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Dynamic pricing is becoming more common in the fast-food industry. This strategy involves fluctuating prices based on demand. Wendy's recent announcement of plans to implement time-based pricing faced backlash from consumers. This led to calls for boycotts. The integration of AI into business operations suggests that the application of dynamic pricing is still in its infancy. The impact of dynamic pricing extends beyond the fast-food industry to the realm of food retailing.
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Dynamic pricing is becoming more common in the fast-food industry. This strategy involves fluctuating prices based on demand. Wendy's recent announcement of plans to implement time-based pricing faced backlash from consumers. This led to calls for boycotts. The integration of AI into business operations suggests that the application of dynamic pricing is still in its infancy. The impact of dynamic pricing extends beyond the fast-food industry to the realm of food retailing.
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The main ideas from this information are: - There is confusion around Wendy's dynamic pricing and surge pricing. - Surge pricing, as seen in Uber, involves a significant change in price based on supply and demand. - Dynamic pricing, which Wendy's intended to implement, refers to day part offers and spontaneous offers. - The confusion arose due to miscommunication and the use of the term "surge pricing" instead of "dynamic pricing". - The discussion also touches on the ethics and consumer perception of different pricing practices. - It is important to segment the audience and carefully communicate the purpose and benefits of new investments, such as digital menu boards, to avoid misunderstandings. I think a lot of people are confused. Yeah, that's exactly right. Surge pricing. Go ahead. Well, I was going to say, you know, maybe we should just start off by saying what happened here? You know, and just, I think a lot of people are still confused about, I think there are people even in the industry that believe they did intend to implement surge pricing and boost up the prices when the restaurant was going to be more busy, because I even saw industry trade press, like, propagating that message that, you know, that. Yeah, instead of off-peak prices. Yeah, and instead of trying to clarify. And what was your sense? Oh, by the way, we're just going to continue talking, and we'll talk right over when we open it up, people will hear us talk, and then we'll go to the intro of the show. Now, that's interesting that people will confuse this with the Uber pricing, and not realize that Uber pricing is doing something entirely different. Hey, Ned, there he is. Hey, how's it going? Hey, Ned. I was blaspheming you in your golf game, because you weren't here. Oh, okay. Well, that's nothing new there. There you go. See, one of us is likable, Ned, but I'm not sure who it is. Yeah, everybody else does the same thing to my golf game, so that's okay. All right. So, Ned, have you had a chance to look at the comments and just the roadmap? Sure. So, I thought we would just start off. I mean, Ashwin was saying that he thought that there were people that were genuinely confused about this, that thought that Wendy's was going to charge a lot more during the busy time, and that's not at all what they intended, as far as I can see. That's right, and I think that's right. Go ahead. So, I mean, you made a comment earlier about the possibility of a restaurant actually implementing some kind of surge pricing, right? Look, in my view, the term surge implies a pretty dramatic change in price. You know, I don't think you could take something that's a $10 menu item and increase it by 10 or 25 cents and call that a surge price. I mean, in the context of Uber, and I was an Uber driver, by the way, so I had my own company in 2010 to 2016, and there was a period where I needed to make extra money, and so I drove for Uber in Charlottesville, Virginia. And it was a moment where there was a university, you know, University of Virginia, but Uber had just started, and so all the college kids wanted Uber, but there were no drivers. So, there was always surge pricing, and I'd pick people up, you know, drunk from the bars at three in the morning and drive them home, and of course, they're not paying attention. They're just clicking at the app, and I dropped them off, and they realized that there was 4X surge pricing. And what a ride that would normally cost $10, I'm dropping them off, and suddenly it says $40, and they're yelling at me, thinking that I did something to rip them off, right? So, that's surge pricing, when the price can really jump because of the dynamics of supply and demand. I have never heard anybody in the entire restaurant industry suggest that that's a good idea in restaurants. So, dynamic pricing is one thing, and then, you know, part of this whole discussion should be, well, does that include both increase and decrease? I think that what caused this whole mess was that poor Kirk Tanner, who worked at Pepsi for 32 years and was a whole month in the hospitality industry, used the term dynamic pricing to refer to the day part offers, spontaneous offers. And then, the NRN, you know, put out an article, Wendy's to test dynamic pricing by 2025, and then that got started to get picked up a little bit on social media. Somebody out there started saying surge pricing instead of dynamic pricing. The New York Post picked that up, and before you know it, you had Slappy Meal on the cover of the Post talking about Wendy's to implement Uber-style surge pricing, and it was like just a game of telephone. Yeah, and you know, not to make matters worse, you know, the value meal from five guys for a burger, fries, and a Coke for $24, including tip, has been all over the news, and they've been posting the receipt. Right. And that's got nothing to do with surge pricing, but it just adds, it piles on. Well, I mean, so that's the interesting thing, right? I mean, you know, whether or not they're doing that in a dynamic way, it's all about perception and value perception. So if the consumer walks into that five guys thinking they're going to spend $15 and they get hit with a bill of $25, you know, call it whatever you want, but I think in the mind of the consumer, they're like, hey, this is surge pricing, you know? I don't care that you're next to some stadium. I don't want to pay $25 for a burger and a fries. And it's interesting that, you know, Wendy's got so lambasted or lambasted, I don't know, but just for using the term is really fascinating. Well, you know, the president's speech last night, they cut part of it. When he was talking about shrinkflation, they were actually going to be talking about Wendy's surge pricing, but they cut that out. Oh, interesting. That's great. Yeah, he did, you know, tweet about this, you know, regarding the hidden fees and drip pricing and things like that. But again, you know, these are complex scenarios and issues. So one thing is in the tech world to talk about showing somebody a price when they're shopping, and then between the time they see the item and by the time they get to the checkout screen, there's a change in price. That's not the same as Uber surge pricing. That's something totally different, right? And each one of these has questions around the ethics, consumer, you know, willingness to accept all these different practices. Well, I think that that's important. And then what would you, from your perspective, how would you have started this? Actually, we're getting sort of close to... Yeah, I think we've got our audience activated, so why don't we kick off and then get into it. Yeah, sometimes I turn the button on early to let people in so they can hear any of the mistakes that we might make. But then again, once the show starts, we'll make plenty of mistakes and they can laugh at us then. So why don't I introduce the show now, Mike? Does that sound like a good idea? I think that sounds like a wonderful idea. Hello, everyone. Welcome to Franchise Chat, Wendy's Misstep with Dynamic Pricing. I'm Joe Caruso here on the Chesapeake Bay at the Susquehanna River in beautiful Haverty Grace, Maryland, with Mike Webster on the shores of Lake Ontario, Toronto, Canada, Ned Leierle in College Grove, Tennessee, due south of the birthplace of country music, Nashville, Tennessee, Ashwin Kamlani in the magic city, Miami, Florida. Thank you for being here today. Franchise Chat is all about the audience of franchisors, franchise owners, supply chain partners and service providers where we get together and talk about what they're doing, learning and building. Franchise Chat episodes are on Fridays at 12 noon Eastern time. So if it's Friday, you know it's Franchise Chat. We will begin shortly. In the meantime, for those of you who are new to LinkedIn audio, let me tell you what you get to do. The audience gets to come up on stage, add their comments, ideas and questions to the conversation. When you want to come up on stage, use the LinkedIn raise your hand button on your device so then we can bring you up. You can raise your hand at any point during the program. We do Q&A throughout it. So do not hesitate to jump up on stage with the speakers. Once you are up on stage, it is imperative that you take that raise your hand button, which turns into a microphone and turn it on. Unmute yourself so we can hear you. As always, for today's program, Mike has put a written roadmap of topics. He's going to tell you where you can find them. Mike, let's get started with the conversation. Tell people where the roadmap is and jump right into things. Thanks, Joe. As usual, the roadmap starts out in the comments section. I've created three basic questions around this idea. And the questions are, what is dynamic pricing? How is it different from surge pricing? Is dynamic pricing a good idea for QSRs? And how could this bad PR been avoided? Now, we're going to touch on all of those topics. We may not touch on them in that order. But those are the questions we're going to revolve the talk around today. And then there's a longer in the comments section, if you want to go to a longer article in which I've got some quotes from other people about these particular questions. You can go there, too, and see what other people are saying. As you can imagine on this one, there was a great deal of press around this. And so I'm going to just start it off by asking Ned, if you were had to introduce, like Kirk Tanner did, electronic menu boards and talk about the ability to update them. How do you think you might have reacted as a CEO or done it slightly differently than Kirk to avoid this problem in the first place? Thanks. Thanks, Michael. And welcome, everybody. For me, it's always easy to analyze and comment on a situation after it's happened. So I think we all have the benefit of hindsight here. However, I think when it comes to messaging around investments that a brand is making, you need to segment the audience that you're communicating to. And I think in this case, Wendy's being a public company, this message wasn't much for Wendy's shareholders and justifying investments that were being made and capital that would then have a return on incremental revenue and then incremental profitability. And so I think you have to be really careful about segmenting your message to your audience to tell an audience of franchisees that investing in new digital menu boards is going to activate different pricing capabilities for your system that can then drive more revenue or improve margins or the combination of both as part of the ROI justification for doing that. And that's a perfect communication and thing to share with that audience. When it's a broader audience, I think you just have to be more mindful of the words you're using and how they can be construed. And I think in this situation, you know, obviously, I think the intent of the comments that were made were not to talk about, you know, surge pricing in the context of Uber style surge pricing. And so I think you just have to be mindful of your audience who you're communicating to. And I think there's been a lot discussed and published since then about, you know, the pricing dynamics that are at hand here. And with the new elevated inflationary, you know, plateau that we're at, you know, inflation has come off, but it's still in a new plateau of inflated costs for food inputs, for labor inputs, for occupancy inputs. And so restaurants and other retailers are all dealing with that. So, you know, margin management, revenue management are all at the forefront of, you know, how to protect your business and grow your business going forward. So I think it's important to, you know, label this differently. And when we're talking about it and, you know, I think revenue management is here to stay and is a good way to think about that. But also as a component of revenue management, you have dynamic pricing, which, you know, I think you've got a short definition here of what that can be. I think revenue management practices of all sorts and dynamic pricing of different varieties are here to stay and are going to be important aspects of running businesses, running the retail restaurants and franchising, you know, going forward. And so what about you, Ashwin, you're in the business of selling this algorithm. How would you advise Kirk Tanner and maybe their spokesman, would you particularly just think that they can get away with talking about dynamic pricing without people misunderstanding it? Or should they have used a different word? What's your sense on that? Yeah, first of all, thanks for having me here. I really appreciate it. And I'd like to welcome everybody. You know, I believe that this is a game of telephone gone horribly wrong. To answer your question specifically, if I was in the room advising Kirk about how to communicate this, I don't think I would have told him to say anything differently. I think what happened here was Kirk, who has spent very little time in hospitality, probably about a month, and he was with Pepsi, I think, for 30, more than 30 years before joining Wendy's, spoke about it in the context of dynamic offers, right, day part offers, and used the term dynamic pricing, which is a correct way to refer to that. And I think the National Restaurant News wrote about it and published an article saying, Wendy's to test dynamic pricing by 2025. I think that started to get picked up on social media. Somewhere along the way, the term dynamic pricing got switched over to surge pricing. And then before you know it, the New York Post had a big slappy meal headline on their paper and was telling the public that Wendy's was going to be implementing Uber-style surge pricing. And I think this is what really caused the outrage. You know, the announcement from Wendy's was out weeks before the New York Post blew it up with their vernacular that I think really incensed the mass market. So I don't think anybody could have predicted, you know, what was going to happen here. So, you know, from my perspective, I don't think I would have advised him to say anything differently. I just wonder, though, about when we've had, I've had conversations with a number of people over the last probably year and a half about the marketing of the term dynamic pricing, because it gets so easily linked to surge pricing. I think they might think about for their own benefit, having a different name for it, not even talking about dynamic pricing, talk about revenue management and maybe day part pricing or value pricing, something like that, that they can stake out as their own. Because otherwise people get this, I think people get confused or can be easily confused that this is going to be a horrible type of surge pricing, that when they line up for their, you know, for their meal at lunch, they're going to see something that costs $8 go to $12, even if none of that makes any sense, which it doesn't. There's that perception that that might happen. Do you think I'm off base on that? No. So, Mike, I think you raise an interesting point. And, you know, after all of this happened with Wendy's, there were a lot of posts on LinkedIn saying, we've got to come up with a better name for this. And the industry's got to call it X or Y or Z. Now, from my perspective, there are plenty of other industries that have implemented some form of dynamic pricing. And as far as I know, nobody came out to the public and said, hey, here's what we're going to start doing. And we're going to call it this or that. They just did it. They just started implementing. Now, it's interesting also to see comments like, you know, this is never going to work in food. It's never going to work in restaurants. Well, it's been working for several years now, because you can go into DoorDash and order something on a Tuesday and order that same exact menu item on a Friday night. And people sometimes pay double for that item because DoorDash or Uber are flexing up their delivery fees because they're busy. You know, and it's interesting what consumers will say that they'll tolerate or will say they like or won't accept versus what they actually end up doing in terms of behavior. And, you know, the best analogy for this I can come up with is I like to talk about when Airbnb first started. I bet if you were to poll audience members, you know, prior to Airbnb and say, hey, you know, on your next trip, instead of going and staying in a hotel, would you rent out some person's apartment that you don't know? Or would you even stay in a room in someone else's house that you don't know? They'd be like, no, you're crazy. I would never do that, right? Well, look what actually happened when somebody built that and brought it out to the public. So, you know, just I would like to just stress that sometimes when you poll consumers like Capterra did and you say, oh, I'm going to go ask a thousand people, would you like to pay more when the restaurant's busy? Well, guess what? They're all going to say, heck, no, I don't want to pay more when the restaurant's busy. That's outrageous, right? But if you do it the way Medallia did, and by the way, they polled, I think, two or three thousand people and said, would you be in favor of receiving better deals in a restaurant when things are less busy? Everybody's like, oh, yeah, I love that. That's a great idea. So, you know, it's really about how you position things. And I do think it's different when things are actually in motion and consumers see the benefits. And I think, Mike, to add to the conversation here and back to your question about is there a different label for it, you know, I agree with Ashwin that dynamic pricing is a fine label for that aspect of revenue management. You know, to me, I think revenue management is a more umbrella concept that dynamic pricing is a subset of. And, you know, I think there's pricing optimization that occurs. And, you know, that's, I think, dynamic pricing and pricing optimization are related. And one is a component of the other. But there are also many other aspects of that, both from, you know, pricing perspectives in the form of, you know, time of day or day part or offer, but also between, you know, trade area and trade environment and type of audience that might be captured in. So there's multiple pricing strategies have been used for years. You know, I think now with all the data and analytics capabilities that have come in, I think it's the dynamic aspect of pricing, I think, is more real and activated today and is going to be a bigger part of revenue management going forward. So the, if I'm hearing you guys right on this, is there still is this, whether whatever you use as the term, you still have to frame it the right way so that your guests don't automatically think that they're getting gouged or ripped off because of different pricings. This is something, a point that Sherry Kimes keeps coming back to. And if I look at Kirk's original, what I think was Kirk's original statement, he did mention day part pricing, but that message got lost. So from a positioning point of view, how do you make sure that you're communicating correctly the value to the guests of your revenue management strategy? So, Mike, just a quick clarification. I believe his exact words were day part offers. Yes, I think you're right. I think you're right. You know what? Look, let me tell you a quick anecdote here. So we have a customer with a thousand locations and they are going to pilot day part offers. And it's very interesting because their objective is actually to improve the guest experience more than the revenue. So let me explain what I mean by that. This particular customer has high peaks and valleys of traffic. So there are literally 20 minute periods where they've got long lines of people who want to be served. So they want to do this to see if we can help educate the consumer that, hey, you know what? Instead of coming at this particular time, if you were to come even 15 minutes earlier, you could save 15%, 20%. And the whole idea is to see if we can smooth out those extreme peaks and valleys of demand. Now, how does that improve the guest experience? Well, these people are frustrated, right? They're in line. They're in a hurry. They want to get their food and run. They don't want to miss anything. And the people behind the counter are also frantic, you know, trying to serve everybody in a timely manner. And so it does really help everybody if we can take some of those price sensitive people and get them to change their behavior slightly and come a little earlier or a little later in order to save that money. And of course, yes, from a revenue and profitability perspective, that outlet is going to do much better because we're filling orders in a period that would generally be slower. So specifically to your question about how does that get communicated, well, yes, there's going to have to be on the digital signage board some sort of message that explains that that offer or discount that was available outside of that period is no longer available. I don't advocate for suddenly increasing the price because things are busy. And I don't think Kirk was advocating for that either. I think that just raises the question about whether you communicate this price through the menu board or whether you communicate the price, you give people discounts on an app that the price remains the same. The posted price remains the same. But you've got a coupon that is good only for certain times. And so when you actually pay, you're getting that discounted price. But the menu board remains the same. I would argue that the price needs to be – just like in the hotel industry, when you're looking at a price at a hotel, you've got the base price there, but it's crossed out. So you have a reference, right? I think that can cause confusion if you've got a certain price on the menu board, but then when they're up at the counter ordering, it's something different. And also that can be used to actually change behavior. We've talked about with this particular customer, during this particular period where there's this traffic jam, can we put a message up on the board that says, hey, come back in 10 or 15 minutes. Come back in 15 minutes and everything will be 20% off. I bet you a certain percentage of people will be like, you know what, that's fine, I'll come back in 15 minutes, that's worth it to me. What do you think, Ned? Do you think that messaging is going to work? Well, you know, I look forward to hearing about how that trial goes and if we're coming back. I agree, I think there would be some that would be interested in that, but the folks that don't have time for that, I don't know how they're going to feel about that, that they paid 20% more because they have to have their food now. I think there's been happy hours and other day part strategies, pricing strategies, promotional strategies to try to smooth out traffic or activate traffic before evening, day part or whatever. So I think there's always that dynamic that's out there. And so I think part of pricing management and revenue management is, like I said, has been going on forever. And so I think some of it is managed and activated and just put into the marketplace and people adjust to it and react to it. And, you know, a number of those practices are alive and they didn't require AI or anything else. They just continue today. So yeah, I don't know if I'd be in favor of that without a lot of data behind it. So Ned, you bring up a really good point about happy hours. And I'm sure a lot of people that are here listening have been in the situation where you walk into a restaurant and it happens to be 7.05 and the happy hour ended at 7, right? And you say, hey, can you give me that happy hour pricing? And the waiter has to say, yeah, you know what? I'm sorry, the system won't let me. I would do it. It's just the system won't let me do it. You don't get upset and walk out and say, oh, well, I'm not going to pay 20% more. You know, you understand that, okay, look, the restaurant had a reason for offering that discount. Same exact food, same exact drinks. That's a commonly accepted practice in the industry. Or even if you look at lunch versus dinner menus, granted, sometimes lunch menus have different portions. But I do think that the consumer is already used to this concept. And making it a little bit more fluid, I don't think it's going to create a huge uproar. Yeah, I think a little more fluidity to it is positive, I think. And I think also some consistency of knowing what to expect when you're in a restaurant or you're engaging with your restaurant through a digital channel. I think having some consistency there, knowing what to expect, I guess you learn that after practice is in place. But I think, you know, how dynamic can you be is another question. And I think there's a threshold there that needs to be in place so that there's more consistency. Yeah, good one. And this isn't going to happen all at once, right? Of course, things start slowly and innovation and change takes time to gain adoption and to test the boundaries. You know, I was just thinking to myself, one of the scenarios that we've talked about often is in a stadium, right? So, if you think about a stadium scenario where everybody wants their food right before that game starts, and they don't want to miss the beginning. You know, I could see a scenario where we talk about like a pre-kickoff special or a post-kickoff special, you know, and that's a discount. You know, the discount coming earlier or going and taking your seats or, you know, getting your food maybe after the game starts. And I do think that enough people are going to say, you know what, it's fine. I'll miss a couple minutes of the game, but I can save money. Nobody's going to be here. And I think that'll improve not only the revenue and profitability, but again, the guest experience and the employee experience. I think the other thing that, and that's a great point. I like the example. I think the other thing is that in many cases before the latest, you know, technology transformations in restaurant and retail, restaurants didn't have the capability to implement price changes kind of on the fly or in a dynamic way like we're talking about now. So, I think, you know, this is a different time and a different element in the evolution of, you know, technology, data, the ability to push prices through to locations, you know, within a matter of, you know, minutes or hours, you know, it used to take days to get pricing pushed through retail channels. So, you know, the current technological platform certainly enables that. And I like your example there. Good morning. Thank you very much. So, I just wanted to share a couple of thoughts and ideas here. I had seen pricing implemented in certain other industries, including hospitality, that is hotels, and car parking as well. So, with car parking, we had faced similar situations when we introduced this about 10 years ago at the British Air Force, the five air force that we introduced it. So, one of the points that I really like what Ashwin has been saying is that you get the pricing as better utilization of your resources. So, whatever revenue, additional revenue that you're getting, don't look at it as the customer is paying for that. Look at it as the inefficiencies or the nullification of the inefficiencies is what's bringing your additional revenue. That's the key point, right? So, it could be one franchise location where nobody wants to go, maybe because it's not that advantageous for the consumer. And there is another franchise location where everybody is there. The national food traffic is there because of all kinds of other things. So, A is seeing less demand. B is seeing more demand. Now, imagine if you have the technology ability, which Ned is referring to, and you're able to say, hey, it's $5 less here, right? And you're able to influence the behavior. Not everyone is going to care for it. Yes, that's understood. But a significant portion is going to care for it, that your optimization of your resources, better utilization of your resources across locations A and B is what's going to give you the additional revenue. That once people see it as that way, the messaging will follow. I completely understand the question that everyone is struggling with. That is how to message this, right? That's a significant portion probably messaging experts need to come into commenting on that. So, messaging is a significant challenge. Number two, mechanics is a significant challenge, which we are also talking about, which is should we have dynamic electronic boards? Should we have an app that's communicating? How do we do this, right? Those are specific to the industry, very specific to the industry because of the way people come, the way you communicate, et cetera. But other than that, the fundamental concepts are the same wherever you go. It's optimization of your revenues primarily. That's one thing that I wanted to highlight from the conversation that I'm already hearing. The other thing that I wanted to mention also is that creation of demand, that is by pricing, you stimulate demand and create demand that does not exist. That is you're bringing someone who is not even willing to step out of their house and spend anything right now by giving them an offer. And at the same time, you're preventing cannibalization like the happy hour example that is given. That is you're saying you have to only come during this time. Otherwise, it's not available. So, you're fencing that offer and protecting your normal revenue. So, these are common practices I see and I see no reason why it cannot be applied to this industry as well. However, I do acknowledge messaging and mechanics are two challenges which are very specific to the industry. I think, Vinay, you made some really good points. But I would also highlight that I don't think there's a one-size-fits-all. And the restaurant industry is very complex and it's becoming even more and more complex. And I think when we talk about delivery and third-party delivery specifically, it calls for different tactics. When we started this company, we focused initially just on third-party delivery. And that's because when you look at those marketplaces and, you know, Joe and Mike, I think this touches on the second question in the roadmap about is this good for QSR, right? When you look at third-party delivery, there is already an inherent amount of price agnosticity in those marketplaces. The consumers opening up those apps and expecting to pay more. They acknowledge that it's more expensive and they accept that the amount they're going to pay varies. They cannot guarantee or they cannot expect that when they get to that checkout screen, they're going to know what that total is going to be. So in that particular channel, there's an opportunity not just for QSR, but for any restaurant that's doing delivery to better optimize and manage their prices to take advantage of that ecosystem. And until today, very, very few restaurants are doing that. All the additional money is going to Uber and DoorDash. Yeah, one of the – this is, I think, our fourth show on dynamic pricing. And one of the people that we had on before was from Europe. And they were working with a 300-unit pizza who did their own delivery. And what they were using dynamic pricing for was purely a demand algorithm. It wasn't a forecast algorithm. It's purely demand. They'd lower the price of delivery on slow days so that the price of the pizza was still the same, but the price of getting it delivered all in would change. And they did some testing for about six months until they finally got that demand function working so that it was – you were getting customers, new customers, say, on a Wednesday afternoon who might never have thought of ordering a pizza, but now we're getting it delivered because the pricing was – the delivery price was so much cheaper. And so – and that was working very, very well. So, I think that the – I think you're right, Ashwin, to focus on that part of the QSR, either pickup or delivery, of requiring some sort of dynamic pricing model, whether the algorithm's a forecast or whether it's purely demand. But – and I think you're right in pointing out that people have already accepted that variability. They are so concerned about getting what they want when they want it. They're not focused on, you know, the price tag being different than it was two days ago. Yeah. Mike, I think you're referring to Koti Pizza out of Finland and the company with ISIS. And I love that case study because it really does show a real example of how consumers will actually alter their behavior in order to save money if it's important to them. And I found it fascinating that that was done in a Scandinavian country, you know, obviously in Europe, where generally, you know, price variability isn't as accepted as it is in the U.S. or in Asia or the Middle East. Hey, Ashwin, this is Joe. On the Koti thing, wasn't the list in sales for the entire system pretty high, like upwards of 6%? Honestly, Joe, I don't remember the details of the statistics. I believe the CEO of Gricef was signed up for this. Maybe he's in the audience and can tell us. Yeah, he did sign up. I don't know if – it's late in Finland today. I mean, it's very late in Finland. But I do remember – you know what? That case study is published in PMQ Pizza magazine, and the details are in there. Yeah, you know what I'll do? They had an academic article in one of the Harvard publications. I'll post that and get that other article because, yeah, those were very important ideas. And you're right that they had a devil of a time convincing the CEO and the franchisees to try this out because you can imagine they didn't get it right the first time. That is such a good point. And kind of bringing this back to Wendy's, you got to kind of take your hat off to any company or executive of that company that goes out on a limb to do these innovative things that, if successful, will end up raising and elevating the entire industry. And I can tell you from experience, we've had franchisees of some of these large brands reach out to us and say, hey, we hear about what you guys are doing. We believe in this. We want to work with you and build a case to go to corporate and convince them that we need to start doing this, right? So, you know, I think Wendy should be congratulated for taking the initiative to do something like this. Well, you know, it's always nice when somebody takes a bullet for you. You know, I think, you know, it's simplistic to say, but I think we're saying that as dynamic pricing is here and the pricing opportunities are going to be more dynamic in the future. And, you know, I think it should have benefits for both, you know, businesses and consumers. You know, and it's not just about revenue management. I think Ashwin said that a while ago. It's also about revenue building and, you know, creating experiences or solutions for customers, whether it's for them at the moment that they're engaging normally with your business or engaging, changing their behavior to get a more favorable pricing as they move forward. The article about dynamic pricing that Metro, the supermarket chain, used to use as it relates to monitoring the expiration dates on their fresh food and allowing, you know, automatic price adjustments as their freshness dates were getting closer to expiration. I thought that was also a pretty interesting, you know, dynamic pricing example. Yeah, I'm conscious that Kimberly raised her hand to say something and it's International Wednesday and we're ignoring the one woman that raised her hand. Thank you, thank you. I will take my seat at the table for a moment. Yeah, so I have a digital signage integration company. We're 16 years old and we work with drive-through coffee shops and the like. And the concept of teaching people that they can adjust pricing based on region and all of the other adjustments and variables obviously is one thing to a client. But in terms of looking at training your customer, and again, it has to be your core customer. You're not looking for the fringe customer. So it really needs to be based on analytics and who you're targeting. If you tell me to go to happy hour from 5 to 7, I'm going to show up at 7.30 because I don't want to be there during that time, actually. So I'm not your core customer for that. So the marketing has to address those people who are going to pay attention, probably on a social media channel, in my view, to some degree. But again, it depends on the business and who the core person is. And as you gentlemen were talking, it kind of took me back to my childhood when there used to be the blue light special at Kmart. And people showed up because they knew when the blue light special was going to go off and they would show up to get that discount. And so I think this concept has been around in some industries for quite some time. It's just that that was a very manual way of doing it, of course. So and, you know, Starbucks, they run a special time of year when they do an offer after 2 p.m., come back with your receipt and get another drink later that day. So they're telling people in the morning when they get their coffee to come back later. So I think the idea of potentially marketing on the digital sign, you know, in the morning that I can come back at a certain time and receive a discount, that's going to appeal to that core audience and people who even read the digital sign itself. And again, just training the customer to look for that at your establishment. The same kind of goes with, you mentioned the premium stadium seating. That's the same with the movie industry. If I want to go and have a premium experience, I'm going to go sit down and schedule my food to be delivered to me at a certain time. So I really see a lot of this crossover. I'd love to see more of our customers take advantage of it, the day partying. So I'm loving this conversation. Well, Kimberly, I'm going to happy hour and drinking your beer at a discount. Touche. That's all right. So I think, you know, Wendy's desire to start experimenting with some of these things clearly drove a $20 million check into digital signage board investment. So I think it's very smart for you to be thinking the way you are. And, you know, one of the things you said sparked something for me, which is we have not even touched on the idea of loyalty here. And former hotel e-commerce executive, I think everybody in the restaurant industry should be very aware that as time goes on, you are getting further and further away from your customer relationship. And that's scary. And a lot of people might not be realizing this. I know in the hotel industry, we didn't realize it until it was too late. But, you know, before COVID, customers would just walk into the restaurant or call the restaurant, you know, with the exception of the name slipping my mind, the reservations platforms out there. For the most part, they own the customer relationship. And as time goes on, that's getting less and less true. I think this idea of offer pricing, you know, spontaneous offers, what you can do directly with your customers through the drive-thru, through the apps, we cannot even imagine today what's going to be around even six months, a year from now, two or three years from now. All of the possibilities that everything we're talking about opens up for the industry to recapture those customer relationships is going to be key. And I predict that a couple of years from now, we're going to be going to conferences, and the vast majority of the conversation is going to be around, how do we get our customers back? How do we get back to the ownership of the customer data, a long-term relationship with those customers? And I think we should be talking about that now. Well, I mean, just to, you know, the hotel and airline business, especially the airlines, have done a very poor job, I think, in maintaining their status as hospitality. And a lot of it is because they have lost, as you say, touch with their customers. But I want to go back to something that I think you had touched on, Ashwin, and we've touched on the guest experience of, you know, pushing people off to the day parts. But I think there's also, correspondingly there, the employee experience. An employee would be much happier with consistent demand, get into a rhythm, than up-and-down demand, you know, whether there's peaks and valleys, where they're pushed too hard in the peaks and bored in the valleys. I think that's absolutely right. And I think the impact on the employees here is also fascinating. You know what, we just got into an agreement with a group this week, and their primary objective was to help their employees. So, I can't name who it is, but they compete with the likes of Kava and Chipotle. The owner of this group was telling me that he's got a challenge, because he likes to reward his employees. And so, when people walk up to the counter and order, he's got a tipping system there. And he's worried that because Kava and or Chipotle don't do that, they don't ask the customer to tip, at least in this location where they have restaurants, that he's getting at a price disadvantage. In other words, a customer goes to his store and ends up paying $16, but they put $3 into a tip, and they're saying, wait a minute, if I had gone to Chipotle, that would only cost me $13. So, the whole reason for him starting to test dynamic pricing is actually to see if, at the end of the month, we can take all the additional revenue he generated, and share half of that back with the employees, and eliminate the need to have tipping at the counter, to make him more competitive with the large brands that he's out there competing with. So again, I think there are so many interesting and creative ways that a more fluid, dynamic, digital approach to business will end up helping not only revenue and profitability, but the consumer experience and restaurants' ability to compete. It's an interesting idea, that's for sure. Brandon, you're up here. Unmute yourself. There you go. Hi, everybody. No, it's a really great conversation. It's been fun to see over the last couple of weeks how everything's played out. One of the key themes I think I keep hearing, that I honestly get confused a bit with having been in the industry, and with one of the groups that's in the spotlight for a while, is we keep talking about dynamic pricing like it's base price and discounts. I think everybody's right. Discounting strategies have been in play for quite some time. But from a consumer standpoint, I think there's two things that tend to worry brands. I think the current situation is a good example of that. And that's, one, the consumer losing track of the price. Having it truly become dynamic, and now the consumer doesn't know what the static price is, and a loss of trust in the brand. And in an environment where there's a lot of opportunities for competition, sometimes right next door, that can be a challenge. And then two, obviously, the scary part for any of the customers, which is really where I think dynamic pricing is getting at, which is charging more, and not the discount strategy. So I think from a consumer standpoint, and if I'm arguing on behalf of the group that was blowing back on and pushing back on this, it's not just about the messaging. It's kind of about what the intent is and what a smart consumer. And we talked about the price-sensitive consumers, but the reality is for QSR, most of those consumers are price-sensitive. So I think those are some of the things that I think we gloss over a little bit in these conversations, and we tend to focus on examples like happy hour and discounting strategies. Consumers don't have an issue with those. As everybody said, those have been in play for some time. I think it's really what we're talking about, which is truly dynamic, ever-changing pricing. How does that affect a consumer? And those instances where prices are being raised, and how that affects confidence and loyalty with consumers that have been patronizing our restaurants for quite some time. Brandon, one of the challenges when we talk about introducing something new to an industry is that we tend to think about it in the context of how the industry works and exists today. One of the best stories I like to talk about is Netflix, right? Everybody thought they were crazy. If you've ever read the book, that'll never work. Everyone thought they were crazy for betting on streaming when the internet was too slow to stream movies. But they were betting on the future, and they knew that the speed of internet was going to increase, and they were prepared when that happened. Now we can talk about how they've declined since then, but that was a brilliant move. So how that relates back to this is, you know, I can understand, hey, you know what? Consumers might not like that things are more variable, or they don't understand what the price is going to be. But if you fast forward a year or two, and let's say a Chick-fil-A or even a Wendy's implement something into their app that says, hey, you know what? You're my loyal customer, and every time we have a really great offer out there, I'm going to ping you through our app so you know. And how amazing would it be if the consumer actually accepts this, and now every brand that does this has a way to actually instantaneously drive more traffic into the store when they actually need it. So I think that's just a quick example of, you know, who knows? There are a lot of ifs in my statements, right? But this is from my tech entrepreneur hat on, you know, I think it does open up a lot of really interesting possibilities. I actually 100% agree with you, Ashwin. I mean, let's not call it dynamic pricing, but data-driven, tech-driven, day park strategies or discounting strategies. I think there's ample opportunity to improve that within the industry. I think where there really ends up being a more sensitive conversation is when, I mean, let's just call it menu board pricing, truly dynamic, ever-changing pricing, you know, changing every half an hour up and down a la, you know, airlines or hotels. I think that's a different conversation. And whether the industry will accept it or adopt it, I think is a debate that we're having it now. And it's really interesting to see the blogs. But I actually 100% agree with you on the point you just made where, you know, advanced tech-driven, AI-driven discounting strategies could be dramatically improved within the industry. Restaurant industry is extremely slow to uptake technology. So, I mean, I 100% agree with you that there's a place for that today. And on the point of price increases, again, I go back to what I said earlier, which is it shouldn't be a one-size-fits-all. I believe that minor price increases, conservative price increases can be implemented on third-party delivery channels. We've been doing that for two years with great success. And we've had zero customer complaints because they have no idea. However, can that be implemented into a restaurant on a digital menu board? Like, I wouldn't even say that that's a good idea right now. I mean, you know, I think by day part, doing it with offers, that can work. But I would not advocate at this point for, you know, as you described it, airline-style dynamic pricing. I think that's gonna make customers seasick. I think another platform upon which dynamic pricing and all these capabilities, you know, come to life are just the technology platforms. And then, you know, when you think about the comment made earlier about restaurant, the restaurant industry has been slow to adopt these technologies. I think these technologies are being adopted, and these technologies are also moving so fast. So I think it's important, you know, and probably a discussion for another day in terms of, you know, how to make sure that as a brand and as a system, a diversified system of company and franchise restaurants, that you have the capability to implement this across your systems and the consistency of your IT stack and your ability, you know, in real time, you know, to deal with these dynamics. The customers that you wanna engage with one-on-one and the locations and different channels that you need to activate your pricing strategies across. I think we got a couple of new people up on the stage, maybe Americo or Fernando. Fernando, jump in. You just have to unmute yourself. No, you're good. No, actually, like you guys just touched on a lot of the things that I was, you know, gonna comment on. But yeah, that idea of, I mean, it's there. You know, people use almost dynamic prices on third-party delivery apps. It's very accepted. It's a great way to like also, you know, try to redirect traffic from those third-party apps to your own system where you can, you know, offer loyalty and more consistency or whatever. But just a hybrid of, you know, maybe using dynamic prices in those platforms so that you can be more competitive in those platforms while you try to, you know, keep your in-house platform more consistent. I don't know. Just wanted to pick your brain about it. Yeah, I think it's a really good question about, and I don't have a feel for the answer, you know, whether you want to restrict or start your trial with, you know, the off-premise platform and just see how much behavior you can change there before you start fooling around with using the digital message board to communicate those messages that you want people to react to. I just don't see a message that says, come back in 15 minutes and the price is going to be cheaper. Really that attractive. It seems like that would be a fail. Mike, it sounds like a buy later button. Yeah. As like on eBay, buy it now, buy it later. Andrew, jump in. How much do you feel this conversation is influenced by the brand perception? Because we've, the clients have been used to dynamic pricing in certain areas. You have places like Sonic that do a clearly outlined happy hour pricing. How much, and we talk about the rapid pace of technology, how much of a factor is it the fact that technology is probably moving faster than what people's brand perception of Wendy's is? So Wendy's did a dynamic pricing concept and it was swamped by a brand that had a stronger identity for that dynamic or surge pricing by Uber or Lyft. Yeah, I think it goes back to my original observation. I think anytime that your brand, and I think Ned made the point. Ned, do you want to make the point about the New York Post? Because I thought that was pretty good. New York Post's comment earlier about the slappy meal. So I think you've just got to be conscious of the messaging and how that can be perceived and be careful of that. What I thought I just heard was some commentary around both the previous speaker and then Andrew here was a couple of things. And it all threads through to A, in order to be dynamic and to engage with your guests, I think it's who has the data, where's the data at, how do you take that data and are able to apply that data to your business. And so I think some of that occurs. If you're using third party channels, then you better get your data from those channels. And to the one gentleman that spoke is like trying to get people on your own channel for consistency's sake, but also I think to feed into your customer data platform so that you can be more dynamic in this regard. And then I think when it comes to Sonics or one brand versus the other brand, I think part of it's what's the brand stand for, what are the different day parks they're operating under, and then how much have they invested in their own tech stack, their own data platforms and their own ability to be dynamic as it relates to pricing. And I think that's all over the spectrum from some folks that are still out of the gate with fixed non-digital pricing displays in their restaurants to whoever's doing it the best and the brightest. And then I think you just touched on something that's important to highlight, which is we're really technologically in the infancy of this whole idea. And to the point about consistency between digital boards and the website and delivery and the apps and those, I don't have to tell you all, the systems in this industry are highly disconnected, sometimes very difficult to communicate with each other. And so that has to improve and that is going to improve. And that's going to open up the door to make this a lot more palatable for consumers. Hey, Rick. I wanted to just add that real quick. I think one of the discussions I had recently with a tech provider in the industry, it used to be the point of sale systems were like the epicenter of what occurred within kind of the restaurant business. And that was where all the transactions occurred. Now, it's really what's your data platform and what does that look like? And how do you define that? And then how do you cascade that across all your different technical assets and channels? And so I think that's an evolution. I agree with Ashwin. It's an early stage in continuing to evolve. And I think a lot of investments that have been made are going to just have to be investments that have to be remade in the coming years. So the capital and the human capital behind this is tremendous. Sorry, Rick, if I jumped on you there. No problem. That makes everyone an interesting dialogue for sure. Couple notes that jumped in my head about approaching franchisee groups. By way of background, I had a little hand in some of the opportunities at Subway back in the day, leading analytics for the company. And a couple of things that I saw, one was that $5 footlong emanated out of testing, quote, unquote, testing. Some franchisees got together and said, let's do this, put a banner out. Next thing you know, we had $4 billion in incremental volume once the commercials were made and all. But I want to tell another one that early on, at the time, Fred DeLuca was big on this program called 26-inch sub for $2.49. But what I could see in the data is what franchisees did was they said, and I'm getting to a question, so sorry for the longer setup. They said, OK, well, I'm going to charge $3.25 for making a meal. Making a meal at Subway is a little bag of chips and a 20-ounce fountain drink. So if you add that up in Connecticut, where I live, and add in tax, my $2.49 goes to $6.14 for lunch. And by the way, this is back in 2005, 2006. I'm a customer. I'm not feeling too happy about that. So now my question, let's assume all this technology is there, all the data feeds, all the other stuff. Is this, in your vision, I guess mainly for Ashwin, and I kind of asked you this on LinkedIn the other day, how is this going to be, let's say, a top-down push from corporate to a franchisee versus enabling the franchisee to have the information to make the right decisions? As any distribution goes, some franchisees would make the right decision off the data. Some franchisees would revert back to buy $3.25 for a meal. So again, top-down versus franchisee control. What does that look like in the future? Yeah, I mean, Rick, that's a really interesting question. We could probably talk about that for an hour here. As you know, there are legal implications around what franchisees, in other words, they have to be in control of their pricing. Nobody can come in and dictate the pricing for them. And so I do think that from a technology perspective, first of all, what I'm starting to see is that franchisees are starting to be given a lot more access to data and analytics, not by all brands, but in certain brands, they're starting to give franchisees a lot more access to data and analytics to be aware of what's going on, how they're positioned in their competitive set, how they should be thinking about pricing measures or offers that they want to put out into the market. And so I think, without naming names, there are certain QSR brands that have created systems where a pricing model can be suggested to the franchisee and then the store can either accept it or not. And then I think there are also scenarios where pricing franchisees can opt in or out. They can say, OK, well, I'm just going to opt in and into this pricing model. So I think there are a variety of different models and scenarios that technology will enable to make the process of, you know, centralized price analytics and distribution of pricing and data down to the franchisees and who ends up making the ultimate decision there. Yeah, and I'd add that I think there's even an opportunity from my experience whether this has changed over the years. We had tiers of pricing like Tier 1, Tier 2, Tier 3. Depending on what those gaps are, that drives a customer in a different direction. And I couldn't bet that franchisees have it set at the right level. So forget changing a day part price or digital boards, just even getting that correct. These would be what the competition's doing. So you could look at, you know, those data sources to say, do I even know if I'm out of bounds? Like, how do I know my marketplace? What, you know, what is, what can I command at my location? Because it's more of an affluent area, more socioeconomically challenged. I question even if that data, that starting point of pricing is even correct. So that's a whole conversation for another period of time. Yeah, well, look, I think if you can't tell them what to do, then at a minimum, you can tell the franchisee, OK, you made this decision. Well, we're going to show you data that tells you in real time how that decision is impacting your sales or how you are now priced against the store around the corner for you so that they can start to make, you know, more informed decisions about whether they did the right thing or not. I like the fact of what you just said, more informed decisions for franchisees. I think in QSR, in general, prices have been pushed up. You know, we're starting to get pushed against the ceiling, the, you know, where consumers are going to be pushing back. And I think as a brand, if you can, you know, provide the transparency and provide the data and analytics for franchisees, can make more informed decisions. I think that's step one. I think step two is if you have more dynamic pricing solutions that build revenue and increase your margin so that you don't have to just go through and take price as across the board as a strategy, because I think some people make the decision that, hey, I want my food and paper costs to be 25 percent. So I'm going to take, you know, whatever it is, the cost of this, and I'm just going to, you know, divide it by that to get my price. So, you know, I think the more tools and the more dynamic pricing options that are out there and activated in the system, you know, allows, you know, restaurants to be more profitable and addressing so many different dynamics of consumer engagement as well. And that's a challenge that we're seeing quite often in the industry from a franchise or perspective, where, you know, you hit it on the head, which is inflation has driven the restaurants to increase their prices. You know, then you've got situations in California where, you know, minimum wage is going up. Then you have Uber and DoorDash charging, you know, extra commission on top of all that. And the restaurant in a survival mode has just been bumping up and up their prices just to keep their head afloat. And it's normal to do that. And if not provided with any data that says, hey, listen, you're hitting the ceiling here and what you're doing is actually impacting your sales. And, you know, for example, if there's a brand that aims to be a price leader in the market, then it becomes impossible for them to actually maintain that as a brand because of what the franchisees are doing just to stay alive. And so to your point, I think providing that data, providing those analytics and that intelligence can be extremely valuable to educate and inform the franchisees about what the impact of their decisions really are. Ashwin, what would you call that concept? Because that concept's not dynamic pricing on its face. But it's obviously very valuable. And so I just want to avoid the situation where, you know, we start using dynamic pricing as a buzzword for a broad situation of or a broad suite of things. But like, what would you call that so we can just reference it as that? Because I agree, it's super, super important and valuable to the industry. Yeah, for sure. I mean, I don't want to plug our own company here, but we offer two products, which is dynamic pricing and a competitive intelligence suite. So, you know, that technology exists either at a franchisor level and or at the franchisee store level that shows each store, hey, look, you know, this is what's happening with your digital conversions. And this is how that relates to how you're priced against the stores around the corner from you. And you know what? The store next door to you just launched this value meal. And if I were to walk into your store and add those five items, you're actually more expensive. So, you know, these are the kinds of things that technology is now enabling that that didn't exist before. Right. And that's exciting. Well, that's a good place to end, I think. We always want to hear something that's exciting. Joe, what are we doing next week? Next week is going to be posted soon. We have a we have a guest that is going to be next week or the following week, and they haven't told me yet. So it will be going up and all of you that are first connections of mine that are in the networking tab for this event will get a message for the next event. Now, it will be at noon Eastern time. That's good. So that's that. I've got that that down. I've got that part locked in. But I did get a message while we were on from Taylor Swift. She says she's not taking any action against Ticketmaster. But this Wendy's thing, she's putting her foot down and she's writing a song. I don't think that's true, Joe. I don't think that's true. I know a lot of people in high places, Mike. You do, sir. All right. We'd like to thank Ashwin, all of our guests, all of our panelists for showing up and making this one of the more interesting, broad discussions that we've had about revenue management and all of the various features that we need to be thinking about. So thank you very much. And we'll see you next Friday. Appreciate it. Thank you, guys. Thanks, Ashwin, Mike. Take care of you. Bye. Thanks. Bye.
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