At one point, it was an advantageous relationship: Walmart locations with big restaurant chains like McDonald’s. When Walmart buyers went hungry, the restaurant was just a few steps away.
According to a Wall Street Journal report, as long as consumers shopped in the store, the relationship was profitable for both the retailer and the eatery. Restaurants brought Walmart rental profits and encouraged the buyer to stay longer on the premises, while eateries were easily provided with hungry foot traffic.
The coronavirus pandemic experienced a significant change in shopping and eating habits, which weakened the bond between the retail giant and McDonald’s.
Now more is being done online. The drive-through window, which is not found at Walmart locations, is usually preferred at fast food restaurants. At Walmart locations, customers were restricted to indoor food and takeaways, which made the pandemic less attractive or sometimes prohibitive.
It is therefore not surprising that the ‘approximately 30-year-old experiment’ between the two companies is declining. This prompted McDonald’s to close hundreds of restaurants in Walmart stores.
After a spate of planned closures expected by summer, about 150 McDonald’s stores will remain at U.S. Walmart locations, according to the fast food chain.
According to The Wall Street Journal, McDonald’s said in the documentation that low-volume stores are the center of closures. According to the report, there were about 1,000 McDonald’s restaurants in the largest U.S. retail stores at the peak.
McDonald’s is not the only restaurant leaving Walmart.
The Wall Street Journal reports that “reduced foot traffic and lower profits” are cited as the reasons why franchises from Subway, one of the largest fast food chains in the world, will also close in Walmart stores this year.
Jim Miller, a subway franchisee, said in the report that “more Walmart customers are picking up their goods during the parking pandemic, which means fewer sandwich sales.”
How will the closures affect Walmart?
The Wall Street Journal points out that the closures could also pose a challenge for Walmart, which has been benefiting from rental income in restaurant stores for decades.
The report also noted that its rival Costco Wholesale Corp., unlike Walmart, sells its own restaurant space that sells cheap menu items. Target Corp. operates its own food service space with partners under license agreements. Food services within store walls have a dual purpose: they encourage shoppers to stay longer and provide workers with a place to eat while they are resting.
Walmart is reportedly currently researching new models for its in-store restaurants. Linne Fulcher, vice president of retail strategy for the retailer, said: “We’ve taken a turn to make sure that what we do matches the strategy for the business,” and “what today’s buyers want. . ‘
Read more about this report via the Wall Street Journal.
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