- Wendy’s CFO said it would raise prices by less than 5 percent this year
- It comes after plans to implement ‘dynamic pricing’ sparked huge backlash
- The executive also said that the company has an “eternal pricing consultant.”
There was an elephant in the room during Wendy’s quarterly earnings conference call this week: ‘price gouging.’
It became a big deal for the fast food giant earlier this year after DailyMail.com reported its plans to roll out “digital menu boards” with prices that would change throughout the day.
During Thursday’s call, Chief Financial Officer Gunther Plosch did not mention what the company itself prefers to call “dynamic pricing.”
But he did say that Wendy’s is paying so much attention to its pricing that it employs an “outside pricing consultant.”
This is to ensure you are “making the right pricing decisions,” he said.
“We’re going to be careful with prices,” Plosch said. “I don’t think we’re going to get too greedy.”
During Wendy’s earnings conference call this week, executives at the fast-food restaurant chain did not discuss its controversial dynamic pricing plans.
Wendy’s CFO Gunther Plosch (pictured) assured investors that the company employs an outside pricing consultant to ensure it is “making the right pricing decisions.”
He said prices were likely to rise in the low single digits over the next year, or less than 5 percent or so. A Dave’s Single burger that costs about $5.70 before tax now could cost about $5.90 in a year.
On Friday, Wendy’s did not tell DailyMail.com whether or not it had hired the consultant in question before the February backlash, but said the two events were unrelated.
“These two things are not related,” a company spokesperson wrote. “We have worked with a third-party pricing consultant for some time to assist our franchisees with pricing decisions in their respective regions.”
They also said Wendy’s will continue to launch digital menus starting next year.
“Digital menu boards could allow us to change menu offerings at different times of the day,” they said.
Wendy’s CEO Kirk Tanner first alluded to how its dynamic pricing plans would boost earnings in February during his previous quarterly call with analysts.
But after DailyMail.com reported his comments, Americans reacted with horror to subsequent broadcasts and newspaper reports that they were expected to pay higher prices at busier times of the day.
Days later, the Dublin, Ohio-based company backtracked and said it would only implement features “designed to benefit our customers and restaurant staff members.”
While he admitted he would change prices, he said this would be to lower them during the slower hours of the day. He denied he would raise them when restaurants were busier.
This week, the company reported that its margins increased 0.6 percent year over year.
This was “primarily due to the benefit of a high average check driven by carryover prices of more than 3 percent, partially offset by declining customer numbers and an increase in labor costs,” Plosch said.
Wendy’s experienced furious backlash in February after it was reported that it was considering changing the cost of menu items at certain times of the day.
A quarter pound of Dave’s Single currently costs about $5.99 at Wendy’s in Newark, New Jersey. If Wendy’s were to move forward with dynamic pricing that could vary throughout the day depending on demand.
The executive said prices rose about 4 percent last year and would likely rise by “single digits” next year.
The justification for its cautious pricing strategy was that consumers are still under pressure as inflation continues to hurt their purchasing power.
Low-income households with incomes under $75,000 were especially hard hit and made fewer restaurant visits last quarter, according to Plosch.
However, the company increased sales overall: Net income during the quarter was $42 million, up from $40 million in the same period last year.