Wendy’s to use AI to bring “surge-pricing” to burgers
"Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and day-part offerings along with AI-enabled menu changes"
Updated February 29: Wendy's has denied it would "raise prices when demand is highest" and instead use digital signboards to offer discounts.
Extra hungry? Stuck in the drive-through? Excellent news for shareholders of Wendy’s: Soon your burger might cost more as a result and perhaps you'll be more likely to stomach that price increase.
The restaurant chain plans to introduce surge-pricing – letting it charge more at periods of higher demand – building on technology that has helped it grow digital sales from $250 million to $2 billion in four years.
Wendys’ CEO Kirk Tanner said: “Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and day-part offerings along with AI-enabled menu changes and suggestive selling.
Wendy's has 7,000 restaurants globally. In 2023 it reported $2.1 billion in revenues. It plans CapEx of $90 million - $100 million in 2024, a significant proportion of which will be on technology, a presentation showed.
Speaking on an earnings call last week, CEO Tanner told analysts: “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 spend a further $15 million this year on its application and $20 million on adaptive digital menus for fluid and AI-led pricing strategies. It is also testing AI voice bots to take orders at drive-throughs.
“We are clearly seeing the benefits of the higher frequency and checks that digital drives. We also know there's a massive opportunity to further unlock digital sales growth and benefit even more from the margin expansion these channels can generate” Wendy’s CEO Tanner said.
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Surge pricing is common with applications like Uber and Ticketmaster, which use dynamic pricing algorithms that change minute by minute, based on demand. The simple fact that menus have traditionally been hard to update regularly has kept many chains from adopting such strategies, as, perhaps, has some caution over potential reputational risk. But applications and digital menus can update prices dynamically.
Wendy’s this week appointed Matt Spessard as its new Chief Information Officer (CIO), replacing Kevin Vasconi, who has held the position since 2020. He will report to CEO Tanner and serve on the Wendy's Senior Leadership Team. Spessard was previously SVP and CTO and “accountable for establishing the Wendy's System global technology vision and leading technological innovation and development to drive continued growth, competitive brand advantage and topline revenue for the Company.”
