Public companies use earnings calls to share information about their recent performance with shareholders and the media. News from these announcements rarely leaves the confines of the business press, but that was not the case yesterday when social media users heard an earnings call comment about the fast food chain Wendy’s. CEO Kirk Tanner mentioned that the company was planning to test “more enhanced features like dynamic pricing and day-part offerings along with AI-enabled menu changes and suggestive selling.”
Articles that appeared online after the call focused on Wendy’s proposed use of “dynamic pricing,” where the price of a product changes depending on demand. Users on Reddit and X, formerly known as Twitter, responded with outrage as they fumed at the idea of Uber-like surge pricing for burgers and fries. Along with facing calls for boycotts from regular customers, Wendy’s also faced criticism from elected officials. “(Wendy’s plan) means you could pay more for your lunch, even if the cost to Wendy’s stays exactly the same,” said U.S. Senator Elizabeth Warren in a post on X. “It’s price gouging plain and simple, and American families have had enough.”
After enduring an onslaught of online vitriol, Wendy’s responded with a statement denying any future plans for dynamic pricing. “To clarify, Wendy’s will not implement surge pricing, which is the practice of raising prices when demand is highest,” said a spokesperson for the company. “We didn’t use that phrase, nor do we plan to implement that practice.” Wendy’s insists that its CEO was talking about the ability of new digital menus to increase sales, part of a $20 million investment to improve the chain’s technological capabilities. “This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants,” said the Wendy’s spokesperson. “We have no plans to do that and would not raise prices when our customers are visiting us most.”
Questions:
1. What is dynamic pricing, and why do many consumers have a negative impression of it?
2. Why do you think the dynamic pricing comments from the CEO of Wendy’s caused such a stir on social media?
Sources: “Wendy’s Will Not Implement Surge Pricing as CEO Comment Causes Online Stir,” Reuters, February 28, 2024; “Wendy’s Says It ‘Will Not Implement Surge Pricing’ After an Outcry,” Quartz, February 28, 2024.