News/Commentary

Wendy’s ‘surge pricing’ trial leaves bad taste in the mouths of diners

February 28, 2024 | | Print Article

A fast food chain’s plan for artificial intelligence-driven “surge pricing” slammed as little more than a rebrand of “price gouging.”

With tighter belts and emptier wallets, consumers across the country have felt the crunch companies have endeavored to cover for with moves like shrinkflation. Now, as the ripple effect of the fight for $15 was coupled with the lasting impact of devastating inflation, Wendy’s plan to test a new pricing scheme set Frosty fans in an uproar.

As reported by Nation’s Restaurant News, the restaurant chain’s new CEO and president Kirk Tanner spoke on a conference call in February to address some of the investment plans of the Dublin, Ohio-based company that included a dynamic pricing scheme.

“We are planning to invest approximately $20 million to roll out digital menu boards to all U.S. company-oriented restaurants by the end of 2025,” Tanner touted of the AI-enabled screens that would promote items based on seasonality and other factors while also adjusting prices on the fly.

“Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and daypart offerings along with AI-enabled menu changes and suggestive selling,” said the CEO.

A graph with data from market research company NPD Group and The Wall Street Journal depicted how customers might see the price of a Dave’s Single range from as low as $4.99 to as high as $6.99 based on consumer trends.

Sharing the graph, one user likened the move to ride share companies that shift prices based on the weather and other factors.

He wasn’t alone in telling Baconator buyers to beware as Investopedia editor-in-chief Caleb Silver told Food & Wine, “Wendy’s foray into dynamic pricing is a bold experiment that could help the chain be more efficient and ultimately profitable if it works.”

“But, it does run the risk of angering and losing customers since they actually have many choices, unlike the rideshare industry,” he added.

Well before planned implementation of the test for they surge pricing, consumers sounded off on the mere suggestion, expressing there disfavor of the idea while also wondering if the effort to increase profits would reflect in employee wages during those peak times.

“Hey @Wendys, will your employees be getting ‘surge pay’ during busier hours, or is the excess profit of your ‘surge pricing’ going directly into the pockets of executives?” came one question.

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Still, with $55 million getting focused on driving breakfast sales, Tanner said, “This investment will further amplify our plans and support and always-on approach across media partnerships and activations as we tell our breakfast story.”

The president eyed a goal of a 50% increase in breakfast sales in two years time.

Kalinowski Equity Research analyst Mark Kalinowski had wrote to investors, “Part of the reason for this breakfast investment is that Wendy’s views it as a high-margin opportunity, as there isn’t any additional labor planned as this daypart’s sales expand.”

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Kevin Haggerty
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