Restaurants have long had a home inside Walmart's cavernous supercenters. But the pandemic and shifting consumer preferences are introducing some notable changes to the retailer's restaurant game plan. McDonald's and Subway are shuttering in-store locations while other national chains like Domino's and Taco Bell have moved in. Walmart is also testing out the latest digital meal craze, ghost kitchens, and increasing its outreach to community restaurants.
Navigating this mealtime evolution is Darryl Spinks, Walmart's head of retail services. A 15-year company veteran, he oversees the retailer's restaurant partnerships along with its tech services business, which handles product assembly and device repairs, and its automated services business, which includes Red Box, Coinstar and other in-store kiosks.
In a recent interview, Spinks said demand from restaurants to set up shop inside Walmart stores is as high as it's ever been. At the same time, he said Walmart's plan is to be more "intentional" in selecting the tenants that can lease space inside its locations while also staying on the cutting edge of digital.
This interview has been edited for length and clarity.
GROCERY DIVE: Tell me a little bit about your position and how long you've been at Walmart.
DARRYL SPINKS: I came here right out of law school back in 2006, and I did real estate for those first 13 years, building stores and doing site selection across the country. That's really where I cut my teeth here at Walmart. I came to this team a couple of years ago and have been in this role for about a year.
Walmart’s move into ghost kitchens caught a lot of readers’ eyes recently. What’s the opportunity that Walmart is seeing right now in these properties?
SPINKS: I think consistent with our overall message of serving the customer how they've told us they want to be served. Their lives are busy. A one-stop trip to Walmart traditionally meant coming to the store and sometimes now it means getting it brought to you or picking it up at the store. We need to innovate with the times and make sure that we can get our customers what they need, when they need it and how they want to receive it.
What does this say about digital demand among your shoppers for not just groceries but for meals as well?
SPINKS: I just know that people are telling us that they want options. It’s not just about getting it to them one way and one way only. It's about getting them what they want in a variety of ways. There will still be people that eat in the stores, and there will still be people that eat food from a ghost kitchen in our stores, but there are also customers who want it brought to them and we want to be able to make sure that we can serve that customer as well.
What are the plans to expand ghost kitchens at this point?
SPINKS: We're excited to get the first few open, and then we'll go from there, but there’s not much really to comment on as far as future expansion at this time. We've got a lot of other partners in the space like La Madeleine and Charleys [Philly Steaks]. My restaurant guy's really busy these days bringing new options to customers, and ghost kitchens are one of those options.
Does Walmart plan to bring its ghost kitchens and other restaurants onto a common digital platform with its grocery sales?
SPINKS: If we get to that point, it would be awesome. But as of right now, they'll probably continue to use the same delivery and pickup partners they're currently using.
Are you able to say if that's something that Walmart is working on, bringing those two sides onto a single platform?
SPINKS: I'm not in the tech space. We've got all kinds of tech roadmaps and those fall outside of my purview. I think it's probably clear that that may be something down the road somebody takes a look at, but that one's not in my realm of understanding at the moment.
You mentioned La Madeleine, which is moving into a few Texas stores this summer. Would you say that Walmart is focused on bringing in more local and regional restaurant players?
SPINKS: We've always made ourselves available to local tenants and they don't always know how to reach us, and we're trying to make a concerted effort to make sure that those local brands know how to start the process, know how to ask for space and put their name in the hat. We're working on a lot of things that you'll see from us to make those tenants more aware of the space that we have available in their communities. Instead of trying to figure out how to contact us, they'll have a place they can go and see what we have available and start the process.
There are a lot of restaurants I’ve seen in my travels in real estate over the years that just have tremendous community support. You don't find them anywhere else, they're really like pillars of their community, and we'd love to have some of those in our spaces where possible.
Walmart has traditionally worked with national restaurant chains. Do stores have any local establishments in them today?
SPINKS: We have a number of local restaurants and salons and hair providers in our stores today. We've got local barber shops — that's been pretty successful. We've got local nail salon owners. And so we're looking at how do we grow this in a more organic way and be more intentional about it.
When you're evaluating a potential restaurant tenant, what do you need to see from them in order for that opportunity to make sense?
SPINKS: I always say the customers vote with their wallets in terms of what they want to see in the store. Looking at the numbers, there's about four or five types of restaurants that customers resoundingly gravitate to, and that’s pizza, burgers, chicken, tacos. There's no real magic there. And I think for us, it's just finding the right fit, the right match in the communities we serve. I think you'll see us be more intentional. Are we going to add a fifth burger restaurant inside the store when there's four of them on the parking lot? Probably not.
Will there be multiple restaurant properties in one store or just one restaurant property per store?
SPINKS: My philosophy is never say never, but as of right now we have a few stores that have an in-store restaurant and a treat tenant, which would be like a pretzels business or a smoothie machine. But the majority of our stores only have the one offering.
Are you seeing sales and foot traffic at restaurants rising along with store traffic?
SPINKS: Due to agreements with the restaurants, we can't comment on their sales. I will say that, different from a lot of landlords, we did give a couple of months of free rent to all of our tenants and we also tried to help them out throughout the rest of the year by offering rent reductions to help those folks out during those tough times. We're pretty proud of that.
How does Walmart see its restaurants in relation to its overall retail experience? How do those two sides of the business work together?
SPINKS: A majority of customers when they come into Walmart expect there to be a food offering. And so we see the restaurants the same as our deli. It's about giving the customers options, and so [grocery and restaurants] play together nicely. We've even opened a bunch of Domino's and of course we sell pizza, both ready-to-eat and frozen as well as take-and-bake, and it's been a good partnership.
Why should a restaurant operator want to open inside a Walmart store right now?
SPINKS: Taking advantage of that traffic that we have in the box makes being inside a Walmart more attractive, especially for a smaller regional restaurant chain that's trying to grow their business. Being in a Walmart, as opposed to building four walls and trying to completely outfit a brand new building on expensive real estate, which is only getting more expensive across the country, also has to be attractive for restaurant owners.
What else might we see in the near future from Walmart in this space?
SPINKS: We’re not done yet. You’re going to see some more exciting things from us that I can't talk about right now. Our customers continue to guide us and guide our decision-making. Even our store managers in the community are helping us here. They’ll say, "Darryl, have you seen this restaurant across town? These guys would be awesome in the store."
