Is surge pricing coming to a restaurant near you?

March 14, 2024·Darcie

Surge pricing is part of Uber and Lyft's business model, airlines have used it for decades, and other companies are now embracing it - including restaurants. The concept is simple - charge more for items during peak demand times and less during slow times. Fast food chain Wendy's recently walked back a statement from its CEO regarding dynamic pricing after consumers reacted negatively to the announcement. Despite this example of customer backlash, other restaurants - especially smaller ones - are moving forward with the practice.

It can help the bottom line of small eateries who can use surge pricing to ease the burdens of rising food and labor costs. One restaurant reported that implementing surge pricing added $1,500 per month to $30,000 of delivery orders. "That's very meaningful for a small business," Shawn Walchef told the Wall Street Journal. "I recommend it to every restaurant owner."

While the downside of this is higher food prices when you most want to eat, the upside is that deals can be found if you are willing to dine at off times. This concept has also been around for a long time - think happy hour at the local pub. Surge pricing might be annoying, but it makes sense for restaurants to adopt it unless they experience a lot of backlash. How do you feel about dynamic pricing for restaurants?

5 comments

FyretiggerMarch 15, 2024

I think "Happy Hour" proves that for the trade, this is not a pricing problem, it's a marketing problem. That the trade is contemplating peak pricing proves to me that there are whole bunch of unearned MBAs out there making pricing decisions. You don't charge more at peak, you charge less off-peak. Yes, you've raised your prices either way, but you can't positively spin peak pricing but you can positively spin off-peak discounts, ala Happy Hour.

Let's look at that small restaurant example. How many people would notice a $20 entree going to $21, versus how many notice the tab including a 5% peak time fee?

People are seriously getting burnt out on the add-on fees. Quote me a price. Honor the price. Bait and switch me and sooner or later I'll return the favor and just switch.

Indio32March 15, 2024

I have absolutely no idea what the answer is but eating out has just become so monstrously expensive that surge pricing just smacks or desperation or rearranging the deck chairs on the Titanic as more and more people stop eating out.
Yesterday, I paid £9 for a takeaway mezze in central London. The portion was stingy, it was hardly cheap and in terms of quality it was supermarket level. I'll never go back yet under this new system it being lunchtime I'll get charged more! Crazy!

RinshinMarch 15, 2024

We have mostly stopped eating out in the US unless we are traveling. Not worth it anymore. Once or twice a year, I hear about new type of food being offered in restaurants and we go out to try it. It is mostly for me to figure out what the food is and try to reproduce it at home if we like it. Like today, trying Brazilian steakhouse with variety of picanha and huge salad offering. But, going during lunch to cut cost. As it is, it will cost $59 for steak variety and $39 for salad not including drinks. Bought few Brazilian cookbooks and will figure how to make similar food at home.

robinswoodMarch 15, 2024

Well there's a way to ensure we never eat at that restaurant again!

ZephyrnessMarch 16, 2024

Happy hour is a discount at off times, not an extra charge for busy times. If it's busy, I already have to deal with waiting longer, and busier and less attentive staff. I should be charged extra for that privelige? I don't think so.
I love the term dynamic pricing. It is intended to make this practice sound good. I do the same thing with my dogs. They are great conversationalists (they are coonhounds and can be heard a mile away). From my point of view it sounds great, but folks who don't like loud barking are not impressed.