1.Your burger and fries could soon cost $12 in the morning and $20 just a few hours later — at the same restaurant. That’s because more eateries are experimenting with so-called dynamic pricing by lowering and raising menu prices based on demand.
2.People who use ride sharing services like Uber or Lyft are accustomed to the companies boosting prices when roads are congested or demand is high. On the flip side, ride share prices can drop during quieter periods to convince customers to book rides, helping keep drivers busy.
3.The same goes for airlines and hotels. Booking flights or accommodations around the holidays costs a lot more than afterwards, when demand tapers off. Now, with the rise of online ordering and digitization of menus, dynamic pricing is starting to pervade restaurants, and it may irk some consumers.
4.Businesses, on the other hand, say it helps them balance supply and demand while giving customers the opportunity to take advantage of bargains at off-peak dining times. Wendy’s made headlines — and faced a backlash — when the fast food chain announced it would experiment with dynamic pricing in its restaurants starting in 2025 using digital menu boards.
5.Customers took the announcement to mean they’d be charged more at peak times. Wendy’s, on the other hand, insisted the move was intended to allow it to more easily change menus and offer customers discounts during slow periods.
Markups and discounts
6.The rise of delivery apps and digital menus, accessible through QR codes, have made it easier for restaurants to implement dynamic pricing. Colin Webb, co-founder and CEO of Sauce, a dynamic pricing engine that helps restaurants leverage data to improve online sales, said in a recent podcast that “you’re starting to see restaurants take that same step” that retail and taxi businesses took when they moved online.
7.Puesto in La Jolla, California —a restaurant chain that relied on Sauce’s services to fluctuate menu prices — said the strategy boosted sales by 12%, according to a case study on Sauce’s website. It raised prices by as much as 8% during busy periods and reduced them by as much as 20% during slower times.
8.”[W]e’re happy to see both the markups, and we’re also happy to see some discounted orders,” Puesto co-owner Moy Lombrozo told Sauce. “When the kitchen is dead, we’re willing to take one to two dollars off an item in order to just keep the kitchen going, keep the staff working.” Restaurant chains Dave & Busters and Tony Roma’s are also planning on rolling out dynamic pricing, according to news reports.
“Punch in the gut”
9.Even so, dining establishments are lagging behind other industries in turning to dynamic pricing. “Restaurants are late in the game in making this happen,” said Stephen Zagor, a restaurant management professor at Columbia Business School. “We’re starting to see it take effect, but there’s a lack of transparency.”