The price of everything seems to be going up these days: gas, clothing, rent. With the costs of living skyrocketing, many consumers have turned to cheaper options, cutting corners wherever possible. For example, some savvy diners have eschewed traditional dining for fast food, trying to find deals on the dollar menu. But even that option might be getting priced out of reach.

In particular, Wendy’s recently announced (and highly controversial) plans to introduce dynamic pricing strategies suggest that the company is trying to stay ahead of consumers’ price-saving tactics with its own profit-protecting tactics. Beginning in 2025, some store locations will adjust the prices of menu items, on the basis of activity levels within that store. Aided by the rollout of digital menu boards, the move aims to improve both customer and staff experiences.

The reaction to the announcement was immediate—and overwhelmingly negative. Customers took to social media, calling for boycotts of participating locations. Comparisons were drawn to other industries that have already adopted dynamic pricing, especially ride-sharing platforms like Uber or Lyft. Many decried the use of surge pricing and claimed that the move represented an example of price gouging.

In response to the public backlash, Wendy’s released a second statement, clarifying its new pricing strategy. The company assured customers that participating restaurants would not increase their prices during especially busy times (i.e., pricing higher in response to surges in demand) but rather would provide different menu variations and discounts to consumers during slower periods (i.e., pricing lower to attract price-conscious buyers). But even with this clarification, many observers accused Wendy’s of just trying to gain control of the narrative by introducing a seemingly more palatable description of the flexible pricing model.

This move is in line with Wendy’s expressed interest in expanding technology-enhanced customer experiences, in ways that can provide its clientele with a higher degree of perceived personalization. The fast-food company has reportedly invested around $30 million into developing technology to support its dynamic pricing rollout, indicating a long-term goal of integrating various technology-enabled and pricing strategies, even despite initial public resistance.

The initial rollout and ensuing backlash also highlights the public’s sensitivity to pricing changes and innovations, especially when a strategy has never been employed in that sector before. Wendy’s is one of the first to introduce fluctuating prices in the food industry. Even if some customers seem more willing to embrace such dynamic pricing models, long-term acceptance remains to be seen.

Their popularity, effectiveness, and growth in other sectors offers a powerful incentive for the initiative though. Dynamic pricing has long been the standard pricing model for the travel industry, especially among airlines and hotels. In those sectors too, initial consumer reactions to the shifting prices were mixed, but many travelers have come to accept the model, to the extent that it now is established as a norm. Moreover, as dynamic pricing becomes more popular across a variety of industries, it might become more accepted as a whole. 

Discussion Questions

1. Why would Wendy’s attempt to employ dynamic pricing, rather than raise its prices in a more traditional way?
2. If Wendy’s continues to use dynamic pricing long-term, will it be good or bad for their business, overall?

Sources: Bruce Crumley, “Dynamic Pricing Keeps Spreading Despite Protest From Wendy’s Customers,” Inc., March 11, 2024; Joseph De Avila, “Wendy’s Makes It Clear After Backlash: No Surge Pricing,” The Wall Street Journal, February 28, 2024; Lola Fadulu, “‘Dynamic Pricing’ for Burgers and Shakes? Wendy’s Will Give It a Whirl,” The New York Times, February 27, 2024.