusive. By leveraging their deeply ingrained brand appeal and meticulously designed remodels, the company is confident in its ability to pass through price increases without alienating its core customer base.

While macro headwinds and consumer uncertainties remain a wildcard, Dave & Buster's strategic reset suggests a compelling hypothesis: the company is poised for a period of sustained, profitable growth, potentially exceeding market expectations and propelling them towards their ambitious $1 billion adjusted EBITDA target.

Dave & Buster's Performance Metrics

The following chart illustrates the trend of key performance metrics for Dave & Buster's, as reported in their Q3 and Q4 2023 earnings calls.

"Fun Fact: Dave Corriveau and James "Buster" Corley, the founders of Dave & Buster's, flipped a coin to decide whose name would go first in the company's moniker. Apparently, "Buster & Dave's" didn't have the same ring to it."