A fluctuating Frosty? Wendy’s will test surge pricing at some U.S.

Craving a Frosty? Better get it on a slow day if you’re going to a Wendy’s that’ll be testing surge pricing in the U.S. The company recently announced the move for some locations as part of its new digital menus to be launched next year.

Known as “dynamic pricing,” the cost of menu items — like the fast-food giant’s signature frozen dessert — will fluctuate throughout the day, costing more when demand is high.

Most consumers will already be familiar with surge pricing, thanks to rideshare services like Uber and Lyft, event-ticket companies like Ticketmaster, and the gas station, of course. But “the opportunity is huge in the restaurant industry,” said Robert Carter, a restaurant industry analyst and managing partner at Stratton Hunter Group.

The company is testing more “enhanced features” like this one alongside its digital menus, said CEO Kirk Tanner during the earnings call. 

Restaurants have historically used a fixed-pricing model, though early bird specials and limited time offers have long been used to draw customers in during slow hours or toward specific menu items, Carter said.

Dynamic pricing has been used elsewhere in the fast-food industry. The price of McDonald’s menu items differs based on location, an investigation by CBC Radio’s Cost of Living found in July 2023.

The prices are set by individual McDonald’s franchisees who oversee each location, factoring in rent, supplies and labour. But when Wendy’s launches its experiment next year, customers might not notice the shift in prices — because it will likely be minimal, according to Carter.

“I think what you’re going to see is a surge pricing that is in the pennies,” said Carter. “I don’t think this is going to be something where you see, all of a sudden, a dollar fluctuation or something of a noticeable difference.”

The company is testing the approach alongside the rollout of its new digital menu board system, which was part of a $30 million US investment that included other features like an automated drive-thru ordering system, according to notes from the company’s February earnings call.

“One of the other benefits of these investments will be the flexibility to change the menu more easily and to offer discounts and value offers to our customers through innovations such as digital menu boards,” a spokesperson for Wendy’s told CBC News in a statement.

The spokesperson added that the change is expected to drive traffic during slower parts of the day. When asked if the changes will take effect in Canada, the spokesperson said the experiment will be confined to some U.S. locations for now.

It’s only a matter of time, said Carter. “I think we’ll see how this fares in the U.S. and then I expect it will roll out into Canada.”

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