Wendy’s is set to embrace surge pricing akin to the models used by Uber and Lyft, as revealed in the company’s latest earnings call in February. As part of its digitalization strategy, Wendy’s aims to equip all its United States restaurants with digital menus by 2025, ushering in a new era of pricing flexibility. CEO Kirk Tanner outlined plans to invest approximately $20 million in deploying digital menu boards across Wendy’s US company-operated restaurants by the end of 2025.
The introduction of dynamic pricing, akin to Uber’s surge pricing mechanism, will mark a significant shift for Wendy’s patrons. This innovative pricing model will see menu items such as burgers and Frosties subject to fluctuations in pricing based on demand levels.
“Commencing as early as 2025, we will initiate trials of more sophisticated features such as dynamic pricing,” stated CEO Kirk Tanner during the earnings call on February 15. “Our intention is to harness the potential of digital menu boards, enhancing the customer experience while adapting to evolving market dynamics.”
Unlike traditional static pricing in the fast-food sector, dynamic pricing responds to factors such as demand, supply, competitor pricing, and other external variables, employing algorithmic calculations to determine optimal pricing strategies.
For instance, the price of Wendy’s signature Baconator, which currently stands at $12.24 in New York City, may vary throughout the day under dynamic pricing. Prices could surge during peak hours such as lunchtime or decrease during quieter periods. However, Wendy’s has not disclosed the extent of potential price fluctuations.
Tanner anticipates that dynamic pricing will yield immediate sales growth. Nevertheless, this approach carries inherent risks. According to a Capterra survey, a majority of consumers (52%) perceive dynamic pricing as akin to price gouging, while 65% find it complicates their decision-making process when choosing where to dine.
Wendy’s has a history of integrating technology into its operations. Previous endeavors include plans to introduce an AI-powered chatbot for its drive-thru services, although it was later revealed that human intervention powered some of these experiences. Additionally, the company announced plans for a fleet of self-driving robots to facilitate order delivery in 2023.
