Surge pricing at Wendy's? Expert not optimistic it will work
BOSTON - Wendy's plans to join the ranks of Uber and Lyft by introducing surge pricing next year. This means that a meal could cost more if a customer dines during peak hours, or even if the weather changes.
"If they jack the price up after a certain amount of time, that is not accommodating the customer," said Kerry Mcaulliffe, a customer in Boston. "You know what I would do? I would go Star Market, buy some cold cuts, and have my sandwich myself because this is crazy."
Surge pricing is common, just not so much in the food industry. Jay Zagorsky is an economics professor at the Boston University's Questrom School of Business. He says Coca-Cola tried surge pricing a decade ago in Atlanta. Coke's vending machines would change the prices based off the weather.
"It was an unmitigated disaster. A lot of consumer push back, and a lot of people quite angry on a hot summer day," said Zagorsky.
Wendy's says it plans to use artificial intelligence (AI) driven menu boards to update the prices regularly. They plan to invest $20 million into the technology. While Zagorsky understands the reasoning behind it, he isn't optimistic that it will work.
"With Uber and Lyft, or even surge pricing for the Boston Red Sox, there are not a lot of alternatives. With Wendy's, many of them are located quite close to things like Burger King or McDonalds," explains Zagorsky. "If you have a choice in a few block radius, why go to the place where they are raising prices?"
"We are almost at $20 for a Baconator meal. I mean that's kind of ridiculous. Fast food is no longer fast food. You're paying gourmet pricing in a way," said Efrain Morales, a Wendy's customer who works near one of their restaurant locations. "Only time I would really come would be lunch or breakfast."
Zagorsky says one benefit to surge pricing may be better customer service. If more people are going during off hours to save a buck, there may be less lines during peak times. He says this also helps Wendy's save money because they can space out staffing. They don't need to pay more to overstaff during rush times.
"If you walk into Wendy's, and there's a long line, you might walk to a different fast food restaurant," explains Zagorsky.
He also expects more companies to use surge pricing in the future now that improvements in artificial intelligence will make it easier for companies to track trends. The question now is, will this work for Wendy's, and who could be next?
