Wendy’s clarifies ‘dynamic pricing’ system won't raise prices at peak times

Wendy’s is clarifying what the company’s CEO meant in a recent call with analysts when he said the fast-food chain plans to roll out “dynamic pricing.”

In mid-February, Kirk Tanner, the new CEO and president of Wendy’s, shared with analysts that they would be rolling out new plans to improve company profits, including digital menu boards that will be more easily able to change the prices of items, as well as testing dynamic pricing and daypart offers, according to Nation’s Restaurant News.

Tanner explained that they plan to 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.”

The digital boards are meant to improve order accuracy and increase sales by upselling certain menu items.

By 2025, the fast food restaurant chain will begin testing dynamic pricing, which is a time-based pricing strategy that companies use to increase or decrease prices for their services or items depending on the time and demand.

While initially compared in the media (including on TODAY.com) to the concept of “surge pricing” on the Uber app when prices rise as drivers are scarce, Wendy’s clarified how the company plans to use “dynamic pricing” in a statement on Feb. 27.

“To clarify, Wendy’s will not implement surge pricing, which is the practice of raising prices when demand is highest. We didn’t use that phrase, nor do we plan to implement that practice,” a spokesperson said in an email to NBC News. They added there are “no plans” to raise prices at high-demand times.

“We said these (digital) menu boards would give us more flexibility to change the display of featured items. This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants. We have no plans to do that and would not raise prices when our customers are visiting us most,” the Feb. 27 statement reads. “Any features we may test in the future would be designed to benefit our customers and restaurant crew members. Digital menu boards could allow us to change the menu offerings at different times of day and offer discounts and value offers to our customers more easily, particularly in the slower times of day.”

But before this clarification came, there was widespread backlash to the announcement on social media, and Burger King, one of Wendy’s biggest competitors, decided to take advantage of the moment and offer customers free Whoppers through Friday, March 1.

“the only thing surging at BK is the ??,” Burger King posted on X. “We don’t believe in charging people more when they’re hungry.”

A Wendy’s spokesperson had initially confirmed the digital menus, as well as dynamic pricing, in a Feb. 26 statement to TODAY.com, noting the company’s future ability to change prices at different times of day. The initial statement did not say the fast-food chain would only lower prices with the new dynamic pricing model.

“As we’ve previously shared, we are making a significant investment to accelerate our digital business. In addition to evolving our loyalty program, we are leveraging technology even more with the rollout of digital menu boards in some U.S. restaurants,” the statement read. “Beginning as early as 2025, we will begin testing a variety of enhanced features on these digital menu boards like dynamic pricing, different offerings in certain parts of the day, AI-enabled menu changes and suggestive selling based on factors such as weather.”

The statement adds 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.”

In the meeting with analysts, Tanner noted that the company has already rolled out its “Wendy’s Fresh AI” in many restaurants, “where we see ongoing improvement in speed and accuracy.”

The digital menus will help reflect the fluctuating prices throughout the day. Tanner said the new rollouts will “play a key role on our restaurant team, enabling the crew to focus on what matters: preparing fresh high-quality Wendy’s favorites and building customer relationships to bring them back time and again.”

Back in 2023, NBC’s Sam Brock told TODAY that dynamic pricing was creeping into restaurants, movie theaters, bowling alleys and more.

“Experts say more businesses are tracking consumer spending habits to determine when and even what to charge more for,” Brock said, adding that to avoid dynamic pricing check online for promo codes, discounts, loyalty programs and more.

Additionally, the CEO said to analysts that the company will also be investing more money to advertise its new breakfast menu offerings. It recently teamed up with Cinnabon for a new breakfast item and added two additional breakfast offerings: English muffin sandwiches and a breakfast burrito.

According to Nation’s Restaurant News, the company is also testing “saucy nuggets” with flavors like honey-barbecue, Buffalo, garlic-Parmesan and ghost pepper in a small number of restaurants in Ohio.

EDITOR’S NOTE (Feb. 27, 2024, at 8:30 p.m. PT): This story has been updated with a clarification from Wendy’s that “dynamic pricing” will not include price increases at high-traffic times.

This article was originally published on TODAY.com