Wendy’s will not implement surge pricing as CEO causes online stir

February 28, 2024 – 8:05 AM PST

A Wendy?s restaurant displays a "Now Hiring" sign in Tampa, Florida, U.S., June 1, 2021. REUTERS/Octavio Jones/File Photo
A Wendy?s restaurant displays a “Now Hiring” sign in Tampa, Florida, U.S., June 1, 2021. REUTERS/Octavio Jones/File Photo

DALLAS (Reuters) – Wendy’s has no plans to raise menu prices during peak demand, the company said on Wednesday, days after comments from its CEO that the burger chain would start testing “dynamic pricing” at its restaurants.

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Starting as early as 2025, Wendy’s would begin testing features including “dynamic pricing and daypart offerings, along with AI-enabled menu changes and suggestive selling,” CEO Kirk Tanner said on a call with investors earlier this month.

Dynamic pricing, also known as surge pricing, refers to a practice where prices of products or services vary based on demand, typically resulting in higher prices for consumers at times of increased demand – similar to a rise in airfare at peak travel season or ride fares on Uber (UBER.N) during certain times.

Wendy’s, in a statement to Reuters on Wednesday, said it “would not raise prices when our customers are visiting us most.”

Its initiative to add digital menuboards to certain stores would instead allow Wendy’s to offer discounts to customers more easily, “particularly in the slower times of day,” it added.

“We said these menuboards would give us more flexibility to change the display of featured items. This was misconstrued in some media reports as an intent to raise prices when demand is highest … We have no plans to do that,” the company said.

Increased media attention to the comment this week resulted in online backlash against Wendy’s, although industry experts were skeptical of the idea of surge pricing in the restaurant landscape.

“(Wendy’s pricing) means you could pay more for your lunch, even if the cost to Wendy’s stays exactly the same. It’s price gouging plain and simple, and American families have had enough,” U.S. Senator Elizabeth Warren said in a post on X, previously Twitter.

“I guess I won’t be eating at Wendy’s anymore,” one Reddit user said, opens new tab in a post, while others on X called for boycotts.

Wendy’s “dynamic pricing” was a hot topic at a restaurant conference in the Dallas area, with several executives saying customers – already skittish after recent price increases – would likely be scared off by unpredictable prices.

“I don’t see it taking off any time soon,” said Victor Fernandez, a senior analyst and Vice President of Insights and Knowledge at restaurant analytics firm Black Box Intelligence.

Michael Lukianoff, CEO of SignalFlare.ai, who has consulted with restaurants about pricing for years, said that “dynamic pricing” is a great success in other industries such as airlines, but wouldn’t work in restaurants.

“Customers will shop elsewhere,” he said.

That’s a concern particularly for Wendy’s, which is already seeing weaker demand hamper sales – Placer.ai data showed visits to Wendy’s outlets declined in all three months of the fourth quarter of 2023.

Jim Sanderson, an analyst at Northcoast Research, said restaurants already adjust price by store or location to reflect the competitive nature of the trade area, “so consumers are already experiencing different prices for the same item.”

Reporting by Deborah Sophia in Bengaluru, Editing by Nick Zieminski

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