Food May Cost More (or Less) Based on Demand in Experiment Starting in 2025

Wendy’s will try out “dynamic Pricing,” aka “surge pricing,” next year, CEO and President Kirk Tanner recently disclosed. This means your burger, Frosty, whatever could cost more during the lunch rush than it would at 9 p.m. This Surge Pricing test correlates with Wendy’s new digital menu boards that permit quick price changes depending on demand, CNN quoted Tanner as saying.  

During an earnings call, Tanner stated that the digital menus will let Wendy’s test “more enhanced features like dynamic pricing and day-part offerings along with artificial intelligence-enabled menu changes and suggestive selling.” He added that the digital menu boards will benefit “order accuracy, improve crew experience and sales growth from upselling and consistent merchandising execution.” 

Tanner said his company will invest about $20 million to “roll out digital menu boards to all U.S. company-operated restaurants by the end of 2025 and approximately $10 million over the next two years to support digital menu board enhancements for the global system,” NBC’s Today reported.

Improvements and AI Upselling

A spokesperson told Fox Business that dynamic pricing can “allow Wendy’s to be competitive and flexible with pricing, motivate customers to visit and provide them with the food they love at a great value. We will test a number of features that we think will provide an enhanced customer and crew experience.”

That source also told Fox Business that Wendy’s AI-enabled upselling suggestions will be “based on factors such as weather.” During the earnings call, Tanner pointed out that Wendy’s already has introduced its “Wendy’s Fresh AI” – an artificial intelligence order-taking system – in many restaurants, “where we see ongoing improvement in speed and accuracy,” NBC’s Today reported.

Surge Pricing Isn’t New

Surge pricing already in fairly wide use. It’s common with ride-hailing apps such as Uber, the hospitality industry, and purchases of sports and concert tickets. Uber, for instance, charges more during rush hour and during bad weather. Hotels often raise prices for events such as sports championships and conventions. Online algorithms generate higher concert and sports event ticket prices when demand spikes. Wendy’s prices would fluctuate based on demand, time of day and location, USA Today reported.

Restaurants have largely not gotten on board with surge pricing because changing menus is typically labor-intensive, CNN noted in its report. (McDonald’s has tried it on a limited way at its cutting-edge drive-through locations and via its app.) Apps and digital menus eliminate that drawback, and Wendy’s will spend $15 million to upgrade its app. 

Will Customers Rebel?

Jonathan Maze, editor-in-chief of Restaurant Business, predicted that if Wendy’s testing proves successful, it could prompt “others to do something similar.” But he also cautioned brands that surge pricing may well rile customers. “It could lead to a backlash,” he told CNN. 

“Wendy’s foray into dynamic pricing is a bold experiment that could help the chain be more efficient and ultimately profitable if it works,” Caleb Silver, editor in chief of Investopedia, told Food & Wine.

 “But it does run the risk of angering and losing customers since they actually have many choices, unlike the ride-share industry.” 

Other News from Wendy’s

In addition to revealing the surge pricing experiment, Tanner said the company will buy more than $55 million in ads to promote its breakfast menu over the next few years. Wendy’s had added two breakfast menu items, English muffin sandwiches and a breakfast burrito, and has partnered with Cinnabon for a new breakfast item. For a Leap Day giveaway on Feb. 29, customers could get a free Cinnabon pull-apart cup, made of buttery dough bites topped with cream cheese frosting, while supplies last. 

Also, according to Nation’s Restaurant News, the company is testing “saucy nuggets” with flavors like Buffalo, garlic-Parmesan, ghost pepper and honey barbecue at a few of its Ohio restaurants.