Walmart is adding new Domino's and Taco Bell restaurants in its stores to replace closing McDonald's

• McDonald's will close all but 150 locations inside Walmart stores by this summer.
• The closures have been planned for over a year.
• Walmart is opening Domino's and other businesses in those leased space.

McDonald's will continue the planned closing of hundreds of restaurants inside Walmart stores, The Wall Street Journal reported.

Walmart leases space, often near the front of its stores, to other businesses, usually restaurants. The big box chain partners with national chains and local businesses, depending on the needs of the community, a spokesperson told Insider. Pizza chain Domino's is an especially good fit, since the restaurants mostly depend on pick-up and delivery, they said.

So far there are 30 Domino's in Walmarts across the country, WSJ reported, noting that Walmart is also working with Taco Bell on installing locations.

Read more: Experts say brick-and-mortar retailers could rebound post-pandemic - but only if they channel the e-commerce boom back to their physical outposts

Not all leased Walmart storefronts are restaurants, and they're often tailored to specific needs of the area. For example, a store in rural Texas has a tool rental shop that wouldn't necessarily make sense in other areas, Walmart says.

Walmart and McDonald's have worked together since 1994, with 800 locations in 2012 and about 500 in 2020.

Two series of closures were planned for 2020 before the COVID-19 pandemic, with another wave planned to finish this summer, leaving 150 remaining locations. McDonald's has previously shared these plans with shareholders in earnings calls, including saying "the majority of closures across the U.S. market are from lower sales volume McDonald's in Walmart store locations," in a fourth quarter 2020 note on openings and closings.

The business relationship between Walmart and McDonald's no longer made sense for either business. McDonald's restaurants inside Walmarts don't have drive-thrus, which have become increasingly important across the fast food industry. 70% of orders in top markets come from drive-thrus, the chain says.

Meanwhile, Walmart has been growing e-commerce and curbside pickup, meaning that fewer customers were coming inside and deciding to buy McDonald's during the trip. COVID-19 also accelerated this trend as indoor dining was closed in many locations.

"We have a great opportunity with our leased space business to help our stores become even more convenient and relevant to local communities. We are excited to continue to bring in new businesses that make sense for our customers and their changing needs," Walmart told Insider.

Some of Walmart's competitors rely on in-store restaurants. Some Target stores have Starbucks locations inside, and Costco is reopening its fan-favorite food courts.

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