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IPFS News Link • Economy - Economics USA

Expect Another Surge in Food Prices Fueled by Dynamic Pricing

•, By Mish

Surge Pricing Is Coming to You

Restaurants are experimenting with surge pricing to deal with peak hours and staffing demand. They like it. You probably won't.

The Wall Street Journal reports Surge Pricing Is Coming to More Menus Near You

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.

Restaurants are experimenting with the technology as the industry looks for ways to boost sales and increase profits. Many restaurants increased menu prices as labor, food and other costs have soared since 2021.

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.

Other restaurants, particularly sit-down ones, are charging more for prime seats during peak hours. Gene and Georgetti, a historic Chicago steakhouse where Frank Sinatra once regularly dined, in late 2022 implemented dynamic pricing on two booths frequented by celebrity customers. Diners typically pay a $20 fee when they book the booths at busy hours, helping counterbalance the restaurant's rising expenses, managing partner Michelle Durpetti said.