Wednesday, February 28, 2024

Mixed signals?


Clearly, fast-food outlets are thinking in different directions when it comes to future planning.

First, McDonald's sees a bumpy ride ahead.

In the U.S., McDonald’s same-store sales rose 4.3% in the October-December period, fueled by price increases as well as successful promotions like its Happy Meal collaboration with artist Kerwin Frost. But Kempczinski said there were fewer visits and lower spending by customers earning $45,000 per year or less.

Kempczinski said that as grocery inflation has retreated, those customers are more likely to eat at home. McDonald’s hopes to get those customers back into its stores this year with marketing that emphasizes low-cost options.

“We certainly know consumers are more wary — and weary — of pricing and we’re going to continue to be consumer-led in our pricing decisions as we look forward to 2024,” Chief Financial Officer Ian Borden said.

There's more at the link.

On the other hand, Wendy's seems to think it can squeeze the hard-pressed consumer even harder.

Wendy’s will start experimenting with surge pricing, much like Uber and Lyft, as the company rolls out digital menus to all its United States restaurants by 2025, according to the company’s February earnings call. Under the test, burgers, Frosties, and other menu items will have “dynamic prices,” costing more during times of increased demand.

. . .

A Wendy’s Baconator costs $12.24 in New York City, but under dynamic pricing, that price could fluctuate throughout the day. The burger could increase in price around lunchtime or go down during a slow afternoon. Wendy’s did not provide details as to how severely prices could fluctuate.

Tanner expects dynamic pricing will result in immediate sales growth, but it’s a risky approach. A majority of consumers (52%) say dynamic pricing is equivalent to price gouging, and 65% say it makes the decision of where to eat more difficult, according to a Capterra survey.

Again, more at the link.

I'm one of those who regards so-called "dynamic pricing" as yet another way to rip off the consumer.  I guess I won't be shopping or eating at Wendy's any more, which is a pity - but that's too bad.  I know roughly what a quick meal should cost me at any fast-food outlet.  If I can no longer be sure what it'll be at one of them, I'll go to another one on principle.  (It's the same with vehicle manufacturers who now want to charge a monthly subscription for features that used to be free along with the vehicle when you bought it.  No way!  I'll buy used cars that don't need subscriptions until that's no longer practically possible, then I'll look very seriously at re-mapping whatever vehicle I buy to eliminate the need for subscriptions.  There's already a small but thriving market in re-chipping them for higher performance, and I understand that's being expanded to switch other features off or on.  Let's hear it for free enterprise!)

Which company is making the right bet on its future?  I don't know, and I guess nobody does at this stage . . . but I'm willing to bet that consumers will vote with their wallets.  My wife and I no longer eat at fast-food restaurants unless we have to, such as on a long trip;  and even there, we'll try to find something nicer in the way of restaurants as we travel, and make time to eat there, because it no longer costs much more to do that than to eat plainer, faster food.  Furthermore, if we can plan ahead and take food with us to prepare at a rest stop, we'll do that rather than eat out at all.  Our wallets can only take so much pressure!



Steve Sky said...

That makes easy and I'm guessing most consumers will simply remove Wendy's from their list of options, rather than trying to hit the "low price" in the dynamic pricing.
Pricing roulette is a way to drive away consumers, although it might produce a short term bump in profitability before people catch on.

Xoph said...

There is not much price difference between fast food and a good meal. When we eat out, about 3 times a month, we go have a nice meal. Great burger place near us that puts any other place to shame for a simple hamburger.

Surge pricing - I could see justifying that by saying you need more staff during the busy period; it might even be true. But does that mean you have staff working only 2 hours? Restaurants are already suffering a shortage of workers.

People know prices are going up due to their home grocery bills. The restaurants need to raise prices - we understand. If they cut costs, how do they do it and what are the consequences in service, cleanliness, quality of food and health of food? And since congress listens to big corps, maybe they could complain to congress and stop some of the BS. Never happen, I know.

Anonymous said...

"...65% say it makes the decision of where to eat more difficult, ..."

On the contrary, as pointed out above, it makes it easier as one option is off the table, as it were.

Re Wendy's in particular, they seem to have been degrading the quality and quantity of their signature items for years, e.g. Frosty cups are smaller and not filled all the way, and that's been happening for years. They used to be one of our favorites but these days we go elsewhere.

Michael said...

The return of the Picnic basket.

When I go on a trip, I pack my picnic basket and two large cups of my coffee.

Good, insulated mugs are awesome.

I need to do the math, but I suspect my coffee is better, the sandwiches are decent and the cost is well under half of anything I can buy on the road made by folks of uncertain training and sometimes dubious personal cleanness.

riverrider said...

the abysmal quality of sit-down restaurant food, and service, has us disgusted. we're down to one place to eat out and that's actually a brewery that serves pizza. they just changed cooks so i'm apprehensive we'll lose that one too. mickey d's has been off our list of edible food for decades. if we ever go on another road trip we'll take most of our own food. hotels are full of illegals, with bedbugs n such now so...this was supposed to be our time to travel now that we're retired. another lie we were fed.

oldvet1950 said...

Surge pricing makes sense in some instances, but not restaurants. It is nothing more than a pricing mechanism to shift demand. Electrical utilities are the most obvious employers of such practices. They have a finite supply of electricity at a given time, so they entice people to use when the price is low thereby reducing demand at historical peak hours. The price differential of a hamburger and shake will not cause a shift in behavior except to shift that demand to another restaurant.

Celia Hayes said...

My daughter and I used to do a lot of market events, and I still have the occasional all-day book thing. We've always run into the nearest HEB on the way to the event to pick up our choice of ready-made sandwiches, or salads or whatever, rather than take a chance on something being available at the event, or the expense of doing to a fast-food place.
We also used to go out once a month for our Red Hat ladies association - but the group dissolved due to age, retirement and moving away of members. I think our last trip to a restaurant was to an Outback Steakhouse for all three of us, including toddler grandson ... and only because my daughter had some gift certificates for there.
The food was pretty good, and the service was outstanding, considering that we had a messy, fussy toddler with us. But I can't see eating out much, given the economic situation now. Getting a sandwich or a sushi selection from the HEB deli counter will be about the limit.

Anonymous said...

I suspect the corporate guys see it as a way to spread out consumers to times of the day that are usually slow. They have to design the restaurant for busiest time and same with staffing. If your clients are more spread out your fixed operating costs go down.

Now i suspect it wont work out for them, people grab food at fixed times based on when work gives them their lunch break and parents are not likely to tell a hungry kud to wait an hour till the price drops. In the end i see this driving customers away during the busy times and very little increase in the slow times.

Also the slow prices will be the same as current prices and the rush times will be higher most likely, so eating during a sliw time will not be a discount and eating at the usual time will be seen as a premium and piss people off


Tree Mike said...

Don't forget to take a 22 and a medium powered rifle to forage along the way.

Toirdhealbheach Beucail said...

BRM - To Xoph's point above, there is less and less difference between a fast food meal and a sit down dinner.

I think I have been to a "chain" fast food restaurant twice in the last five years and it was purely due to convenience. I can now get the same meal at a local chain for about the same which tastes far better - or, as noted above, just bring my own.

Anonymous said...

I used to eat at Wendy's as often as I ate at other fast food places...
In recent years I only go to McDonald's or Taco Bell - everywhere else has too inconsistent quality and even worse prices. Even McD and Taco Bell are on the edge for quality and service (or lack thereof).

Anonymous said...

I've found a small motorhome to be very useful for those reasons and more.

Anonymous said...

My local McDonald's (the only local fast option) has full meals between $9 and $11.
One block away is a sports bar with lunch specials ranging from $9 to $12 for a sandwich (burger, hotdog, etc), fries and a drink.
3 blocks away is a Mexican place with meals starting at $11, no drink. Why on earth would I get a full price combo at McDonald's?

I don't pay full price at McDonald's; I use deals in the app for anything over $3.

Ultimate Ordnance said...

I have avoided eating out for many years, ever since I worked in a restaurant and saw what goes on among the pimple faced teen-agers who work there.
For road travel, I'd recommend Cracker Barrel. They are near interstate highways, serve real food, and have good variety. They aren't cheap any more, but still a good value.

Bob C. said...

Regarding the "subscription features", I'd never heard of this; if it was installed it should be (and was, when we bought our last cars) available upon purchase of the car. I guess we'll keep our existing cars, a 2002 CR-V and a 2005 Pilot; both run fine, with a bit over 100k miles on both. But I'd cheer on the aftermarket "remappers" and "rechippers"; the car companies deserve *zero* consideration when they use this sort of crap. :-x

And FWIW, the idea of remote access to my vehicle is in itself a non-starter.

Anonymous said...

"But Kempczinski said there were fewer visits and lower spending by customers earning $45,000 per year or less."

How in blazes do they know how much money their clients make in order to say who is buying more, the same, or less than previously thought? Are they asking? Are they using the data from cashless sales to investigate the buyers banking habits?

How do they come up with such determinations, and how do they get their information?


Hamsterman said...

I'm sure Wendys has figured out that the 'rush hour' price will the the 'regular' price on the menu, and then have 'sale: 20% off' during the off-peak times. That's basic human perception, and low-end retail's basic operating premise.

What I'm worried about is when Amazon (and other online retailers) revive this practice. Amazon used to do this, with different members getting different prices, but got caught.

Anonymous said...

Talked to a grocery store owner back in 2015 in an east coast town that had declared itself a sanctuary city. Most locals were all on welfare. The store owner let the store sit empty with no employees most of the month, then the night before welfare checks hit the bank accounts, he’d bring in a crew to stock all the shelves for the buying bonanza the next day. After which, the store sat dead again for the rest of the month. Made me think of a movie scene with shock paddles trying to start a dead guy’s heart. Flatline, then a jolt, then more flatline. The local town was dead and the government slush was a momentary shout of “Clear!” while trying to jump start the dead town’s heart and deny the obvious.

John V said...

Wendys is already backtracking on this claiming their comments were misunderstood.

Anonymous said...

The travel industry seems to have gotten consumer acceptance of surge pricing. When demand is high, airline tickets, hotels, cruises, cost more. When the price is too high, we don't buy and go about our business.