A popular international fast-food chain is planning to experiment with a new pricing model where the cost of menu items will vary depending on the level of demand, similar to the one used by the ride-hailing service Uber. The anticipated test is now causing concern over fluctuating fares amongst consumers and industry experts alike.
Highlights
- Wendy's will test a dynamic pricing model similar to Uber's surge pricing, impacting menu costs based on demand.
- CEO Kirk Tanner announced a $20M investment in real-time digital menu boards to implement surge pricing.
- Experts warn customers could be upset by fluctuating prices, as critics label it a potential rip-off strategy.
- Dynamic pricing could add to consumer struggles amid inflation, affecting those unable to dine at off-peak hours.
Wendy’s “Uber-style” surge-pricing model, where the cost of menu items will fluctuate throughout the day based on requests, suggests that, for instance, a Dave’s burger, the eatery’s signature burger, will cost more during lunchtime or dinner rush.
The restaurant’s intention to implement the fluctuating pricing strategy has been described as “high-stakes,” as it’s scheduled to undergo a significant and potentially risky implementation process in the upcoming year.
Moreover, the pricing strategy could potentially disadvantage American consumers who are already struggling with inflation, particularly those who may not have the option to eat their meals during “off-peak” hours.
Wendy’s CEO Kirk Tanner reportedly announced the new surge-pricing model on a call with investors, highlighting that the Ohio-based company will invest $20 million on high-tech menu boards that will be able to update prices in real-time without incurring additional overhead costs.
Kirk, who rose to the chief role earlier this month, reportedly said: “As we continue to show the benefit of this technology in our company-operated restaurants, franchise interest in digital menu boards should increase, further supporting sales and profit growth across the system.”
Wendy's is planning to experiment with a new pricing model where the cost of menu items will vary depending on the level of demand
Image credits: Siyuan Lin/Unsplash
The CEO didn’t specify a maximum limit on how much prices could increase under the new dynamic pricing model, nor did he mention whether the base price of items would decrease during less busy times.
A Wendy’s spokesperson told The New York Post: “Dynamic pricing can allow Wendy’s to be competitive and flexible with pricing, motivate customers to visit, and provide them with the food they love at a great value.
“We will test a number of features that we think will provide an enhanced customer and crew experience.”
Prices on items, like the iconic Dave’s Single, already vary depending on location. Wendy’s has more than 6,000 locations nationwide in the US.
A Dave's burger, which is named after the company's founder, Dave Thomas, typically includes a quarter-pound beef patty, cheese, lettuce, tomato, pickles, onions, ketchup, and mayonnaise on a toasted bun.
Wendy's intention to implement the fluctuating pricing strategy has been described as “high-stakes”
Image credits: Wendy's
Its price has already been affected by the new pricing model, as the tasty treat costs $5.99 at an outpost in Newark, New Jersey, while that same quarter-pound burger costs $8.19 at a Wendy’s in Times Square.
Ted Jenkin, CEO of Atlanta-based wealth management firm oXYGen Financial, told The Post: “Guess people better change their lunch hours from 2 pm to 4 pm.
“With all of the concern of rising prices, the last thing you want to have to consider is how much will it cost you for a burger and fries depending on the time of day.”
The financial planning expert added: “This isn’t any better than what we see going on with guilt tipping right now.
“It will prey on the fact that people can’t remember what the price was yesterday or the week before.
“It isn’t a Taylor Swift concert. It’s a burger, fries, and a Frosty.”
Wendy's new pricing model is similar to Uber's surge pricing because it involves adjusting prices based on demand levels
Image credits: Uber Blog
Industry experts have reportedly anticipated that Wendy's may face backlash from hangry customers when they officially implement the new pricing strategy.
Restaurant analyst Mark Kalinowski told The Post: “There are people who view dynamic pricing as a rip-off.”
A separate restaurant consultant, Arlene Spiegel, echoed Mark’s opinion: “It won’t fly and guests will be very upset.
“You can’t surprise a guest with, ‘Your meal will cost another 50 cents or $1 today.’”
Wendy’s is the most expensive fast-food chain in the US after menu costs rose 35% due to inflation between 2022 and 2023, according to data from consumer transparency platform PriceListo.
As per the platform, the most expensive Wendy’s item is “2 Spicy Chickens, 2 JBCs, and 4 SM Fries,” which costs $18.96.
Meanwhile, the cheapest item on the fast-food menu is Crispy Chicken Nuggets, which costs $1.56. The average price of all items on the menu is currently $6.03.
Wendy’s is the most expensive fast-food chain in the US
Image credits: Wendy's
Nevertheless, franchise owners have reportedly argued that the new dynamic pricing is primarily aimed at improving operational efficiency, such as managing kitchen workload during busy periods, rather than solely focusing on increasing profits.
Faizan Khan, a Dog Haus franchise owner, said at the recent Restaurant Finance and Development Conference, according to Food & Wine: “I think there’s a lot of room for consumers in terms of price amounts they’re going to accept.
“Generationally, I think we’re seeing this being acceptable.”
The success experienced by industries such as airlines, hotels, and transportation, which have also implemented dynamic pricing models to adjust prices based on demand, suggests that other fast-food chains, like McDonald's and Burger King, are likely to closely monitor Wendy's experiment with the new strategy.
Restaurant analyst Mark admitted: “I think it’s just a matter of time before it becomes commonplace in the restaurant industry because it’s a way to generate more profits by being smarter about your pricing.”
Wendy's anticipated pricing model incited various reactions
