Wendy's surge pricing coming in 2025
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Surge pricing is coming to Wendy's with the fast-food chain planning to test "AI-enabled menu changes" starting as early as 2025.
Why it matters: If a burger or spicy chicken sandwich costs more during the busy lunch or dinner rush, Wendy's runs the risk of driving consumers to its competitors.
The big picture: The Ohio-based chain is planning to invest approximately $20 million to add digital menu boards to all U.S. company restaurants by the end of 2025, new CEO Kirk Tanner said earlier this month.
- "We expect our digital menu boards will drive immediate benefits to order accuracy, improve crew experience and sales growth from upselling and consistent merchandising execution," Tanner said.
- Testing more features like dynamic pricing will begin as soon as 2025, Tanner said.
- Wendy's told Axios that the investment will increase traffic and provide value during slower parts of the day and suggestive selling will be based on factors like weather.
Between the lines: Wendy's has been working to automate its drive-thrus with an AI chatbot service, which it's been testing with help from Google.
- Generative AI will process orders and language model technology will "talk" with customers in real-time to answer menu questions, the company said last year.
What they're saying: Tanner said the technology will enable restaurant staff to "focus on what matters, preparing fresh, high quality Wendy's favorites and building customer relationships to bring them back time and again."
- A benefit of the investment is it adds "flexibility to change the menu more easily and to offer discounts and value offers to our customers," a Wendy's spokesperson told Axios Tuesday.
Reality check: "If consumers detect the rapid price changes, Wendy's could lose profits," said Farnoush Reshadi, assistant professor of marketing at Worcester Polytechnic Institute. "However, small price changes often go undetected by consumers."
- "Consumers see surge pricing that is based on time ... as an unfair practice and feel anger and resentment towards a brand that engages in surge pricing," Reshadi said.
Yes, but: Reshadi said bundling products like with combos "reduces the chance that consumers detect the surge pricing and leads to less perceived price unfairness and a less likelihood of consumers switching to the competitors."
Editor's note: Wendy's clarified how it will use dynamic pricing on Wednesday. Read the latest story here.
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