What happened

Shares of Dave & Buster's (NASDAQ:PLAY) were gaining today after an activist investor took a position in the stock, lifting shareholders' hopes for a turnaround by the struggling "eatertainment" chain. The stock was up 10.9% as of 12:26 p.m. EST on Friday.

So what

The private equity firm Kohlberg Kravis Roberts (KKR) revealed a 6.3% stake in Dave & Buster's this morning. In a Securities and Exchange Commission filing, the activist investor said it had already held talks with management about its business, operations, strategy, plans, and prospects.  The statement also said that KKR could pursue any number of moves, including a merger, reorganization, a change in the board of directors, or a sale of assets.

Dave & Buster's has not yet issued any statement about KKR's position or the discussions they've held.

The entrance to a Dave & Buster's

Image source: Dave & Buster's.

Now what

The restaurant and arcade chain has been struggling for years, suffering comparable-restaurant sales declines even as it continues to open new locations. Share buybacks have helped lift earnings per share although performance in the underlying business has been weak.

Considering those results and the company's unique brand and growth potential, it's not surprising to see an activist investor like KKR take a stake here. Some of the usual activist tools here don't seem so applicable, however, as Dave & Buster's probably wouldn't find a buyer and the company is already aggressively returning capital to shareholders.

But the company needs to find a way to drive more traffic to its restaurants because adding new games in virtual reality and other areas has not been enough. D&B has also faced competition from delivery apps and at-home entertainment like Fortnite that have made it more attractive for customers to stay home.

Investors should expect an update in the coming weeks and months, possibly in the form of board changes. At the very least, KKR's involvement should help put a floor on this struggling restaurant stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.