Dynamic Pricing at Wendy's: Where's the Beef?

In early 2024, Wendy’s new CEO announced on an earnings call that the company would install digital menus in its US locations so it could begin testing dynamic pricing—changing prices up or down in response to shifts in supply and demand – as well as allow engaging in suggestive selling by frequently varying what the menu featured. Artificial intelligence had made it easier to analyze data about consumer behavior, competitors’ pricing, and other factors and to adjust prices in near-real time. The announcement prompted a backlash, with some customers calling for a boycott and policymakers crying foul. While dynamic pricing was common in the airline and other industries, it seemed particularly sensitive for fast food. But the industry faced higher costs and growing competition from fast-casual restaurants. Now, Wendy’s CEO must decide whether to go ahead with dynamic pricing and AI-enabled suggestive selling and, if so, how to use these practices to increase profits without alienating customers.