Lawmaker Proposes Ban On Surge Pricing

FILE - A sign stands over a Wendy's restaurant, Feb. 25, 2021, in Des Moines, Iowa. Wendy’s says that it has no plans to increase prices during the busiest times at its restaurants, Wednesday, Feb. 28, 2024. The burger chain clarified its stance on how it will approach pricing after various media reports said that the company was looking to test having the prices of its menu items fluctuate throughout the day based on demand. (AP Photo/Charlie Neibergall, File)

Wendy’s has walked back its plan to test surge pricing at some of its restaurants.

A New York lawmaker wants to make sure surge pricing doesn’t come to any Wendy’s restaurants in the state – or any other restaurant, for that matter.

Assemblyman Angelo Santabarbara, D-Schenectady, recently introduced legislation (A.9488) to prohibit food service establishments from introducing dynamic pricing models. Dynamic pricing is used by some companies like Uber to moderate use by customers during the busiest days of the year, or when drivers or cars are in short supply during the day. Prices rise and fall with demand using that business model.

Santabarbara’s proposal would require a restaurant’s prices to remain fixed and be posted for all menu items. Restaurants that don’t comply with the legislation could face a $1,000 a day fine. If fines exceed $50,000 in a year, further penalties can be enforced, including penalties from the state Attorney General’s office and a revoking of the restaurant’s operating permits from local health departments.

“Recent discussions by national restaurant chains regarding dynamic pricing could unfairly burden consumers. with higher costs and impede their ability to make informed purchasing decisions,” Santabarbara wrote in his legislative justification. “This legislation seeks to protect consumers from such practices.”

Assemblyman Angelo Santabarbara, D-Schenectady, speaks during a news conference earlier this year.

During a February conference call with investors and industry analysts, Wendy’s CEO Kirk Tanner said dynamic pricing and daypart offerings could begin as early as 2025, along with AI-enabled menu changes and suggestive selling. The company faced backlash when the story began to circulate, and said a couple of days after the conference call that there was no plan to use surge pricing. According to the Associated Press, Wendy’s officials said in an email to the AP that any fluctuations the company decides to test in the future “would be designed to benefit our customers and restaurant crew members.”

“Wendy’s will not implement surge pricing, which is the practice of raising prices when demand is highest. We didn’t use that phrase, nor do we plan to implement that practice,” the company said in an email to The Associated Press on Wednesday.

Dynamic pricing and surge pricing are both models that continuously adjust prices based on a range of factors, sometimes within minutes. Dynamic pricing can involve both increasing and decreasing prices, based on market conditions, the season and supply changes. Surge pricing is a subset of dynamic pricing and only involves increasing prices, based on supply and demand.

Dynamic pricing is commonplace for those who purchase airline tickets that go up and down in price depending on the time of year, expected demand and projections of how many seats will be filled at various flight times. Hotels use the same models, as do concerts, sporting events and some parking facilities that charge more during highly trafficked events. Utilities use dynamic pricing to limit utility use at peak electric load times.

Neil Saunders, a managing director with research firm GlobalData, told the Associated Press in February that even though dynamic pricing is already ubiquitous, the grief Wendy’s got shows how sensitive consumers are to price variations.

“Dynamic pricing is common in travel and accommodations. There’s a fixed level of supply,” Saunders said. “But if one minute a burger is $5 and the next minute it’s $6, and then it goes up and down again, they will simply get annoyed. And they’ll probably go elsewhere.”

The Associated Press contributed to this report.


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