Wendy’s will soon begin testing Uber-like surge pricing

Feb 27, 2024, 10:09 AM

A picture of Wendy's new digital boards given to CNN. (Photo courtesy: The Wendy's Company via CNN ...

A picture of Wendy's new digital boards given to CNN. (Photo courtesy: The Wendy's Company via CNN Newsource)

(Photo courtesy: The Wendy's Company via CNN Newsource)

NEW YORK — The price of a Wendy’s Frosty could soon fluctuate throughout the day as the chain looks to introduce Uber-like surge pricing on its menu.

The practice, known as “dynamic pricing,” will begin testing in 2025, Wendy’s recently revealed in an earnings call. It’s part of a $20 million investment in new digital menu boards at its U.S. restaurants that enable them to change prices depending on demand.

Few details were released about the change, but Wendy’s CEO Kirk Tanner said the new menus will let the fast food chain test “more enhanced features like dynamic pricing and day-part offerings along with AI-enabled menu changes and suggestive selling.”

“We expect our digital menu boards will drive immediate benefits to order accuracy, improve crew experience and sales growth from upselling and consistent merchandising execution,” Tanner said on the call.

The menus were first shown in a mockup of a redesigned Wendy’s unveiled in 2022 that featured new pick-up windows, a more technologically advanced kitchen and a spruced-up interior. The new menus have already rolled out at some drive-thrus, with some TikTok users showing them powered by an automated voice, instead of a human worker, with suggestions for add-ons featured onscreen.

Surge pricing is common with sports and concert tickets and for ride-hailing apps, with services like Ticketmaster and Uber using sophisticated dynamic pricing algorithms that change minute by minute, based on demand. However, there hasn’t been widespread adoption from restaurants because of the labor it takes employees to change menus.

But apps and digital menus can easily update prices on the fly, giving fast food chains an easier to way to implement dynamic pricing. Wendy’s expects digital order sales to reach $2 billion this year and is spending $15 million to upgrade its app.

McDonald’s has also dabbled with dynamic pricing and new order-suggestion capabilities at some of its upgraded drive-thrus and on its app. However, the varied and inconsistent prices at its franchises have ignited outrage recently for affecting the affordability of its food.

Surge pricing could be a “turning point” in the industry, according to Jonathan Maze, editor-in-chief of trade publication Restaurant Business. “If Wendy’s idea works, it could get others to do something similar, and I wouldn’t be surprised to see another chain or two test the idea themselves, given what Wendy’s is doing.”

Maze adds that there’s risk, especially in light of the fluctuating prices of fast food. “The idea that a restaurant chain would potentially raise prices during busy times of day, even if consumers think they’re raising prices, then it could lead to a backlash,” he told CNN. “They’ll have to tread carefully. This is why we haven’t seen a lot of it.”

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Wendy’s will soon begin testing Uber-like surge pricing