uWink's High-Tech Approach Aims To Disrupt Restaurant Industry

| About: uWink, Inc. (UWKI)
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The restaurant industry has become pretty stale in terms of new ideas in recent years. A legend in the video game industry is aiming to change all of that with uWink (UWNK.OB). Nolan Bushnell, the CEO and founder of uWink, founded both Atari and Chuck E. Cheese in the 1970s. The first uWink Bistro opened October 16th in Woodland Hills, California, and they plan to begin aggressively franchising next year (management projects that 1/3 of their restaurants will be company-owned and 2/3 franchised).

There is an emphasis on digital media in each uWink Bistro restaurant. At each table there is a video terminal through which the party can view the menu and enter their order (there are no waiters/waitresses; instead there are just "runners" who bring food and drinks to the tables as soon as they are ready). Their proprietary software allows for extensive customization in food and drink orders and displays ingredient and information for each entree.

Self-service ordering also allows customers the freedom to order whenever they want and enables them to more easily summon staff to request refills or other assistance. Orders are transmitted and displayed on a video screen in the kitchen which improves efficiency and eliminates errors. Use of the touchscreen for ordering also makes possible the real-time monitoring of consumption trends, the display of relevant advertising (deals with Red Bull, Evian and Stockholm Vodka have already been announced), and personalized recommendations based on analysis of their order history.

uwinkBased on the amount of food/drink ordered, patrons receive a number of credits that can be used to play video games (50+ game choices will eventually be programmed in) on the monitors at their table. Other media that will be accessible from the tabletop screens include trivia quizzes, horoscopes, movie trailers, music videos, comedy skits, and magic tricks. The company's philosophy is to foster "social gaming" and activities in which customers can participate as a group as opposed to the normal arcade setup where people split up and play different games (i.e. Dave & Buster's).

One of their strategies is to pit one table against another in trivia and/or video games and eventually one table in one restaurant could be playing a game against people sitting at a table in another uWink restaurant. Multi-player "Pong" games are also available by the bar to stimulate socialization. Games will even be projected onto the walls and/or floors in the waiting area to engage those not yet at a table.

You might think the quality of the food would suffer amid the focus on engaging customers in games and other activities. The consensus of numerous bloggers who have sampled their cuisine is that it is "unexpectedly good". This is not surprising when you consider uWink's menu was designed by their Executive Chef Greg Schroeppel, who has considerable product development experience at Applebee's and Frito Lay.

Additionally, John Kaufman, the former VP of Operations at California Pizza Kitchen, is serving as uWink's consulting director of restaurant operations. He is taking 50% of his compensation in stock.

The stock has run up quite a bit of late (from $0.30 in August to $1.85 before the current pull-back), but with a market cap of only $25 million, and outstanding catalysts (including the possible announcements of their first franchise agreements) on the horizon, it still has lots of room to run. It's also interesting to note the company has no long-term debt and management has not been selling off after the recent increase.

Even if uWink's expansion falls short of the "billions and billions" of locations Bushnell has jokingly targeted, a steady and methodical rollout of uWink bistros throughout the country could push the stock price dramatically higher in the coming years.

Disclosure: Author is long uWink