Fast food chain Wendy's (WEN) has announced plans to implement surge pricing at certain high-demand times. Using AI technology, Wendy's will fluctuate menu prices during periods of peak demand caused by factors like weather disruptions or high foot traffic throughout the day.
Yahoo Finance’s Josh Schafer, Alexandra Canal, and Brooke DiPalma breaks down the details.
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Editor's note: This article was written by Angel Smith
Video Transcript
BROOKE DIPALMA: Finally, we've been taking a closer look at Wendy's, which isn't exactly raising all prices. But it's trying something that is sure to raise a few eyebrows and maybe some tempers, too. It's called surge pricing. This is also similar to what Uber does, really taking into different factors like weather, like foot traffic, and perhaps spiking prices during these highly demanded times.
And so Wendy's ultimately telling Yahoo Finance that they're making a significant investment in technology to accelerate their digital business. But they are taking consideration these different factors, like weather, foot traffic, to understand pricing. So they'll ultimately use AI-enabled technology to differentiate their menu prices throughout the day based upon demand, largely what we see it's being mostly compared to an Uber.
But they're also saying, hey, if it's hot outside, more people are going to want frostys. And so the prices could change around those times of day.
JOSH SCHAFER: AI.
BROOKE DIPALMA: Really changing things up for us.
JOSH SCHAFER: Yeah. But it's very interesting, because you would think if this works or starts to work, that would be an AI capability that most of these restaurants could flip on, right?
BROOKE DIPALMA: Scary.
JOSH SCHAFER: You connect the data set to the foot traffic, like Brooke said. And then when there's high foot traffic, you boost the prices a little bit. It's not like it's the old days where someone's pressing the switch, right? It is an AI-operated engine and it just happens, which is pretty wild. It will be interesting to see when the price hikes happen, right?
ALEXANDRA CANAL: And how significant they are, like what-- like, how much more will it be?
BROOKE DIPALMA: How much more of an increase will it be? I mean, we see that they're trying to offer value here, that they're going to play in. But of course, this is an opportunity for Wendy's to really increase sales, especially during dayparts that they're really trying to increase demand.
And so we're seeing a large amount of consumers go in for lunch, but they want more people to come in for breakfast. They want more people to come in for the afternoon and late night. And so how will this all play into that as well?
ALEXANDRA CANAL: I also think dynamic pricing, we see that across multiple industries, right? Like if you want to see a matinee as opposed to a primetime show at the theater, you're going to be paying less. So, you know, it could be something that works for Wendy's. I think it all comes down to how much more people are going to pay. And that'll be very interesting.
JOSH SCHAFER: As a consumer, it seems brutal, though.
BROOKE DIPALMA: But will you ever know how much more--
[INTERPOSING VOICES]
ALEXANDRA CANAL: They're not going to be able to market it that way.
JOSH SCHAFER: They just have certain things that you expect to pay a certain amount for. And I think it'll be interesting to see how consumers react to that once the price is a little different.
BROOKE DIPALMA: Will consumers avoid long drive-thru lines maybe?
JOSH SCHAFER: I need a Baconator. I need a Baconator.
BROOKE DIPALMA: Immediately. I need a frosty. I need some fries.
