Wendy’s says, where’s the beef in surge pricing?

Wendy’s CEO Kirk Tanner, during a conference call earlier this month, announced the chain would test fluctuating prices on its menu. As food prices stay high despite US economic growth, Wendy’s hopes to entice more business.

First Look

Companies like Uber have used dynamic pricing, or surge pricing, to moderate use by customers during the busiest days of the year, or when drivers or cars are in short supply during the day. Prices rise and fall with demand using that business model.

But could that also work to sell more hamburgers?

Stories started swirling this week after media picked up on comments by Wendy’s CEO Kirk Tanner that the company would test features like dynamic pricing at restaurants.

Wendy’s says that it has no plans to increase prices during the busiest times at its restaurants.

“Wendy’s will not implement surge pricing, which is the practice of raising prices when demand is highest. We didn’t use that phrase, nor do we plan to implement that practice,” the company said in an email to The Associated Press on Feb. 28.

The company said Feb. 28, after the story began to circulate this week, that any features it decides to test in the future “would be designed to benefit our customers and restaurant crew members.”

Wendy’s said that its digital menu boards “could allow us to change the menu offerings at different times of day and offer discounts and value offers to our customers more easily, particularly in the slower times of day.”

Wendy’s is looking to test having the prices of its menu items fluctuate throughout the day based on demand, implementing a strategy that has already taken hold with ride-sharing companies and ticket sellers.

During a conference call earlier this month, Wendy’s CEO Kirk Tanner said that the Dublin, Ohio-based burger chain will start testing dynamic pricing, as early as next year.

“Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and daypart offerings, along with AI-enabled menu changes and suggestive selling,” he said. “As we continue to show the benefit of this technology in our company-operated restaurants, franchisee interest in digital menu boards should increase, further supporting sales and profit growth across the system.”

Wendy’s Co. plans to invest about $20 million to launch digital menu boards at all of its U.S. company-run restaurants by the end of 2025. It also plans to invest approximately $10 million over the next two years to support digital menu enhancements globally.

Mr. Tanner, a longtime PepsiCo executive, became Wendy’s CEO earlier this month. He succeeded Todd Penegor, who had served as Wendy’s president and CEO since 2016.

Last year, Mr. Penegor announced a restructuring intended to speed decisionmaking and invest more in new restaurant development, particularly overseas. The chain and its franchisees operate about 7,000 restaurants worldwide.

Shares of Wendy’s fell slightly in Feb. 27 morning trading.

US economy grew solid 3.2% in fourth quarter, a slight downgrade

The U.S. economy grew at a robust 3.2% annual pace from October through December, propelled by healthy consumer spending, the Commerce Department reported Feb. 28 in a slight downgrade from its initial estimate.

The expansion in the nation’s gross domestic product – the economy’s total output of goods and services – slipped from a red-hot 4.9% from July through September. The fourth-quarter GDP numbers were revised down from the 3.3% pace. U.S. growth has now topped 2% for six straight quarters, defying fears that high interest rates would tip the world’s largest economy into a recession.

Far from stumbling, the economy grew 2.5% for all of 2023, topping the 1.9% growth in 2022.

Consumer spending, which accounts for about 70% of U.S. economic activity, grew at a 3% annual pace from October through December. Spending by state and local governments rose at a 5.4% annual rate from October through December, fastest pace since 2019. Growing exports also contributed to fourth-quarter growth.

The Feb. 28 report also showed inflation pressures continuing to ease. The Federal Reserve’s favored measure of prices – the personal consumption expenditures price index – rose at a 1.8% annual rate in the fourth quarter, down from 2.6% in the third. Stripping out volatile food and energy prices, so-called core inflation was up 2.1%, accelerating slightly from a 2% increase in the third quarter.

Voters are weighing the economy’s health in advance of November’s presidential election. Many Americans are exasperated with high prices and blame President Joe Biden. Although inflation has eased and hourly wage hikes have beaten price increases over the past year, consumer prices are still 17% higher than they were three years ago.

In response to resurgent inflation, the Fed raised its benchmark interest rate 11 times between March 2022 and July 2023, taking it to the highest level in more than two decades. Higher borrowing costs have reined in the inflationary surge. Last month, consumer prices were up just 3.1% from January 2023, down from a peak of 9.1% in June 2022, and coming closer to the Fed’s 2% target.

American households are largely in good financial shape, allowing consumers to spend. And businesses have improved productivity by using automation and finding ways to make employees work more efficiently.

This story was reported by The Associated Press.