Surge Pricing Is Coming to More Menus Near You

Restaurants experiment with technology that can move prices up and down based on demand and staffing; ‘a little sales boost to offset our costs’

By Heather Haddon of The WSJ. 

Since price is determined by the intersection of supply and demand, it makes sense that the price would be higher when demand is higher (and yesterday at an Irish pub my wife and I went to there was a very long line just to get in-maybe if they had higher prices when they knew demand was going to be higher the wait time would have been much less).

Excerpts from the article:

"If you are hungry for barbecue on a Saturday night this month, a delivery of a pulled-pork sandwich from Cali BBQ could cost you around $18. 

Or you could hold off a few days and order the same sandwich delivered on a weekday afternoon for around $12. 

Restaurants like San Diego-based Cali BBQ are experimenting with a form of the dynamic pricing long used by airlines, hotels and ride-hailing services. Technology providers are pitching services that enable restaurants to change prices weekly or monthly, increasing or slashing the cost of a taco or sandwich between a few quarters to several dollars, depending on demand and sales patterns."

"Dynamic pricing—charging higher rates at peak times and dropping them at slower ones—has become commonplace in industries such as e-commerce, and mobile apps have made it easier for companies to study consumers’ buying and browsing and quickly adapt. Rising costs in recent years have led more retailers to implement it."

"Wendy’s drew public scrutiny after the burger chain said in a mid-February earnings call that it was looking to test dynamic pricing. The chain said it would invest around $20 million in its U.S. restaurants to install digital menu boards by 2025 that could suggest items to customers and present different offerings depending on the time of day."

"Inflation-fatigued consumers protested the possibility of surge pricing hitting their burgers, and Wendy’s last week said it wouldn’t raise prices at the busiest times. New digital menus could instead allow the chain to offer discounts during slower hours, Wendy’s said.

Drew Patterson, co-founder of restaurant dynamic pricing provider Juicer, said restaurants need to reference “happy hour” and other known promotions when explaining variable pricing to customers."

"Dave & Buster’s and other chains are dabbling with the technology to help spread out customer visits over a broader part of the day and better capitalize on rush periods."

"An estimated 61% of adults support variable pricing where a restaurant lowers or raises prices based on business, with younger consumers more in favor of the approach than older ones, according to an online survey of 1,000 people by the National Restaurant Association trade group. 

While some consumers tend to resent surge pricing, as Wendy’s discovered last month, they like happy-hour discounts and other deals at slow times, industry consultants said."

Related posts:

How elasticities affect Uber passengers and drivers (2019)

Concert promoters are using Airline-style dynamic pricing to increase revenue (2019) 

Amusement Park Changes Its Pricing Strategy (2016) (Disneyland 'demand pricing' will cost you $5 less on slow days and $20 more when it's busy)

Wow, The World Series Sure Is Expensive-It Costs $140 . . . Just To Park! (2012)