Business·Updated
Craving a Frosty? Better get it on a slow day if you’re going to a Wendy’s that’ll be testing dynamic pricing in the U.S. The company recently announced the move for some locations as part of its new digital menus to be launched next year.
Wendy’s responds to ‘surge pricing’ reports, says it won’t up prices during busy times
Jenna Benchetrit · CBC News
· Posted: Feb 27, 2024 3:58 PM EST | Last Updated: February 28
A sign is posted in front of a Wendy’s restaurant on Aug. 10, 2022 in Petaluma, Calif. The fast-food chain will test dynamic pricing on its new digital menus at locations across the U.S. next year, the company announced during an earnings call earlier this month. (Justin Sullivan/Getty Images)Craving a Frosty? Better get it on a slow day — if you’re going to a Wendy’s that’ll be testing dynamic pricing in the U.S., that is. The company recently announced in an earnings call that it would launch the experiment at some locations as part of its new digital menus to be launched next year.
The idea is that the cost of menu items, such as the fast-food giant’s signature frozen dessert, will fluctuate throughout the day, and might even cost more when demand is high.
After media reports noting the change were published on Tuesday, Wendy’s responded, saying it won’t increase prices during the busiest times at its restaurants — and that it isn’t implementing “surge pricing,” which the spokesperson said was distinct from dynamic pricing.
A summary of the earnings call posted on the Wendy’s website refers to “dynamic pricing” and “upsell capabilities” in a slide touting its new digital menu boards.
The company is testing more “enhanced features” such as this one alongside its digital menus, said CEO Kirk Tanner during the earnings call.
Customers likely won’t see big difference, says analystMost consumers will already be familiar with surge pricing, thanks to ride share services such as Uber and Lyft, event-ticket companies such as Ticketmaster, and the gas station, of course.
But “the opportunity is huge in the restaurant industry,” said Robert Carter, a restaurant industry analyst and managing partner at Stratton Hunter Group.
Restaurants have historically used a fixed-pricing model, though early bird specials and limited time offers have long been used to draw customers in during slow hours or toward specific menu items, Carter said.
A similar pricing model has been used elsewhere in the fast-food industry. The price of McDonald’s menu items differs based on location, an investigation by CBC Radio’s Cost of Living found in July 2023.
The prices are set by individual McDonald’s franchisees who oversee each location, factoring in rent, supplies and labour. But when Wendy’s launches its experiment next year, customers might not notice the shift in prices — because it will likely be minimal, according to Carter.
“I think what you’re going to see is a surge pricing that is in the pennies,” said Carter. “I don’t think this is going to be something where you see, all of a sudden, a dollar fluctuation or something of a noticeable difference.”
Expected to drive traffic during slow hoursThe company is testing the approach alongside the rollout of its new digital menu board system, which was part of a $30-million US investment that included other features like an automated drive-thru ordering system, according to notes from the company’s February earnings call.
“One of the other benefits of these investments will be the flexibility to change the menu more easily and to offer discounts and value offers to our customers through innovations such as digital menu boards,” a spokesperson for Wendy’s told CBC News in a statement.
The spokesperson added that the change is expected to drive traffic during slower parts of the day. When asked if the changes will take effect in Canada, the spokesperson said the experiment will be confined to some U.S. locations for now.
It’s only a matter of time, said Carter. “I think we’ll see how this fares in the U.S. and then I expect it will roll out into Canada.”
ABOUT THE AUTHOR
Jenna Benchetrit is a senior writer with the business content unit at CBC News. She has also covered entertainment and education stories. A Montrealer based in Toronto, Jenna holds a master’s degree in journalism from Toronto Metropolitan University. You can reach her at jenna.benchetrit@cbc.ca.
With files from CBC’s Meegan Read and Reid Southwick