It looks like dynamic pricing is slowly finding its way into the restaurant industry. While consumers are used to dynamic pricing at airlines, hotels, and ride services, dynamic pricing in restaurant menus could be an entirely different pill to digest.
Recently, quick-service restaurant chain Wendy’s (NASDAQ:WEN) backtracked on its plans to introduce dynamic pricing following a wave of social-media backlash. Still, the company is investing nearly $20 million to bring in digital menu boards across all of its self-operated outlets in the U.S. by the end of next year.
Dynamic pricing could potentially boost the sales and margins for restaurants in the short term. However, in the long term, the technology could significantly impact the buying patterns of consumers already reeling under high inflation and interest rates.
While Wendy’s may have backtracked, some restaurant players are giving the technology a go. According to the Wall Street Journal, dozens of restaurant brands are already trying out dynamic pricing. Users may not realize it, but delivery operators such as Uber Eats already allow restaurants to move their prices up or down.
Reportedly, Tock, a reservation platform, offers dynamic pricing to nearly 7,000 restaurants that utilize its services. For struggling restaurants, dynamic pricing could very well prove to be a savior amid ever-rising labor and commodity costs.
What Is the Price Target for WEN?
Meanwhile, Wendy’s has seen its share price contract by nearly 5.5% so far this year. Overall, the Street has a Hold consensus rating on Wendy’s, and the average WEN price target of $20.53 points to a modest 11.45% potential upside in the stock.
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