Long-Term Relationship between High-Profile Consumer Brands Was Already Eroding
McDonald’s Corp. plans to close about 325 restaurants in Walmart stores as it shifts spending to new openings and renovations while Walmart looks to introduce new food concepts.
The in-store food service changes come after what started as an experiment in 1994 between the two high-profile consumer brands expanded to more than 1,000 Walmart SuperCenters at its peak.
Over the years, however, sluggish sales at McDonald’s sites at Walmarts have led to closings periodically. That has gotten worse since the onset of the pandemic as traffic into Walmart has notably diminished because of lockdowns, capacity restraints, reduced hours and a dramatic shift to online shopping. At the same time, in-door dining has lost much of its attraction during the coronavirus outbreak.
Moreover, Walmart stores do not have drive-thru service for the McDonald’s units, further impeding sales results under the golden arches at a time when Walmart’s sales were on fire. That also has led to “frayed” bonds between the two, according to the Wall Street Journal, which first reported the split.
After the closings, which McDonald’s alluded to in its annual report, the two expect only about 150 Walmart stores will be selling Big Macs and fries in coming years. McDonald’s did not respond to a request for a comment.
McDonald’s instead will spend about $1.1 billion in capital expenditures this year on new restaurants openings, estimated now at about 650 net of store closings elsewhere throughout the system.
Some $500 million of this year’s spending will be allocated to adding new technological bells and whistles to about 1,200 restaurants, according to the regulatory filing. The fast-food giant has been installing touch-free ordering devices into its stores for much of the past five years and has implemented other technologies into stores in the past year.
Walmart, meanwhile, is looking to beef up its fast-food service offerings in its stores by adding to-go meals as well as delivery with big-name eateries and smaller local food sites. It is testing Taco Bell and Domino’s Pizza counters and is bringing in ghost kitchens for a multitude of food choices in some stores.
“We have a great opportunity with our leased space business to help our stores become even more convenient and relevant to local communities,” Avani Dudhia, a Walmart spokesperson, said in an email to CoStar News.
“We are excited to continue to bring in new businesses that make sense for our customers and their changing needs,” Dudhia added.