Wal-Mart (WMT) and McDonald’s (MCD) begin to part ways as Subway moves in
Posted by: in Stocks Money NewsFiled under: Deals, Consumer experience, Competitive strategy, Wal-Mart (WMT), McDonald’s (MCD)
Several years ago, McDonald’s (NYSE: MCD) had the exclusive franchise to provide fast food in Wal-Mart (NYSE: WMT) stores. Now, Subway is moving in [subscription required] according to the Wall Street Journal. Subway is “in 1,419 Wal-Marts compared with 1,021 McDonald’s.” And Subway is adding stores at the retailer much faster than McDonald’s.
The Journal says that the food on the menu is a big part of the shift. Wal-Mart wants to offer healthy food to its customers as it makes the retailer seem more compassionate. Perhaps it looks bad for a fast food outlet to be pushing greasy hamburgers and French-fries on unsuspecting shoppers. And, all the soot from grilling gets on the ceilings.
There may be another explanation, though. McDonald’s may be finding that Wal-Mart is not very profitable as a place to put its fast food stores. Subway recently picked up a location in Montana, but McDonald’s had let the lease expire in that store.
McDonald’s has built its current success on being open 24-hours a day, and serving breakfast at 5 AM. It has built its drive-in business because many people in a hurry don’t want to leave their cars. None of these tactics work in Wal-Mart locations.
Subway may want to present its move into Wal-Mart as a big win, but it may just be taking over locations that McDonald’s does not want.
Douglas A. McIntyre is a partner at 24/7 Wall St.
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