Dive Brief:

• Hy-Vee will transition all 21 of its full-service Market Grille restaurants to Wahlburgers locations by early summer, according to a press statement emailed to Grocery Dive. The Wahlburgers will retain the seating area and bar like Market Grille but replace table ordering with counter service. 
• The retailer did not say how many employees it will lay off or transfer to Wahlburgers. An anonymous employee told the Star Tribune that of the 45 employees that worked at their location, seven or eight were asked to stay to work at Wahlburgers at a lower pay rate. Some of the general managers received severance pay, the worker said.
• During the Wahlburgers transition, Market Grille locations will operate from 6 a.m. to 9 p.m. seven days a week, offering a smaller menu including breakfast items, appetizers, burgers and sandwiches that can be ordered at its kiosk. The full-service bar will remain open. 

Dive Insight:

Hy-Vee's Market Grille restaurants have served as community gathering spots and as alternatives to popular sit-down spots like Chili's or Olive Garden. But the grocer clearly sees better value in offering faster service along with a name brand and lower operating expenses.

Hy-Vee and Wahlburgers linked up three years ago when the grocer agreed to become the chain's largest franchisee. Since then, Hy-Vee has opened restaurants close to its stores and at novel locations like Minneapolis' Mall of America. Hy-Vee has also incorporated Wahlburgers' menu items into its Market Grille locations.

Hy-Vee operates Market Grille Express locations in several stores, and those dining spots are unaffected by this latest announcement. At Market Grill Express, customers go to a station to order and pay, and when the food is ready a server brings it to the customer.  

In an interview with Grocery Dive last year, Hy-Vee CEO Randy Edeker said the company planned to operate one or two full-service Market Grille locations in every large town, and have either a full-service or Express location in the vast majority of its stores. However, he also noted the challenges that come with being in the restaurant business.

"It's very difficult," Edeker said at the time. "Labor is challenging, finding people is challenging. And then you're dealing with how do we overcome the stigma of meeting in the grocery store?"

Hy-Vee had already begun replacing Market Grille locations before this week's announcement. Last July, the retailer replaced an in-store location in Chariton, Iowa, with a Smokey Row Coffee Co. coffee shop and restaurant, and said at the time it intended to open more Smokey Row locations. 

Hy-Vee has made several recent moves to rein in operating costs. It's closing down four online fulfillment centers later this month and ending 24-hour service at its stores. It also announced a restructuring initiative last month that shifts management roles in stores and at the district level, and moves more than two dozen dietitians from store-level to corporate positions.