www.washingtonpost.

com /opinions/2024/02/29/wendys-dynamic-pricing-elizabeth-warren/

Stop your populist grandstanding over Wendy’s ‘surge pricing’

Catherine Rampell ⋮ 5-6 minutes ⋮ 2024-02-29

It’s the outrage of the week, the latest sign that “late-stage capitalism” has doomed America to a dystopian
hellhole.

I’m referring, of course, to “surging” prices for spicy chicken sandwiches.

In a recent earnings call, Wendy’s President and CEO Kirk Tanner spoke about the company’s investment in
digital menu boards and their potential uses. “Beginning as early as 2025, we will begin testing more
enhanced features like dynamic pricing,” he said.

The comment was vague, but the phrase “dynamic pricing” is generally understood to mean that prices
could vary based on time of day or strength of consumer demand. Customers immediately condemned the
prospect of subjecting Baconators to “surge pricing,” a la Uber and Lyft.

Wherever the beef is, it threatened to get a bit pricier, at least at busier times of day.

Everyone tried to exploit the fast-food flip-out, including some of the burger chain’s competitors. Chili’s
mocked it on social media. Burger King used the opportunity to announce a new deal on Whoppers. “We
don’t believe in charging people more when they’re hungry,” the company said in a saucy tweet.

Meanwhile, progressive pundits co-opted the controversy into their ongoing anti-“greedflation” crusade.

“@Wendys is planning to try out ‘surge pricing’ — that means you could pay more for your lunch, even if the
cost to Wendy’s stays exactly the same,” Sen. Elizabeth Warren (D-Mass.) wrote on X. “It’s price gouging
plain and simple, and American families have had enough.”

Sen. Bob Casey (D-Pa.) wrote an official letter to Wendy’s, in which he called fluctuating Frosty prices
“predatory and greedy.” Perhaps most ominously, Lindsay Owens, the head of left-wing advocacy
organization Groundwork Collaborative, proclaimed it “the end of a fair price in America.”

Wendy’s scrambled to contain the fallout. In a blog post, the company said news media had “misconstrued”
the CEO’s words and that the company has “no plans” to “raise prices when demand is highest at our
restaurants.”

“Any features we may test in the future would be designed to benefit our customers and restaurant crew
members,” the company said. “Digital menuboards could allow us to change the menu offerings at different
times of day and offer discounts and value offers to our customers more easily, particularly in the slower
times of day.”

Consumers cheered Wendy’s apparent reversal, or “gulp back,” as one newspaper characterized it.
“National nightmare over,” declared the news site Morning Brew.

Here’s the thing: If you read the Wendy’s statement carefully, it’s not actually a reversal. Wendy’s still plans
to experiment with varying prices, and that’s totally reasonable. In fact, it’s quite common!
Note that Wendy’s said it will offer discounted prices “particularly in the slower times of day.” In other words,
things will be cheaper when demand is low to draw in more customers when there’s otherwise idle capacity.
Lots of restaurants do this, including other burger chains. It’s usually called “happy hour.” Or the “early-bird
special.” Non-restaurants do it, too. Think the weekday matinee deals at your local movie theater or cheaper
airfares on low-traffic travel days.

Cutting prices during slower hours of the day is arithmetically identical to raising prices during busier
periods. But for whatever reason, consumers seem more willing to stomach a “discounted” low-demand
price rather than a “surged” high-demand price. They also get mad about some consumers being charged
more, but they seem fine with price discrimination when framed as some consumers being charged less
(senior discounts, student prices, etc.), as long as there’s some predictability to what prices will be for whom
and when.

In other words, there’s a good way to market variable pricing and a bad way. Ask Coca-Cola, which
infamously set off a PR crisis when an executive mused about programming vending machines to raise
soda prices on hot days. The Wendy’s foul-up was not really about its pricing strategy, per se, but how it
presented it to the public.

Competitors that capitalized on the Wendy’s controversy know this. In fact, Chili’s offers its own happy-hour
discounts. Burger King has experimented with similar deals. Yet it’s hard to blame companies for exploiting
public confusion about a competitor’s pricing strategy. This isn’t hypocrisy; it’s clever marketing.

We should have higher expectations, though, of the grandstanding greedflationists who purport to be
serving the public by condemning Wendy’s pricing behavior.

Warren might get a pass, I suppose, since Massachusetts has banned happy-hour drink deals for decades
(the legacy of a drunken-driving death in the 1980s). But even she has presumably ordered a lunchtime
special at her local brewpub or otherwise proved complicit in sneaky differential pricing strategies.

Just wait until these populists learn about “peak” and “off-peak” train fares! I look forward to their indignant
tweets about government “price-gouging,” too.