Happy Meals will soon get harder to find at Walmart.
This summer, hundreds of McDonald’s eateries located inside Walmart stores across the US are slated to close because of sluggish business — a trend that was accelerated by the pandemic.
The decades-old partnership between the largest restaurant chain and largest retailer in the world has been fraying for years. There were about 1,000 McDonald’s restaurants inside Walmart stores during their heyday, but by 2020 there were half as many McDonald’s stores, Walmart confirmed.
In July, McDonald’s said in its second quarter earnings report that it would be closing 200 restaurants in 2020 and that over half of them were at “lower sales volume” Walmart locations.
At the end of the summer just 150 McDonald’s stores will remain at Walmart, the retailer confirmed.
The accelerated pace of store closures was first reported by the Wall Street Journal.
McDonald’s does a significant amount of business via its drive-thrus — more so since the pandemic began — and Walmart lacks that option, sources pointed out. Margins at McDonald’s Walmart locations have likewise been hit as “customers at times loaded up on refills and condiments,” according to the Journal. Walmart also has largely stopped building new stores, instead remodeling them, which has created awkward situations, according to the paper.
“You can’t do a multimillion-dollar remodel in a store and then have a 1980s McDonald’s at the front,” one source told the Journal.
Subway eateries are also pulling up stakes in Walmart stores, according to the paper. The franchise is facing its own challenges, as The Post has reported, with stores closing across the country.
Walmart, which has long relied on rent from restaurants and other in-store tenants to pad its bottom line, said its stores will be switching to more grab-and go options. In addition to food, Walmart leases space to banks, hair and nail salons and veterinarian clinicc. In Texas, it has a number of tool-rental stores inside its stores, the company said.
“We have a great opportunity with our leased space business to help our stores become even more convenient and relevant to local communities,” the company said in a statement. “We are excited to continue to bring in new businesses that make sense for our customers and their changing needs.”
Walmart is testing smoothie vending machines in stores and opening Charleys Philly Steaks locations, which is a 600-store chain, and Walmart is also working with a Sushi concept in its home state of Arkansas and a concept called Ghost Kitchens, which allows customers to order food from other restaurants.
It’s also in discussions with Domino’s to add more locations to its existing 30 eateries inside Walmart locations, the company said. The pizza chain, however, had to convince Walmart that it wouldn’t hurt Walmart’s frozen pizza business, according to The Journal.
McDonald’s declined to comment on the story, pointing to its previous statements about slow business at Walmart locations.