Wendy's says it won't use surge pricing for burgers after announcing 'dynamic pricing.' What's the difference between the 2?

Wendy’s is responding to intense backlash this week after announcing plans to test dynamic pricing — which uses AI to change prices on its new digital menus — in an effort to improve sales growth.

Here’s why Wendy’s is saying the news you may have heard is no biggie.

▶️ What’s happening

Wendy’s CEO Kirk Tanner announced in an earnings call on Feb. 15 that it was investing $20 million into its digital business to increase sales and improve accuracy. One new feature at restaurants would be digital menu boards, which would give the restaurant flexibility to change what was displayed on the menus in real time.

“Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and daypart offerings along with AI-enabled menu changes and suggestive selling,” Tanner said.

Tanner presented his expectations for the menu boards to “drive immediate benefits to order accuracy, improve crew experience and sales growth from upselling and consistent merchandising execution.”

In reporting Wendy’s new changes, multiple media outlets used the phrase “surge pricing,” which sparked negative backlash and endless memes.

📲 Wendy’s was accused of price gouging

Word of Wendy’s new plan coupled with the phrase “surge pricing” trended on social media, with many users a little frosty toward the restaurants.

In an X post on Wednesday, Pennsylvania Sen. Bob Casey, a Democrat, accused Wendy’s of “corporate greed.” Massachusetts Democratic Sen. Elizabeth Warren added: “It’s price gouging plain and simple.”

Price gouging involves inflating an item or product in high demand, such as spiking prices for N95 masks during the coronavirus pandemic.

Some on social media poked fun during the surge pricing debacle. Burger King, for example, also took advantage of the conversation as well, tweeting: "the only thing surging at BK is the 🔥. We don't believe in charging people more when they're hungry."

📈 Dynamic pricing vs. surge pricing

While Wendy’s used “dynamic pricing” in its rollout of new changes, surge pricing is a form of dynamic pricing. Both business strategies have flexible pricing models.

As Reuters notes, “dynamic pricing refers to surge pricing based on demand, especially during peak hours of the day.”

Many people may be familiar with surge pricing because ride-sharing apps like Uber and Lyft, and some major airlines have enacted the strategy of hiking prices based on high demand in recent years.

But while surge pricing involves only increasing prices, dynamic pricing can also decrease prices based on the current market, changes in supply and the season.

At a restaurant conference in the Dallas area on Wednesday, Michael Lukianoff, CEO of SignalFlare.ai and a consultant for pricing at restaurants, said that while dynamic pricing is a success in some other industries, it would not work in restaurants because “customers will shop elsewhere.”

🍔 Wendy’s says surge pricing is off the menu

In a statement Tuesday, Wendy’s said the announcement was misconstrued by media outlets as an intent to practice surge pricing. The company assured that there were no plans to raise prices during peak times and that any tested features would benefit customers and employees.

“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,” the statement read.