WENDY’S: A “FROSTY” RECEPTION FOR DYNAMIC PRICING
CASE STUDY SOLUTION
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pl
SYNOPSIS
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Wendy’s was founded by Dave Thomas in Columbus, OH, in 1969. Over the next 30 years, the company grew
Sa
rapidly, expanding from that first one restaurant to 6,000 stores by October 2001 .2 Although growth had
slowed in the 20 or so years since then, as of December 31, 2023, the company still operated 7,240 restaurants:
6,030 in the US and 1,110 in 32 international markets.3 In 2024, the menu at Wendy’s featured hamburgers,
fries, chicken sandwiches and chicken nuggets, salads, chili, baked potatoes, breakfast sandwiches, and its
signature Frosty dessert.4 Because of the company’s commitment to high-quality offerings, its prices were
n
high—Wendy’s had the highest prices of any fast-food chain in 2023.5 For the fiscal year ending on December
tio
31, 2023, Wendy’s revenue was $2.18 billion,6 and its profits were $667.6 million.7
This case is about Wendy’s announcement in February 2024 that the company would be testing dynamic
lu
pricing in select US stores, beginning in 2025.8 The case highlights the negative reactions to the
company’s announcement by competitors and in the media. Several expert opinions regarding how
So
consumers might react to Wendy’s new pricing strategy, as well as how Wendy’s might implement its
dynamic pricing scheme, are discussed. For context, the case also discusses various industries that rely on
dynamic pricing—some of which have used this pricing method for a significant amount of time. As a
point of comparison, the case also discusses Coke’s attempts to implement dynamic pricing and
highlights the price discrepancies that are part of McDonald’s operating model. Price discrimination in
the retail food sector is also discussed. The case asks students to consider how Wendy’s CEO Kirk Tanner
should implement the company’s dynamic pricing scheme.
OBJECTIVES
• Understand that pricing has both economic and psychological components
The Case Solution Starts From page 5
,• Discuss why dynamic pricing has become popular in several industries
• Understand how promotion and pricing are linked
• Determine how a company should implement dynamic pricing
• Evaluate whether dynamic pricing will become commonplace in the fast-food industry
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pl
m
Sa
n
tio
lu
So
ASSIGNMENT QUESTIONS
1. Why has dynamic pricing become an established practice in various industries? Why have price
discrepancies at McDonald’s and price discrimination in the retail food sector been accepted by
consumers?
2. Evaluate Wendy’s decision to publicly announce its intention to test-market the idea of dynamic pricing.
3. How should Wendy’s implement dynamic pricing in its restaurants?
4. Do you think dynamic pricing will become a common practice in the fast-food industry? Explain.
The Case Solution Starts From page 5
,ANALYSIS
1. Why has dynamic pricing become an established practice in various industries? Why have price
discrepancies at McDonald’s and price discrimination in the retail food sector been accepted by
consumers?
e
Why has dynamic pricing become an established practice in various industries?
pl
It is likely that a variety of factors have led to the success of dynamic pricing in the industries in which it
has been accepted. As far as the ride-sharing industry is concerned, dynamic pricing has been successful
m
in part because the industry is new—Uber is often the only option available during a price surge.9
Because Lyft also implements similar price surges during busy periods,10 consumers effectively have no
Sa
choice if they wish to rely on a ride-sharing service. In addition, the ride-sharing industry is relatively
new, and Uber has been using price surges since the very beginning. Thus, consumers may accept that
dynamic pricing is part of this industry, as it has been unveiled to them in this fashion. It should also be
noted that increasing prices during busy times may also increase supply, as drivers may be motivated to
pick up higher-priced rides. This can help justify the use of dynamic pricing in this industry.11
n
tio
With regard to the bar/restaurant industry, dynamic pricing has succeeded largely because it has benefited
lu
So
The Case Solution Starts From page 5
, EXHIBIT -1: WHY IS DYNAMIC PRICING ACCEPTED IN SELECT INDUSTRIES?
INDUSTRY REASON FOR ACCEPTANCE OF DYNAMIC PRICING
Ride-sharing industry • Lack of alternatives
• New industry that has been defined in this fashion
• Increased prices help increase supply
Bar/restaurant industry • Dynamic pricing has been beneficial to consumers
E-commerce • Dynamic pricing has been beneficial to consumers
• Consumers may be unaware of dynamic pricing in
certain situations
• Benefits of e-commerce may outweigh
consequences of e-commerce
Public utilities • Demand management
•
e
pl
m
Sa
n
tio
lu
So
The Case Solution Starts From page 5
CASE STUDY SOLUTION
e
pl
SYNOPSIS
m
Wendy’s was founded by Dave Thomas in Columbus, OH, in 1969. Over the next 30 years, the company grew
Sa
rapidly, expanding from that first one restaurant to 6,000 stores by October 2001 .2 Although growth had
slowed in the 20 or so years since then, as of December 31, 2023, the company still operated 7,240 restaurants:
6,030 in the US and 1,110 in 32 international markets.3 In 2024, the menu at Wendy’s featured hamburgers,
fries, chicken sandwiches and chicken nuggets, salads, chili, baked potatoes, breakfast sandwiches, and its
signature Frosty dessert.4 Because of the company’s commitment to high-quality offerings, its prices were
n
high—Wendy’s had the highest prices of any fast-food chain in 2023.5 For the fiscal year ending on December
tio
31, 2023, Wendy’s revenue was $2.18 billion,6 and its profits were $667.6 million.7
This case is about Wendy’s announcement in February 2024 that the company would be testing dynamic
lu
pricing in select US stores, beginning in 2025.8 The case highlights the negative reactions to the
company’s announcement by competitors and in the media. Several expert opinions regarding how
So
consumers might react to Wendy’s new pricing strategy, as well as how Wendy’s might implement its
dynamic pricing scheme, are discussed. For context, the case also discusses various industries that rely on
dynamic pricing—some of which have used this pricing method for a significant amount of time. As a
point of comparison, the case also discusses Coke’s attempts to implement dynamic pricing and
highlights the price discrepancies that are part of McDonald’s operating model. Price discrimination in
the retail food sector is also discussed. The case asks students to consider how Wendy’s CEO Kirk Tanner
should implement the company’s dynamic pricing scheme.
OBJECTIVES
• Understand that pricing has both economic and psychological components
The Case Solution Starts From page 5
,• Discuss why dynamic pricing has become popular in several industries
• Understand how promotion and pricing are linked
• Determine how a company should implement dynamic pricing
• Evaluate whether dynamic pricing will become commonplace in the fast-food industry
e
pl
m
Sa
n
tio
lu
So
ASSIGNMENT QUESTIONS
1. Why has dynamic pricing become an established practice in various industries? Why have price
discrepancies at McDonald’s and price discrimination in the retail food sector been accepted by
consumers?
2. Evaluate Wendy’s decision to publicly announce its intention to test-market the idea of dynamic pricing.
3. How should Wendy’s implement dynamic pricing in its restaurants?
4. Do you think dynamic pricing will become a common practice in the fast-food industry? Explain.
The Case Solution Starts From page 5
,ANALYSIS
1. Why has dynamic pricing become an established practice in various industries? Why have price
discrepancies at McDonald’s and price discrimination in the retail food sector been accepted by
consumers?
e
Why has dynamic pricing become an established practice in various industries?
pl
It is likely that a variety of factors have led to the success of dynamic pricing in the industries in which it
has been accepted. As far as the ride-sharing industry is concerned, dynamic pricing has been successful
m
in part because the industry is new—Uber is often the only option available during a price surge.9
Because Lyft also implements similar price surges during busy periods,10 consumers effectively have no
Sa
choice if they wish to rely on a ride-sharing service. In addition, the ride-sharing industry is relatively
new, and Uber has been using price surges since the very beginning. Thus, consumers may accept that
dynamic pricing is part of this industry, as it has been unveiled to them in this fashion. It should also be
noted that increasing prices during busy times may also increase supply, as drivers may be motivated to
pick up higher-priced rides. This can help justify the use of dynamic pricing in this industry.11
n
tio
With regard to the bar/restaurant industry, dynamic pricing has succeeded largely because it has benefited
lu
So
The Case Solution Starts From page 5
, EXHIBIT -1: WHY IS DYNAMIC PRICING ACCEPTED IN SELECT INDUSTRIES?
INDUSTRY REASON FOR ACCEPTANCE OF DYNAMIC PRICING
Ride-sharing industry • Lack of alternatives
• New industry that has been defined in this fashion
• Increased prices help increase supply
Bar/restaurant industry • Dynamic pricing has been beneficial to consumers
E-commerce • Dynamic pricing has been beneficial to consumers
• Consumers may be unaware of dynamic pricing in
certain situations
• Benefits of e-commerce may outweigh
consequences of e-commerce
Public utilities • Demand management
•
e
pl
m
Sa
n
tio
lu
So
The Case Solution Starts From page 5
