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The bulk of U.S. restaurants being closed by [hotlink]McDonald’s[/hotlink] this year are locations within [hotlink]Walmart[/hotlink] stores—another illustration of how the pandemic is shifting consumer behavior.
McDonald’s, which had 13,682 U.S. restaurants at the end of 2020, said in its most recent annual report that it would close 325 restaurants this year, the bulk of them “lower sales volume McDonald’s in Walmart locations,” while opening hundreds of new locations elsewhere. This will leave McDonald’s with 150 restaurants inside the big-box chain’s stores.
The move continues a gradual retrenchment over the years of the hamburger giant’s presence at Walmart, which at its peak comprised about 1,000 restaurants around a decade ago. Last year, McDonald’s closed 100 of its Walmart locations.
Walmart and McDonald’s strategic relationship dates back to 1994: Walmart would provide the restaurant chain a steady flow of traffic, and McDonald’s would give the retailer’s customers a reason to spend more time at the store.
The benefit of that has been challenged as shopping behavior has evolved, changes that were accelerated by the pandemic.
During the pandemic, fewer shoppers wanted to linger in a Walmart and instead just sought to get their shopping done quickly, while using Walmart’s curbside delivery or in-store pickup of online orders to a greater degree, leading to soft business. The Wall Street Journal, which first wrote about the closings, reported that about one-third of restaurant sales inside a Walmart come from Walmart employees.
Walmart, which has thrived thanks to a big campaign to modernize its stores and e-commerce muscle in the past few years, has been testing out different uses for the freed-up space, a spokesperson told Fortune. That includes hosting a local barbershop in one case, a tool rental service at another store in South Carolina, or other restaurant chains like [hotlink]Domino’s Pizza[/hotlink], which has restaurants in about 30 stores.
Its main rivals also offer restaurant options for shoppers: [hotlink]Costco[/hotlink] Wholesale runs its own restaurant space, selling pizza and $1.50 hot dogs, while [hotlink]Target[/hotlink] has [hotlink]Starbucks[/hotlink] cafés at hundreds of its stores.
As reported this week in an in-depth Fortune investigation, McDonald’s is currently undergoing a period of intense cultural change.
This story was originally featured on Fortune.com