UPDATE: Wendy's clarified its comments later Tuesday, saying it has "no plans" to raise prices when demand is at its highest in its restaurants. Read the full story here.
Those late-night fast food cravings might cost you: Wendy’s revealed it will begin testing an Uber-like surge pricing plan on its menus as early as next year.
The fast food chain announced its plans to introduce the practice of “dynamic pricing” during a recent earnings call, according to multiple sources.
It’s all part of the company’s $20 million investment in new digital menu boards at its U.S. restaurants, which would allow it to regularly change its prices.
“Wendy’s has always been about providing high quality food at a great value to our customers and this recent investment will continue that by driving traffic and providing value during slower parts of the day,” the company said in a statement provided to Scripps News.
The flexibility to change its menus would also allow them to offer more discounts to customers, Wendy’s added.
No, Wendy's isn't trying surge pricing. Here's what it's changing
Wendy's is clarifying that there's a difference between "dynamic pricing" and "surge pricing" in its restaurants.
The digital menu boards will also feature Wendy’s new “FreshAI” technology, which is powered by an automated voice instead of a human employee and can offer suggested add-ons to orders based on factors like weather and time of day.
“Think of Wendy’s FreshAI as an assistant — not a replacement — to empower Wendy’s crew members working the drive-thru,” the company said when it first announced the generative technology. It claims the use of AI will help workers focus on preparing the orders with a focus on quality, speed and accuracy.
Some of these new menu boards are already being tested at various Wendy’s locations, including four in the Columbus, Ohio area near its headquarters.
The practice of demand-based pricing is not necessarily groundbreaking since it is essentially based on supply and demand economics. Just like with Uber’s exercise of surge pricing, the cost of a flight will often depend on when you book, the cost of tolls can change depending on time of day or number of drivers on the road and electric companies offer time-of-use rates.
But it is becoming a growing phenomenon in the restaurant industry as a means to take advantage of digital ordering channels and to combat rising food costs.
Restaurants and fast food chains no longer have to take the time to change their physical menus to implement competitive prices, making it easier for them to utilize AI technology that can alter digital menus both in-person and through their loyalty apps throughout the day.
However, industry experts warn brands should tread carefully since it could easily lead to backlash from consumers. Last year, Restaurant Business magazine described it best by stating, “While dynamic pricing is alluring to companies looking to take advantage of demand when they’re busiest and price more aggressively when they’re not, the practice is a minefield.”
