Wendys clarifies no surge pricing after CEO dynamic pricing comment

August 23, 2024

Wendy’s will soon spend $20 million on digital menu boards that will allow stores have a more flexible menu, but the fast food chain will not be using Uber-style surge pricing.

Company representatives sought Tuesday to clarify CEO Kirk Tanner’s comments to investors Feb. 15 that, “beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and … AI-enabled menu changes and suggestive selling.”

“This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants. We have no plans to do that and would not raise prices when our customers are visiting us most,” Wendy’s spokeswoman Heidi Scheuer said in a statement to The Washington Post.

She added: “Digital menuboards could allow us to change the menu offerings at different times of day and offer discounts and value offers to our customers more easily, particularly in the slower times of day.”

A Wendy’s spokesperson told The Washington Post earlier on Tuesday that the investment will provide “value” during the slower parts of the day, adding: “As early as 2025, we plan to test a number of features such as AI-enabled menu changes and suggestive selling based on factors such as weather that we think will provide great value and an improved customer and crew experience.”

Dynamic pricing in the dining and beverage world isn’t a foreign concept. Think of bars trying to entice customers with happy hour specials.

Another form of this strategy, increasing price in line with demand, is commonly used in the travel industry: Anyone who has tried to buy a ticket to fly around the holidays or get an Uber right after a big concert lets out knows that prices tend to go up with demand. Dynamic pricing can take into account multiple factors, including off-peak sales.

“Whether you like it or not, it’s the rules you have to live by. But the restaurant business is much more competitive,” said Timothy Webb, an assistant professor of hospitality at the University of Delaware who studies dynamic pricing.

Wendy’s hasn’t released details about its dynamic pricing and didn’t respond to questions from The Post about its proposed pricing strategy.

Wendy’s has 415 company-owned stores and nearly 7,000 franchised locations.

“We’re kind of in an evolving time where companies are realizing some opportunities with technology and trying to drive some bottom line for their businesses,” Webb said.

Restaurants using dynamic pricing are often trying to get customers to come during off-peak hours instead of the traditional noon lunchtime or post-work dinner rush. So, as a way to get customers to come at a more efficient time for the workers, restaurants might offer deals.

Webb said artificial intelligence and other back-end technology have made it possible for companies to optimize prices.

“No one can run experiments in every individual person. But AI can track what items you purchase and when,” Webb said.

If you’re a loyal customer who uses the Wendy’s app, the chain knows what you like to order and when. So you may get a push alert to your phone enticing you to come visit the lady with red pigtails and have that favorite sandwich, maybe even with a small coupon for an item that the store is trying to move before it goes bad.

The real trick is how to avoid making people feel manipulated.

“They’re just trying to find windows where people won’t notice or are willing to pay a little more,” Webb said.

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