Wendy’s, the popular fast-food chain, is set to introduce a dynamic pricing model similar to Uber’s surge-pricing. The move comes as the company faces aggressive federal increases on breakfast foods and a rising credit card debt among Americans. The new pricing model is expected to be rolled out as early as next year, with Wendy’s CEO Kirk Tanner announcing it on an earnings call earlier this month.
According to a spokesperson from Wendy’s, the dynamic pricing model will include features such as AI-enabled menu changes, suggestive selling based on factors like weather, and different offerings during certain parts of the day. This pricing overhaul is part of Wendy’s plan to provide value to its customers while focusing on great tasting, fresh, high-quality food. The company is making a significant investment in its digital business, including the implementation of digital menu boards in some U.S. restaurants.
Dynamic pricing, also known as surge pricing, is a strategy where the price of a product or service fluctuates based on demand or other factors. For example, calling for an Uber ride during rush hour or bad weather may result in higher prices. Wendy’s believes that dynamic pricing will allow them to be competitive and flexible with pricing, motivate customers to visit, and provide them with great value.
However, some experts have raised concerns about the introduction of dynamic pricing. Steven Suranovic, an associate professor of economics at George Washington University, warns that customers may not be ready for this change. He argues that dynamic pricing could take surplus away from consumers and put it into the company’s pocket. Lunchtime customers may be the biggest losers if they feel like they are being gouged by this pricing strategy.
To implement the dynamic pricing model, Wendy’s plans to spend $20 million on digital menu boards that will reflect fluctuating prices in real time. The company has already faced criticism for being the most expensive fast-food chain in the U.S., with menu costs rising 35% due to inflation between 2022 and 2023, according to data from consumer transparency platform PriceListo.
In contrast, rival fast-food chain McDonald’s has faced backlash for its menu hikes, including its Big Mac combo priced at nearly $18. The company has promised to focus on affordability after low-income customers, making less than $45,000 per year, have largely stopped ordering from McDonald’s due to inflation and increased grocery prices.
Wendy’s decision to introduce dynamic pricing reflects the changing landscape of the fast-food industry. With rising costs and changing consumer behaviors, companies are seeking innovative ways to remain competitive and provide value to their customers. While there are concerns about the impact of dynamic pricing on customers, only time will tell if this strategy will be successful for Wendy’s.
