Consumers are outraged after reports surfaced this week saying fast-food chain Wendy’s plans to increase menu prices during its busiest hours, known as ‘surge pricing’. The Associated Press reports that Wendy’s clarified its intentions Wednesday, drawing a distinction between the company’s “dynamic pricing” strategy and “surge pricing” practices that charge more during times of peak demand. The company said any fluctuations it decides to test in the future “would be designed to benefit our customers and restaurant crew members.”
The AP explains: “dynamic pricing and surge pricing are both models that continuously adjust prices based on a range of factors, sometimes within minutes. Dynamic pricing can involve both increasing and decreasing prices, based on market conditions, the season and supply changes. Surge pricing is a subset of dynamic pricing and only involves increasing prices, based on supply and demand, experts say.”
While dynamic and surge pricing is not common in restaurants, there are familiar companies consumers experience them in. “Airlines, for instance, regularly raise and lower fares depending on the time of year, expected customer surges, and projections of how many seats they can fill at various times.”
Hotels do much the same with room reservations, Uber charges more money depending on high traffic times of the day, and apps such as ParkWhiz or ParkMobile help companies get premium prices for parking spots.
As for consumer reactions, the AP writes, “experts say it’s going to be hard to change public attitudes toward dynamic pricing, especially in fast-food restaurants. At the same time, charging customers to choose a seat or check a suitcase for a flight hasn’t always been the routine it is now”
“Rather than saying we’re going to use surge pricing at peak demand periods, they could say we’re going to explore giving discounts during off-peak periods,” said Daniel Freund, a business professor at the Massachusetts Institute of Technology. “And of course, those two statements are equivalent.”