If competition is bad, why is there a Burger King within eyesight of McDonald's.
Good for the customers maybe, but not for the business:
Co-location is not about competition, per se. Pure logic from a population density standpoint: the best place for a McDonalds is also the best place for a Burger King. As long as there's enough people nearby a Wendy's and an Arby's will be there too. But to be sure, none of them is happy the others are there too.