Fast-food chain Wendy's pushed back Wednesday against considering charging more at peak times, a strategy experts called a “very bad idea” and risky for the sector.
• Also read: Dynamic pricing is being tested at Wendy's
Kirk Tanner, head of the fast food chain since the beginning of February, stated that he wanted to test several functions enhanced with artificial intelligence in 2025, pointing in particular to dynamic pricing, which allows prices to be adjusted in times of high demand, e.g. VTC services, air traffic or ticket offices.
A project that has provoked strong criticism.
But Wendy's said Wednesday that its comments had been “misinterpreted” and that it had “no intention” of raising prices during peak hours.
According to experts, this strategy can be very risky in the restaurant industry.
“When people are hungry, they want to eat immediately. If the price is higher due to rush hour, they will not wait for it to go down. They will go to the competitor,” comments John Zhang, professor of marketing at Wharton Business School at the University of Pennsylvania.
Dynamic pricing is “a very bad idea” for this sector, he says.
“Customers will find it unfair and unreasonable to pay more for the same product, they will be angry and leave, never to return,” he warns.
Sarah, a 24-year-old teacher, finds the strategy “very strange.” “I’ve never heard of that before,” she said. “It can stop people from buying groceries.”
Experimenting with price increases “is interesting, but there is a risk of upsetting customers and causing confusion, particularly among regular customers,” said Neil Saunders, director at GlobalData, ahead of Wednesday's Wendy's update.
This strategy allows “to maximize sales and potentially boost off-peak demand,” he adds, by encouraging consumers to avoid price spikes.
However, for him as well as Professor Zhang, the best option would be to encourage customers to come during quieter times by offering them discounts. Which is what Wendy mentioned on Wednesday.
Discounts on weekdays
According to the National Restaurant Association's 2024 report, 85% of adults surveyed said they would be willing to take advantage of discounts for dining on weekdays when crowds are lighter, and 84% would eat during off-peak hours. There were discounts.
The association points out that the catering industry has long been juggling price dynamics, with special offers for first-time visitors (“Early Birds”) or “Happy Hours”.
Thanks to new technologies (mobile apps, internet ordering, digital menus, QR codes, etc.), restaurants can now adapt to demand in real time, keeping their cash drawers as full as possible during the busiest times. In this way, they can improve their margins, which have been eroded by food price inflation.
Encouraging customers to avoid peak periods can also offset the labor shortage that has plagued the industry in the United States since the pandemic.
For Purvi Shah, a lecturer at the School of Business at Worcester Polytechnic Institute (WPI), the crucial element for a company wanting to implement a price increase during a surge is determining the “elasticity of demand,” or the extent of the additional costs that the consumer accepts before turning away from the brand.
It's about “taking a risk while counting on the reward,” notes Ms. Shah. Because unlike a show, a plane or a VTC service, whose capacity is limited, competition in restaurants is very high, especially in big cities and in the fast food world, where the chains are never far from each other.
We need to be “transparent about the process and educate the consumer, otherwise they will see that it is unfair or suspicious,” explains Ms. Shah, emphasizing that on social networks, any misstep can be punished harshly and quickly.
This, in their opinion, is the misfortune that befell the British pub chain Slug and Lettuce in 2023 when it wanted to increase the price of a pint of beer by twenty pennies (23 cents) during public opening hours.
“The rejection was brutal to X,” she said earlier on Twitter.