Dynamic Pricing is Coming to Restaurants

Dynamic pricing is nothing new. We’ve encountered it before in many sectors, from airlines to hotels to even taxis. We’re used to seeing Uber surge pricing when demand is high and lower prices when demand slows.


Other industries are quickly adapting to this new way of pricing, especially when seeing the potential for increased revenue and more balanced demand patterns.


When will the restaurant industry be able to take advantage of this trend?


Tech providers are prepping for restaurant dynamic pricing


It’s no secret that restaurants have been hit hard the last two years, and the pandemic has meant that operations and revenue have been a nonstop rollercoaster ride for most. As a result, restaurants are looking for ways to increase revenue, and tech providers are thinking ahead in order to help.


Dynamic pricing has become a mainstay for many services, and food delivery apps are starting to move towards that model for restaurants too.


In theory that lays the groundwork for restaurants to start implementing similar methods. In practice though, restaurants don’t have the technology to do so, leaving money on the table. Third-party delivery apps are increasing delivery fees during peak times, and while the logical next step would be for restaurants to follow suit, they simply don’t have the capability.


Restaurants have an incredible opportunity in front of them

I wrote earlier about how the time is now for restaurant dynamic pricing, and I stand by it.


Most restaurants are still recovering from the pandemic and are still at risk for increased revenue loss. There is a lot of unpredictability, and tech providers like third-party delivery apps are moving quickly to capitalize on new revenue models. Restaurants need to work fast to adapt. With food and labor costs on the rise, it’s crucial for restaurants to build direct revenue streams and grow their business.


One concern among restaurateurs is that restaurant dynamic pricing may anger customers since it sometimes results in increased pricing. But data from other industries suggests otherwise. Take a look at this case study published by PMQ Pizza Magazine.


Furthermore, there are many different approaches to implementing dynamic pricing and restaurants have less aggressive options available that customers are more likely to accept. For restaurants offering discounts, in some cases lower pricing can work to lure more price-sensitive customers during off-peak periods.


Restaurant dynamic pricing helps restaurants become more efficient and rewards customers accordingly. Look at it this way; restaurants have fixed capacity - they can only cook a certain amount of meals at any given time with the resources available. That means that peak times are chaotic, and slow times mean a loss in revenue.


However, restaurant dynamic pricing helps alleviate that. It smooths out the demand pattern for restaurants and evening out the drastic peaks and valleys - while strengthening the restaurant’s direct revenue channel.


Price-sensitive customers will take advantage of those slow times to get a deal, while others will pay the increased price for speed and convenience. Rather than making the decisions for customers and eschewing restaurant dynamic pricing altogether, it’s time to let customers decide the value of the service.


Dynamic pricing is happening already, and the industry is starting to prepare. It’s better to be ahead of the curve than behind when it comes to ways to increase revenue for restaurants. It’s an incredible opportunity for restaurants, and those that adopt early will see real benefits. For more information on dynamic restaurant pricing, including trends and case studies, make sure to check out other articles on our blog here.


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