Wendy's will spend $20 million on digital menus to introduce customers to "dynamic pricing"

[Cal Jeffrey]

Imagine this: You are standing in line at a fast food restaurant, looking at the menu to decide what to order. You decide on a plain burger for $4. The queue finishes one order, so you move up, then notice your burger now costs $4.20. The line moves again, and now it's $4.40. There are still five more customers ahead of you. What do you do?

Fast-food chain Wendy's plans to start experimenting with surge pricing next year. In an earnings call earlier this month, Wendy's CEO Kirk Tanner told investors that the company will invest $20 million in digital menus that can change item prices based on real-time demand.

"Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing," Tanner said. "We are planning to invest approximately $20 million to roll out digital menu boards to all US company-operated restaurants by the end of 2025."

Follow up story: Wendy's says surge pricing reports were "misconstrued" after internet turns Frosty

While so-called surge pricing is well established in the ride-sharing sector now, it is relatively uncharted territory in fast food, and for good reason. Surge pricing works for Uber and Lyft because even though the rider knows that prices are higher at peak times, they still need that ride, so they bite the bullet and hit "Pay."

From a Wendy's menu in New York City. Click to enlarge.

In a fast-food restaurant, people can make dynamic decisions as fast as the menu can dynamically change prices. Wendy's customers are more inclined to walk across the street to Burger King if they see the prices get jacked up while standing in line. It's a risky move, especially with $20 million in up-front costs.

A lot will hinge upon how much price fluctuation occurs. A few cents will not bother most people, but Customer B getting charged $0.75 more than Customer A is liable to grate on their nerves, and anything over a dollar is probably in the walkout range. Consumers are already annoyed that fast food prices have spiked in recent years, with some items slipping into the double digits in locales like New York and San Francisco.

Business software analytics firm Capterra conducted a survey showing that only 34 percent of consumers think dynamic pricing is reasonable for customers, while 54 percent call it price gouging. Most (51 percent) say they have stopped eating at their preferred establishment because of price hikes. Capterra says that anything more than a 10-percent price increase will drive most customers away or incentivize them to order during off-peak hours.

Undoubtedly, Wendy's bean counters already know this, which is why the pricing scheme will start experimentally. The company will likely see what it can get away with and dial in the pricing gradually to avoid too much business loss. However, consumers can be vindictive. Knowing that the company is considering dynamic pricing might be enough to spur regular customers to avoid Wendy's altogether.

Story update: Wendy's has released a statement denying its plans to introduce surge pricing, adding that the media misconstrued what Tanner and the company's slide presentation said. You can read the full story and context here.

Permalink to story.

https://www.techspot.com/news/102048-wendy-set-spend-20-million-digital-menus-introduce.html

 

[yRaz]

What do I do? I stop shopping at Wendy's

Edit: fast food prices have gotten so absurd that over the last year I've found it more cost effective to literally goto the store, buy a steak and cook it on the grill than it is to get a "meal" at a fast food joint. A steak at my local grocery store is $7-10. I quit eating fast food and started eating steak and potatoes at home 2-3 times a week. Now they want to find ways to increase prices even more.....

 

[passwordistaco]

I wonder where Kirk Tanner got his MBA lobotomy.

If the price changes between the time I walk in the door and the time I order, I'm out. I'll even go somewhere more expensive if they're not trying to screw me. No fast food burger is that important.

 

[winjer]

That is a great way to stop people from using your restaurant chain.

 

[Theinsanegamer]

Fast food is in serious trouble, they are pricing themselves out of the market. Surge pricing only pisses people off, and they will stop going. If I have to do fast food, its chick fil A, or culvers. Most of the time I'd prefer an actual restaurant, for an extra $3 I'll get actual food.

Not to mention, Wendys management is garbage and has been for years. They cant keep employees or train the ones they have. And now, they are turning "high demand" caused by a tiny workforce into a way to make more money.

 

[NumberNine]

I wish those burgers were as tasty as their profit margins.

 

[hahahanoobs]

I would imagine rising prices while in line would cause a line to form at the exits.

 

[Superconductor]

Fast Food Variable Demand Pricing. Seriously laughing my &^$ off.

 

[GodisanAtheist]

What do I do? I stop shopping at Wendy's

Edit: fast food prices have gotten so absurd that over the last year I've found it more cost effective to literally goto the store, buy a steak and cook it on the grill than it is to get a "meal" at a fast food joint. A steak at my local grocery store is $7-10. I quit eating fast food and started eating steak and potatoes at home 2-3 times a week. Now they want to find ways to increase prices even more.....

- My wife and I both work full time, have two kids, and are generally obscenely busy people.

Fast food would be all too easy a trap to fall into, but with the garbage quality, high prices, and then nonsense like this I'm effectively out.

Get some pre-marinated chicken from my local meat mart, bake it on a rack above some brussel sprouts or broccoli so they get flavored with the drippings (this is all in a baking pan lines with foil or parchment paper). Bake up some tots or a couple cups of rice for a small bit of carb and you have a tasty, nutritious, cheap, easy clean-up meal without kowtowing to chain restaurant BS. Can feed a family of four for $20-30 for a meal, no problem.

If we're ever all in on take out for a night, hit the local taqueria for a burrito the size of your forearm filled with actual real ingredients for $12 a pop.

Last time I went to a McD's several months ago, the food made my stomach hurt and that was the last time I've been back to any of these places.

 

[TheBigT42]

How about some Dynamic Salaries for the restaurant personnel.

 

[BakaRed77]

This is nonsense. So anyone on a lunch break at the same time as other people in the area are going to be charged more? Sometimes it is the 4 for $4 and other times it's the 4 for $4.67. Yeah that will catch on.

 

[yRaz]

- My wife and I both work full time, have two kids, and are generally obscenely busy people.

Fast food would be all too easy a trap to fall into, but with the garbage quality, high prices, and then nonsense like this I'm effectively out.

Get some pre-marinated chicken from my local meat mart, bake it on a rack above some brussel sprouts or broccoli so they get flavored with the drippings (this is all in a baking pan lines with foil or parchment paper). Bake up some tots or a couple cups of rice for a small bit of carb and you have a tasty, nutritious, cheap, easy clean-up meal without kowtowing to chain restaurant BS. Can feed a family of four for $20-30 for a meal, no problem.

If we're ever all in on take out for a night, hit the local taqueria for a burrito the size of your forearm filled with actual real ingredients for $12 a pop.

Last time I went to a McD's several months ago, the food made my stomach hurt and that was the last time I've been back to any of these places.

My current local favorite is this gas station with a restaurant in it that sells a 16" 1 Topping pizza with a 2liter($15) or a 6pack of beer($20). You can easily feed 4 people for $20 and you get some beer. Unfortunately, we don't have many taco places where I live. Chipotle and tacobell are as Mexican as it gets. Although, I'm in Pittsburgh. We have lots of locally owned places that serve our own weird style of food that can't really be described.

 

[brucek]

The difference vs. Uber is the Uber process already involved looking at your phone ahead of time for the price and wait. This step was already factored into a process that consumers generally find convenient enough for the value received.

Wendy's is in a completely different situation. Consumers expect they know the price without having to check their phone first, and many will not want to add this new step to a fast food restaurant experience whose primary selling point is convenience. Those who travel to the store first, and only then find out the pricing has "surged" unexpectedly, are rightly going to be angry. We're talking the kind of anger that people carry a grudge over, not the kind you forget a minute later. My expectation is many of those customers will not return to Wendy's again. And if Wendy's had any advertising or signage with a lower price, Wendy's can also expect actionable consumer complaints over deceptive pricing.

A related but different complaint would apply if it is per-item "surge" pricing as opposed to just a general adjustment that applies the same to all items on the menu. If a customer puts an order together in their head, and then finds that out that specific order got hammered on price before they even had a chance to place it, they will likely be upset. Now imagine that happens with a family of six. That's another family that will never associate "Wendy's" with "convenience" again.

I'm a tech enthusiast but this is an area where the old low-tech way is superior to this new high-tech way. Make your normal pricing the "surge" pricing, and then advertise discounts for non-surge periods like "Happy Hours" and "Senior Blue Light specials" or whatever you want to call the less crowded hours. Everyone is already comfortable with that model, it is simple to communicate, and requires no additional investments in technology.

 

[noel24]

I would definitely buy some swaps on Big Bacon Classic.
Just wait till 4chan smells the blood and drown Wendy's in the pool of It, for fun.

 

[yRaz]

I would definitely buy some swaps on Big Bacon Classic.
Just wait till 4chan smells the blood and drown Wendy's in the pool of It, for fun.

I was actually thinking what is 4chan gonna do about this? This is just the type of thing to piss off their hivemind. 4chan can be a force to be reconned with when it wants to be.

 

[Endymio]

Despite the horse-and-buggy crowd crying foul, this actually sounds like a great idea. For one thing, the prices aren't going to fluctuate dramatically -- not nearly as badly as Uber. (In leaving a large event, I've seen a ride go from $15 to $90 in a few minutes time).

Furthermore, the article ignores the very real benefits this will have for consumers. Yes, for consumers. If you're a price-conscious individual for whom a $1 difference matters -- you'll try to lunch a little earlier or later. And if that price delta doesn't bother you, why you'll get your burger even faster, as the peak crowds will now spread out more over time.

From the perspective of economic efficiency, it makes little sense that these facilities sit near-idle for most of the day, while 90% of their business is crammed into 2 or 3 brief peaks. Anything that improves overall efficiency, eventually helps us all.

 

[yRaz]

Despite the horse-and-buggy crowd crying foul, this actually sounds like a great idea. For one thing, the prices aren't going to fluctuate dramatically -- not nearly as badly as Uber. (In leaving a large event, I've seen a ride go from $15 to $90 in a few minutes time).

Furthermore, the article ignores the very real benefits this will have for consumers. Yes, for consumers. If you're a price-conscious individual for whom a $1 difference matters -- you'll try to lunch a little earlier or later. And if that price delta doesn't bother you, why you'll get your burger even faster, as the peak crowds will now spread out more over time.

From the perspective of economic efficiency, it makes little sense that these facilities sit near-idle for most of the day, while 90% of their business is crammed into 2 or 3 brief peaks. Anything that improves overall efficiency, eventually helps us all.

1 problem, pretty much everyone takes lunch between 11am and 1 because that's what our employers dictate.

 

[ShadowDeath]

Something tells me this will go 1 of 3 ways.
1. The implementation will never see the light of day.
2. They will implement it and start going under after customers stop shopping there.
3. All other fast food places all jump on this idea at the same time and it becomes the norm.

 

[Endymio]

1 problem, pretty much everyone takes lunch between 11am and 1 because that's what our employers dictate.

Everyone? I believe it varies dramatically by sector. Factory and construction workers are usually required to all knock off at the same times. In the academic and professional milieus I've been in, there's a near-infinite degree of latitude. And, of course, the self-employed and so-called "Gig workers" have more freedom still.

 

[hazphan]

Learn to cook. It is a basic skill that is timelessly relevant to our existence. Stop feeding into being so damn lazy, happy people work hard, happy people create things. Why not start with creating what you put in your body?

My wife and I cook 7 nights a week at home, meal prep for lunch and eat oatmeal, berries and eggs for breakfast. Our dinners contain protein, veggies, starches, sauces, nutrients and we constantly break down the ingredients of our shopping trip to under $2-$3 per adult per dinner. On my lone, lazy nights I grill up a piece of fish or chicken, dice up a zucchini, saute it with salt pepper, put it over some rice, add sriracha sauce and I'm good to go. Cheap, delicious and takes under 30 min.

 

[GoldenGoat]

I will avoid Wendys if they do this. If there are enough people like me then there won't be any upward surge. I'm tired of this kind of BS in our society today.

 

[Theinsanegamer]

Despite the horse-and-buggy crowd crying foul, this actually sounds like a great idea. For one thing, the prices aren't going to fluctuate dramatically -- not nearly as badly as Uber. (In leaving a large event, I've seen a ride go from $15 to $90 in a few minutes time).

Furthermore, the article ignores the very real benefits this will have for consumers. Yes, for consumers. If you're a price-conscious individual for whom a $1 difference matters -- you'll try to lunch a little earlier or later. And if that price delta doesn't bother you, why you'll get your burger even faster, as the peak crowds will now spread out more over time.

From the perspective of economic efficiency, it makes little sense that these facilities sit near-idle for most of the day, while 90% of their business is crammed into 2 or 3 brief peaks. Anything that improves overall efficiency, eventually helps us all.

This was written by someone that has never experienced surge pricing.

Oh, and for those who are "worried about price" there is no money to save. Prices will STILL go up, they'll just surcharge you more to cover for their inability to handle lunch hours.

Everyone? I believe it varies dramatically by sector. Factory and construction workers are usually required to all knock off at the same times. In the academic and professional milieus I've been in, there's a near-infinite degree of latitude. And, of course, the self-employed and so-called "Gig workers" have more freedom still.

Take 1 look at the busy hours for most fast food locations and you will see that 11-1 is indeed correct.

 

[Endymio]

This was written by someone that has never experienced surge pricing.

On the contrary; I've experienced it for well over half a century. Airlines, hotels and resorts, many other sectors have always adjusted pricing around peak periods. Even ordinary, non-fast food restaurants have done this throughout history. Why do you think "lunch entrees" are so much cheaper than dinners, or why bars have "Happy Hours"?

...there is no money to save. Prices will STILL go up, they'll just surcharge you more

Why not stop to think instead of blindly posting? This chain will still be competing with restaurants not doing surge pricing. They'll thus only be able to boost pricing very slightly in peak periods, if at all. This will certainly be primarily a tool to attract more traffic in off-peak hours.

 

[brucek]

Despite the horse-and-buggy crowd crying foul, this actually sounds like a great idea. For one thing, the prices aren't going to fluctuate dramatically -- not nearly as badly as Uber. (In leaving a large event, I've seen a ride go from $15 to $90 in a few minutes time).

Furthermore, the article ignores the very real benefits this will have for consumers. Yes, for consumers. If you're a price-conscious individual for whom a $1 difference matters -- you'll try to lunch a little earlier or later. And if that price delta doesn't bother you, why you'll get your burger even faster, as the peak crowds will now spread out more over time.

From the perspective of economic efficiency, it makes little sense that these facilities sit near-idle for most of the day, while 90% of their business is crammed into 2 or 3 brief peaks. Anything that improves overall efficiency, eventually helps us all.

As you yourself point out in a later post, significant discounts for off-peak eating are hardly new.

If your argument is the price changes will be so minor as to be insignificant, then there's really no point to having this program at all. If they are spending the money to implement them, let's assume the ultimate plan is they will not be rounding errors.

What you did not address and what is brand new to any restaurant I know of, is the "surprise" aspect of you do not know the pricing until you have driven to the store, waited on the drive through line, and/or got out of your car to wait in line inside. Many consumers have a very strong, very negative reaction to what they perceive is being taken advantage of by a price increase unknown to them until they have already partly committed to the deal by showing up. In my experience the strength of this reaction is often far out of proportion to the actual price change, meaning Wendy's will be buying themselves $100 of enduring consumer anger for an attempt at a $1 surcharge.

I also think that if Wendy's is not extremely careful about clearing up all their marketing communications well in advance of this program, they may find themselves on the wrong end of consumer regulations that prohibit advertising one price and then charging another. Again, people are accepting of "happy hour pricing is 50% off between 3 and 5", which is clear communication. I do not think an ad like "Price is $6.99 (*but really could be anything)" is going to stand up under challenge.

Another unhappy surprise they're probably going to run into, and this is not my favorite part of modern day society, is that some class action law firm is going to find a location where a disproportionate number of say factory workers on a fixed schedule that aligns with surge pricing are members of protected classes. These Wendy's stores will therefore be charging more money to, say, certain races, or that's what the court case will be anyway. I don't know if they have independently owned franchisees but if they do some of their owners might be in for a legal bill they are not prepared for.

I just do not see how Wendy's does not lose money compared to the no-cost, tried and true, "happy hour discount" program. If anyone is going to profitably absorb all the up-front expenses on all this it is going to be one of the far bigger chains but I don't recommend it for them either.

 

[Thatsdisgusting]

Screw dem corpos, you wanna go out, go to the nearest family restaurant, give'em another chance. And by family I mean model of ownership, not like any "causal restaurants" chain