Maybe you are the type who enjoys biting into a warm, spicy chicken nugget from Wendy’s, and at $5.99 for a 10-piece in Midtown Manhattan, it is a tempting treat.
Soon, you may want to consider what time it is before you satisfy such a craving, because the fast-food chain is going to price those crispy chunks of meat and other menu items differently, depending on demand.
The company plans to begin testing dynamic pricing as early as 2025, Wendy’s president and chief executive, Kirk Tanner, said during a February earnings call.
In other words, the prices of a Wendy’s Vanilla Frosty and other menu items will rise and fall based on demand. The feature will be rolled out along with digital menu boards that would reflect the price changes; the company plans to invest approximately $30 million in those initiatives.
“We are always focused on improving the customer and crew experience, and in that spirit, we are leveraging technology in our restaurants even more,” Mr. Tanner said.
Mr. Tanner, who became the Wendy’s chief executive last month after a long career at PepsiCo, did not offer many details during the call on how much prices could rise, or exactly how the dynamic pricing model would work.
Wendy’s customers expressed outrage on social media over the new strategy, with some even calling for a boycott. One quipped that she’d plan to get lunch at 11 a.m. or 3 p.m.
The announcement came as food inflation in the United States appeared to be cooling after two years of rapid growth. The cost of food at home rose in January, but at a much slower pace, and restaurant chains and other food providers have said that they are no longer raising prices as steeply. The cooling could be explained partly by consumers pushing back against rising prices and companies saying they have had to spend less for labor and packaging.
In adopting the pricing strategy, Wendy’s will join a number of other companies that have introduced dynamic pricing to charge more during periods of high demand, often to the chagrin of customers.
Uber and Lyft, for example, charge more when demand outpaces the availability of cars on the road — during rush hour, for instance, or in bad weather. Concertgoers have also experienced dynamic pricing, with some Bruce Springsteen fans, for instance, finding that seats on Ticketmaster were costing upward of $5,500 when he returned to performing with his band after a yearslong hiatus.
Dynamic pricing has also been widely adopted in the commercial theater world, which has helped institutions that experienced losses to recover. But the variable prices could hurt new attendees, as they are likely the ones to be searching for tickets to a show at the last minute, when tickets become more expensive.
Many consumers have learned to take notice of changing prices. Before choosing where to eat, 81 percent of consumers check menu prices “always or often,” and half report noticing when restaurant prices have changed, according to a January 2023 survey of 901 U.S. consumers by Capterra, a company that connects businesses with software vendors.
Around 52 percent of those surveyed believed that dynamic pricing was price gouging, the Capterra survey said.
As for Wendy’s, its dynamic-pricing plan and the accompanying digital menu boards would help with sales growth while improving order accuracy and crew experience, Mr. Tanner said.
Wendy’s also plans to introduce menu changes that would be directed by artificial intelligence. The company announced in December that it would expand its use of a platform called Fresh AI, which it had made part of its drive-through experience to improve speed and accuracy, Mr. Tanner said.
Altogether, Mr. Tanner said, the technology has helped employees “to focus on what matters, preparing fresh high-quality Wendy’s favorites and building customer relationships.”