Wendy’s plots new ‘Uber surge-style’ menu where prices jump up and down in line with demand – so when will be the cheapest (and costliest) time to eat?
Wendy’s plans to charge different prices depending on the time of day, meaning a Dave’s burger at lunch will be more expensive than mid-afternoon.
So-called dynamic pricing is intended to stimulate customers during quiet times of the day, when staff are waiting, and then cool demand in times of rush.
Such a system could mean that at busy times, such as breakfast, lunch and dinner, the prices advertised on a digital menu will be higher and at quieter times they will fall.
For example, a Dave’s Single quarter pounder currently costs about $5.99 at Wendy’s in Newark, New Jersey.
Under the new system, that could increase by a dollar during lunch and decrease by a similar amount during the post-lunch break.
Wendy’s new system will begin testing in 2025 and will rely on “digital menu boards,” in which it will invest $20 million, according to CEO Kirk Tanner. That means it can update prices in real time and at little to no cost.
A Dave’s Single quarter pounder currently costs about $5.99 at Wendy’s in Newark, New Jersey. Under the new system this may vary throughout the day depending on demand
Wendy’s CEO Kirk Tanner said the fast-food chain would use ‘digital menu boards’ as a way to change the listed costs of its menu items
While consumers are familiar with constantly changing prices for airline tickets and concerts, and with “surge pricing” when booking an Uber, this bold move would make Wendy’s the first fast food chain to implement dynamic pricing for meals.
If it pays off, the chain will boost sales and possibly improve margins. On the other hand, there is a risk of alienating consumers because they always expect to pay a fixed price for a meal, regardless of when they visit.
“They could be shooting themselves in the foot by introducing something that customers aren’t ready for,” said Steven Suranovic, an associate professor of economics at George Washington University.
“If people feel like they’re being left behind, they won’t be happy with this dynamic pricing strategy,” he said.
In fact, 52 percent of the more than 900 consumers surveyed by software companies Capterra Last year they said they considered dynamic pricing in restaurants as price gouging.
“As early as 2025, we will begin testing more enhanced features such as dynamic pricing and half-day deals, along with AI-enabled menu changes and suggestive sales,” Tanner said during an earnings call this month.
Wendy’s CEO Kirk Tanner (pictured) said the company will invest $20 million in ‘digital menu boards’ over the next two years
Retail experts and economists suggest that dynamic pricing can alienate customers who feel they are being left behind
Dynamic pricing – also called surge pricing – means that prices change based on various market factors, especially demand.
It’s already being used by airlines and rideshare apps like Uber and Lyft, which adjust prices to ensure they can charge consumers as much as they are willing to pay at any given time.
It means retailers can gain an edge over consumers by ensuring they sell products at the highest possible margins, eating up so-called ‘consumer surplus’.
That’s the difference between how much consumers are willing to pay and how much they actually pay. A higher consumer surplus benefits the consumer.
“Dynamic pricing allows them to take that surplus from the consumer and put it in the pocket of the company,” Suranovic said. Ultimately, the lunch customers would be the biggest losers.
The system would mean that during downtime, when the burgers are not selling, it can generate additional demand by appealing to more potential customers.
“There are periods during the day when I’m sure they have a team ready to prepare meals, but there’s just no demand,” Suranovic said.
That could be a win-win for both the consumer and the restaurant, because the price-conscious consumer pays less than they would otherwise and the restaurant still scores a sale.
In theory, Wendy’s could increase its sales even if the average margin on each burger were smaller by simply increasing sales volume.
Pictured is a Dave’s Single quarter pounder. As of February, a restaurant in Newark, New Jersey charged a flat price of $5.99 for the burger
To calculate how much to charge at any given time, retailers can increasingly rely on algorithms and AI to determine the price at which sales will be optimized – technology that was not readily accessible just a decade ago.
Likewise, smartphone apps would allow restaurants to quickly notify customers of sudden changes in prices on the menu.
Retail analyst Neil Saunders of GlobalData similarly suggested that the dynamic pricing model could backfire as repeat customers might not tolerate it.
“If regular customers pay $5 for something one day and $6 the next, it’s likely to cause confusion and annoyance,” he said.