No, Wendy’s says it has no plans to introduce surge pricing
A sign is posted outside a Wendy’s restaurant on August 10, 2022 in Petaluma, California. The company announced Tuesday that it plans to experiment with dynamic pricing. Image: Justin Sullivan/Getty Images
Updated February 28, 2024 at 12:31 p.m. ET
You may have seen articles this week suggesting that Wendy’s planned to implement a practice known as surge pricing, which involves companies raising the price of products and services in real time as demand increases .
In other words, if you find yourself waiting in line at Wendy’s during the lunch rush, you might be sold a more expensive Frosty.
The brouhaha came in response to comments made by Kirk Tanner, president and CEO of the fast-food chain, during a Feb. 15 earnings conference call.
“As early as 2025, we will start testing more enhanced features such as dynamic pricing and daily deals,” he said.
Tanner was talking about the company’s $20 million investment in new digital menu boards and said the technology would allow Wendy’s to experiment with a few new strategies, including so-called dynamic pricing.
But after media outlets published stories warning that Wendy’s planned to raise prices during the busiest times of the day, company executives tried to better explain what Tanner meant.
“To clarify, Wendy’s will not implement surge pricing, which involves raising prices when demand is highest,” Wendy’s Vice President Heidi Schauer said in an email to NPR. “We have not used this expression nor do we plan to implement this practice.”
Wendy’s didn’t provide many additional details, but said in a separate statement that digital menus could allow the company to offer discounts to customers during less quiet times of the day.
Rob Shumsky, a professor at Dartmouth’s Tuck School of Business, suggested that this could actually mean lower prices for Wendy’s customers.
“They talked about, for example, attracting more breakfast customers,” Shumsky said. “They could actually reduce breakfast prices at certain times to encourage people to come during times when demand is currently relatively low.”
Wendy’s has said it won’t begin introducing dynamic pricing until 2025 at the earliest.
Wendy’s May Not Embrace Price Hiking, But Other Industries Do
Dynamic pricing – or surge pricing – is not a new idea.
Airlines began varying ticket prices in the 1980s, Shumsky said, noting that customers complained about it at first but eventually accepted it.
Today, the practice of announcing price increases during peak times is still common. Consider more expensive theme park tickets on weekends.
More recently, however, technological advances have made it easier for companies to change prices on a minute-to-minute basis in real time as demand fluctuates.
The ride-hailing app Uber uses the famous price gouging, increasing fares for rides when weather or other factors are the cause. demand is skyrocketing.
But Shumsky says these types of unpredictable price changes can confuse and annoy customers, who expect to pay a certain price for a good or service. This can erode customer trust in a company and push them toward competitors.
“The problem with this approach is that it is very opaque to clients and it is very difficult for them to plan,” Shumsky said. “If you can’t count on a price that’s at a certain level, you’re going to be hesitant to go back.”
Nonetheless, companies across various sectors of the economy, from hotels to movie theaters and more, have implemented price increases in recent years.
“If the) If the price is the same all day, they actually lose revenue during those peak periods,” Shumsky said.
However, he added that the price increase has certain advantages for consumers. This can lead to lower prices outside of peak periods, and industries that depend on the relationship between a company and its customers – such as healthcare – are unlikely to accept price increases.
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