Why Walmart Is About To Lose Most Of Its In-Store McDonald's Locations

McDonald's has announced that it will close most of its remaining Walmart-based outlets, leaving only 150. This appears to have less to do with any falling out with Walmart than an accidental detail, as, according to a statement from McDonald's CFO Kevin Ozan that Nasdaq quotes, "The U.S. is accelerating some restaurant closures previously planned for future years. Of the 200 U.S. closures for this year, over half are low-volume restaurants in Walmart store locations." So, McDonald's is not so much picking on Walmart as accepting that their presence in Walmart is not producing profit. The ones that remain are the ones that have proven themselves valuable.

Still, as CNBC notes, this marks a low point in their 30-year relationship which, at its height, saw McDonald's restaurants in around 1,000 Walmarts.

It also marks a massive blow to Walmart, which, according to Fox Business, relies on the rent it draws from the smaller businesses that operate within their stores. Though, after some assurance that there would be no competition, Walmart does seem to be considering an offer from Domino's to fill some of the empty spaces.

The final fraying of the Walmart-McDonald's partnership is another example of the ever-unfolding impact that the novel coronavirus pandemic has had on the food industry.

Although, as Restaurant Business noted a few weeks ago, McDonald's has maintained its dominance in the fast food market, its sales come from drive-thrus or delivery. However, the business logic of its Walmart restaurants is that people who happen to be at Walmart may decide to treat themselves on the way out.

The passive feeding off foot traffic, though, has failed because, as Forbes writes, the pandemic has spurred many Walmart customers to either buy via a pick-up option or receive delivery. In either case, there aren't nearly as many wandering customers for McDonald's to take advantage of. The Forbes piece also notes that without a drive-thru option, Walmart-based McDonald's locations had consistently underperformed when compared to the solo McDonald's ventures. So, in the end, the pandemic accelerated pre-existing trends.