As fast-food chains McDonald’s and Subway slim their ties with Walmart, the retail giant has turned its attention to other major players, such as Taco Bell and Domino’s, according to The Wall Street Journal.
The increase of online ordering and drive-thru and decrease of dine-in traffic have forced McDonald’s to make the move. The burger chain said in an SEC filing that it expects to close roughly 325 stores in 2021, which will mostly be lower sales volume locations inside Walmart.
At one point, there were about 1,000 McDonald’s units inside Walmart, but after the cut this year, only 150 will remain. There were more than 800 in 2012 and around 500 at the beginning of 2020. The relationship between the multi-billion-dollar companies dates back to 1994, but strategies have diverged since then. Walmart prefers to remodel existing locations instead of opening new ones, which leaves outdated McDonald’s store fronts, a person said to the Journal.
Subway franchisees are also closing Walmart locations due to decreasing traffic and profits. Jim Miller, a Subway operator, told the Journal that more Walmart customers picking up online orders in the parking lot have hurt sales. The franchisee also noted that Walmart added a soft pretzel concept and advertised its own sandwiches nearby his store, which did notable damage. He plans to shut down four of his five Walmart locations across three states.
In response, Walmart is testing Taco Bell locations and growing its Domino’s stores, Linne Fulcher, Walmart’s vice president of customer strategy, told the Journal. Domino’s is interested in Walmart locations because of its focus on smaller markets and investment in carryout. The chain, which now has 30 Walmart locations, had to convince the retail store that its sales wouldn’t cannibalize frozen pizza sales, a source reported to the news outlet.
In addition, Charleys Philly Steaks plans to open 10 stores inside Walmart in 2021, Boyd Hoback, president of shared services of parent GOSH Enterprises, told QSR in November. He said the chain is chasing a goal of $700,000 to $800,000 in AUV for those particular stores. The executive said Charleys demographics match Walmart’s.
“Charleys’ value doesn't necessarily come from low price points,” Hoback told QSR. “It comes from the quantity and quality of food you get for the price, and so we don't need a high-income base for it. So we think that matchup works pretty well. We'll see how that goes. There's lots of opportunity there.”
Saladworks, which has around 130 stores in North America, is planning to open 90 nontraditional stores in 2021, many of which will debut inside Walmart. Ghost Kitchen Brands, a company that lets customers choose from a selection of concepts like Jamba, Quiznos, Nathan’s Famous, and Cinnabon, is also opening several stores inside Walmart.