Do you want AI with that? Fast food chains go digital with dynamic pricing and bots

Fast food restaurants are diving deeper into the digital realm, adopting strategies ranging from dynamic pricing to in-vehicle voice robots and weather-based menu boards.

Experts say cutting-edge sales tactics have the potential to optimize service, attract new customers and fill job gaps amid high turnover rates, but they also warn that the public can be put off by poor communication and concerns about privacy.

News of a plan at Wendy’s to implement “dynamic pricing” sparked backlash after CEO Kirk Tanner told financial analysts on a Feb. 15 conference call that the 7,000-location burger chain would introduce it as soon as the next year.

Wendy’s clarified in an email Wednesday that the fluctuating prices it plans to implement will mean lower prices during slower hours of the day, rather than price increases during peak hours.

Initial confusion over whether the 55-year-old establishment would adopt top-down pricing tactics similar to those of tech-savvy ticket sellers and ride-hailing companies marked the latest change for a quick-service sector that is increasingly shaped by digital technology and artificial intelligence.

Chains like Canadian-owned Popeyes, as well as Taco Bell, Panera Bread and Chipotle, have tested AI-powered virtual assistants at drive-thrus.

Next year, Wendy’s plans to test menu boards at all U.S. locations that can offer AI-powered changes based on the weather — “a cool Frosty on a warm summer day,” the company said. spokesperson Marcy McMillan. McDonald’s has done the same for about eight years, and in 2019 acquired Israeli artificial intelligence company Dynamic Yield in a $300 million deal before selling it two years later.

Back in 2017, KFC offered customers in Beijing recommendations based on their apparent gender, age and mood through facial recognition technology embedded in a menu screen.

“In the last five to seven years in the restaurant segment, there has been a lot of technology adoption through third-party aggregators, loyalty apps, people placing online orders through their website; you can collect all that data, you can collect your data. competitors’ pricing strategies. And all of that comes together and starts to be analyzed in real time,” said Robert Carter, managing partner of StratonHunter Group.

“The result is a much more competitive pricing strategy.”

However, food costs are a sensitive issue after nearly two years of high inflation, and companies should be cautious about implementing and promoting dynamic pricing and other technologies, said retail analyst Bruce Winder.

“What Wendy’s is trying to do is soften the demand so that their customers aren’t coming in exclusively at noon and exclusively at 5 or 6,” he said. Lower prices at off-peak times could also attract more guests overall.

“But in a way you’re asking the customer to break a tradition that’s been around for a couple hundred, if not thousands, of years.”

Maintaining customers’ sense of privacy is also key, at least for now.

“If I get to a drive-thru and they say, ‘Hey, Bruce, how are you?’ I might be a little taken aback by that,” Winder said. But experts also say that younger buyers tend to be more indifferent to personalized data collection.

Dynamic pricing already plays a role in a variety of industries, and not just those led by digital disruptors. Airlines, hotels, department stores, and sports venues rely on sophisticated algorithms to continuously fluctuate prices based on demand, supply, and consumer behavior, as do companies like Uber and Amazon.

The changes can draw attention: “Send a blast on social media and you’ll have a flash sale to drive traffic in those slower periods,” Carter said.

They can also be subtle and involve multiple price adjustments per day for hundreds of flights or millions of products, or dozens of fast food items at thousands of locations. “That will translate into millions of dollars in increased revenue with only very slight changes,” he said.

This report by The Canadian Press was first published Feb. 28, 2024.