McDonald’s Closings 2021: Why Hundreds Of Locations Are Closing At Walmart

As the pandemic shifted consumer eating and shopping habits, McDonald’s (MCD) has made changes to its restaurant model by pulling hundreds of restaurants from inside Walmart (WMT) as a result.

The fast-food chain, which at one time had 1,000 locations inside Walmart, will close most of its restaurants that are situated inside the stores as part of a 30-year partnership with the retail giant. Consumers now trend toward drive-thru orders for their food purchases, The Wall Street Journal reported.

According to the report from WSJ, only 150 McDonald’s locations will remain inside Walmart locations after the process is complete.

The news of McDonald’s exit doesn’t come as a surprise as consumer behavior has dramatically changed during the pandemic as people looked to prevent the spread of the virus.

More customers turned towards food delivery and quick pickup options, as well as online ordering for contactless ways to get meals on the go as many restaurant dining rooms across the U.S. remained closed during the height of the COVID crisis.

Restaurants have had to learn to adapt, adding drive-thrus, single-serve condiments, enhanced cleaning procedures, and curbside pickup options to continue to generate sales.

For McDonald’s, the dining rooms inside Walmart no longer offer a benefit as fewer consumers shop in-store and more are avoiding eat-in dining options, deeming them a COVID risk as the pandemic continues to wage on, the news outlet said.

But McDonald’s is not the only restaurant chain that has made the decision to pull out of Walmart stores. Subway has said it is also closing locations in 2021, attributing its departure to lower foot traffic and lower profits as the retailer’s customers utilize curbside pickup at stores, according to the Journal.

Restaurant chains at Walmart once found the move inside the retailer attractive as it offered a ton of foot traffic from customers shopping at stores. Now that customers are shopping online and picking up orders online, in-store shoppers have waned, leaving these restaurants void of customers.

But Walmart has a plan to replace the empty spots left by McDonald’s and Subway. The company is currently working with Yum! Brands, the parent company of Taco Bell, KFC, and Pizza Hut, to test new locations in stores, and is looking to expand its partnership with Domino’s Pizza, Linne Fulcher, vice president of customer strategy at Walmart, told WSJ.

“We took a turn to make sure what we are doing matched up with the strategy for the company,” and what today’s shoppers want, Fulcher told the news outlet.

Fulcher continued by saying that the other options Walmart is exploring include smoothie vending machines and the opening of around 10 Charley's Philly Steak shops.

The report indicated that the McDonald’s closures are expected to be finalized by summer, which is an accelerated timeline. McDonald’s had about 500 locations in Walmart at the start of 2020.

Shares of McDonald's were trading at $230.65 as of premarket hours, up 40 cents or 0.17% while share of Walmart were trading at $140.20, up 49 cents of 0.35% at the same time.