Wendy’s announced on Tuesday 27th that it is considering to follow the lead set by airlines and rideshare companies in adjusting menu prices according to demand, a policy referred to as “surge pricing”. The strategy as presented was intended to even out customer flow across the meal periods. Based on rideshare and airline experience, the strategy could, in theory, increase sales value and hence profits. If Wendy’s would have been the first restaurant to introduce dynamic pricing, and the approach were predictably rejected by consumers, the company would have suffer severe degradation of image benefitting competitors. Extensive social media criticism of the intention to introduce surge pricing led
Wendy’s to backtrack on Wednesday 28th. The Company clarified the earlier statement falling back on the semantics of “dynamic” and “surge” pricing. The Company explained that installation of electronic menu boards would allow the prices to be adjusted down during off-peak periods and provide value. Now the Company has created a self-inflicted problem of credibility and effectively created an undesirable web persona.
If Wendy’s were to introduce any form of variable pricing, it would be advisable to select the market and carefully analyze results before embarking on an extensive application of the strategy. The potential to lose customers to adjacent QSR chains is a real possibility and a loss in traffic could more than offset any incremental revenue from surge pricing
On February 15th, Wendy’s Company reported results for the fourth quarter and Fiscal 2023 ending December 31st, 2023. For the full year, net income was $204 million on total revenue of $2,182 million with a diluted EPS of $0.97. For the corresponding FY2022, Wendy’s earned $177 million on total revenue of $2,1096 million with a diluted EPS of $0.82. The increase in revenue resulted from higher sales at company-operated restaurants and franchise royalty revenue and advertising contributions. During 2024, Wendy’s invested $55 million in advertising breakfasts. Thirty million dollars was used to increase the number of digital menu boards that would be necessary for the company to introduce some form of variable pricing.
For 2023, systemwide sales growth attained 6.1 percent with 5.1 percent in the U.S. and 14.1 percent in the International Segment. Same restaurant sales growth in the U.S. was 3.7 percent.
Guidance for 2024 included systemwide sales growth of 5 to 6 percent and adjusted EBITDA of $535 to $545 million with an adjusted EPS of $0.98 to $1.02.
The Company reported increased digital sales and the opening of 250 new restaurants worldwide during the fourth quarter.