2024-02-29 05:02:55
The fast food chain Wendy’s defended itself on Wednesday from considering charging more during peak hours, a strategy described by experts as a “very bad idea” and risky for this sector.
Kirk Tanner, boss of Wendy’s since the beginning of February, indicated that he wanted to test several features enhanced with artificial intelligence in 2025, citing in particular dynamic pricing, which makes it possible to adapt prices during periods of high demand, as restaurant services do. carpooling, air transport or ticketing.
A project which has attracted strong criticism.
But Wendy’s said Wednesday that its comments had been “misinterpreted” and that it had “no intention” of raising prices during peak hours.
” Bad idea “
According to experts, this strategy can be very risky in the restaurant business.
“When people are hungry, they want to eat right away. If the price is higher because it’s rush hour, they’re not going to wait for it to go down. They’re going to go to the competitor,” comments John Zhang, professor of marketing at the Wharton business school at the University of Pennsylvania.
Dynamic pricing “is a very bad idea” for this sector, he thinks.
“Customers will find it unfair and unreasonable to pay more for the same product, they will be angry and leave and never return,” warns Mr. Zhang.
Sarah, a 24-year-old teacher, considers the strategy “very strange”. “I’ve never heard of that,” she said. “It can dissuade people from buying food.”
Experimenting with price increases “is interesting, but it risks exasperating customers and sowing confusion, particularly among regulars,” said Neil Saunders, director at GlobalData, before the Wendy’s update on Wednesday.
This strategy makes it possible “to maximize turnover and, perhaps, to stimulate demand during off-peak periods”, he adds, by encouraging consumers to avoid price peaks.
But, for him as for Professor Zhang, the best option would be to encourage customers to come during quieter periods by offering them discounts. What Wendy’s also mentioned on Wednesday.
Weekday discounts
According to the National Restaurant Association’s 2024 report, 85% of adults surveyed said they would take advantage of discounts for dining on weekdays when crowds are lower and 84% would eat outside of peak hours. There were discounts.
The association points out that the catering sector has been juggling pricing dynamics for a long time, with special offers for first arrivals (“ early birds “) where the ” happy hours ».
Now, thanks to new technologies (mobile applications, Internet orders, digital menus, QR codes, etc.), restaurants can adapt in real time to demand and thus fill their cash drawers as much as possible during the busiest periods . They can thus improve their margins eroded by the inflation of food prices.
Encouraging customers to avoid peak hours also makes it possible to compensate for the lack of labor from which the sector in the United States has suffered since the pandemic.
“Elasticity of demand”
Purvi Shah, a senior lecturer at the Worcester Polytechnic Institute of Business School, said the crucial element for a company wanting to implement a price increase during a surge is determining the “elasticity of demand”, that is to say the extent of the additional cost that the consumer will accept before turning away from the brand.
It’s taking “a risk while counting on the reward,” notes Ms. Shah. Because, unlike a show, a plane or a car service whose capacity is limited, competition is very keen in restaurants, especially in big cities and in the world of fast food, where chains are never good. far from each other.
We will have to be “transparent regarding the process and educate the consumer, otherwise they will find that it is unfair or suspicious,” explains Ms. Shah, emphasizing that with social networks, any misstep can be harshly and quickly punished.
This, according to her, is the misadventure that the British pub chain Slug and Lettuce experienced in 2023 when it wanted to increase by twenty pennies (34 cents Canadian dollars) the price of a pint of beer during hours of point.
“The rejection was brutal on X”, formerly Twitter, she says.
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