March 1, 2024
Wendy’s won’t be beefing up the price of a lunchtime burger after getting salty feedback, reports The Wall Street Journal.
On a mid-February earnings call, the fast-food chain’s new CEO Kirk Tanner said Wendy’s would “begin testing more enhanced features like dynamic pricing” as early as next year. To do so, Wendy’s was investing about $20 million to roll out artificial intelligence-enabled digital menu boards in U.S. restaurants; and $10 million to support such efforts globally, he said.
The dynamic-pricing detail didn’t catch much attention at the time. But about two weeks later, the headlines started, comparing Wendy’s strategy to that of Uber. The ride-hailing company is known for its surge-pricing strategy, when prices rise due to heavy demand.
On social media, people poked fun at the chain and complained about paying sky-high rates at lunchtime for a burger. People even jokingly raised the prospect of arbitrage trading—a market strategy of profiting off tiny differences in the price of an asset.
“Engaging in burger arbitrage by buying burgers when cheap and then reselling at below peak Wendys prices during the lunch rush,” said one post on X.
Politicians got involved in the commentary. Massachusetts Senator Elizabeth Warren, a Democrat, said Wendy’s plan was “price gouging plain and simple.”
Dynamic pricing often entails charging higher rates at times of high demand, and such strategies are commonplace in many industries. Airlines and gas stations have long used it. In recent years, it became more widespread among retailers as a response to higher costs. The practice has even crept into gyms, golf courses, and bowling alleys.
Sometimes consumers push back. When AMC Entertainment started charging more for the best seats in theaters during prime viewing times, some moviegoers complained. The theater company reversed course months later.
Wendy’s—which has been facing sluggish comparable-sales growth in the U.S.A.—scrambled to course-correct. It posted a statement on its website on Tuesday, February 27l, saying its dynamic-pricing plan has been misconstrued, and it wouldn’t raise prices at the busiest times.
Instead, Wendy’s pointed to better deals for customers. It said new digital menus could allow it to change menu items during the day and offer discounts, particularly at slower times.
On Wednesday, the company specifically disavowed surge pricing. “We didn’t use that phrase, nor do we plan to implement that practice,” Wendy’s said.
Research contact: @WSJ
