The coronavirus (COVID-19) pandemic has changed the way consumers shop and purchase fast-food. As a result of those two trends, McDonald’s and Subway are reportedly closing hundreds of their stores located within Walmarts.
The Wall Street Journal reports that the closings mark the final stages of what has been a relationship spanning three decades. It was brought on by two trends that emerged over the last 12 months.
First, fewer people visited brick-and-mortar locations, moving a larger portion of purchases to online channels. Others came to store locations but never made it inside because they took advantage of curbside pickup.
Restaurants, meanwhile, closed or limited dining rooms and shifted a greater portion of their business to takeout and delivery. Fast-food restaurants within Walmart stores are not exactly set up for drive-thru service.
With fewer people in stores and in-store restaurants lacking drive-thru windows, these fast-food locations saw profits plunge. McDonald’s, which at one time operated more than 1,000 locations inside Walmart stores, is trimming that number to about 150, according to The Journal.
Subway executives also said they plan to close some of their locations within Walmart stores, a result of sharply declining foot traffic. Even at stores where shoppers are still numerous, people were less likely to purchase or consume food on the premises because of the pandemic.
“The Walmart locations have been our toughest challenge,” Jim Miller, a Subway franchisee, told The Journal. He said he expects to shutter four of his five store locations within three months.
In-store restaurants have a long history
In the year before the pandemic began, The Washington Post reported that the concept of restaurants located within department stores had become trendy again. Beginning in the 1950s, stores offered restaurants where shoppers could have a meal while taking a break, increasing the chances they would shop longer and spend more money.
In its 2019 article, The Post noted that the revival of in-store restaurants proved profitable because they didn’t carry the same risks as stand-alone restaurants. “They have a guaranteed space, a steady stream of customers, and an ulterior motive: to get you to buy stuff,” The Post noted.
What a difference a year makes. There are now fewer shoppers in stores and, until the pandemic is completely behind us, there may be a reluctance to consume food in the midst of thousands of shoppers.
However, shoppers do get hungry, and the concept of in-store restaurants probably won’t disappear completely. Walmart is reportedly tinkering with its in-store concept and considering restaurant service that can offer take-out and delivery.