Dive Brief:
- Noodles & Company hinted at testing dynamic menu pricing on its earnings call earlier this week, and later confirmed this intent to Nation’s Restaurant News.
- On the company’s Q4 2022 earnings call, Noodles executives said digital menu boards will allow it to be more flexible with pricing and change featured menu items. The chain has already seen digital menu boards drive sales of gift cards and promoted items.
- Dynamic menu pricing could become more common in the restaurant sector as operators adjust to economic uncertainty, but there may be resistance from some customers, experts told Restaurant Dive.
Dive Insight:
Noodles expects pricing to moderate in the back half of the year, but supply chain uncertainties, the possibility of rising labor costs and continued inflation pressure may override that assumption. Noodles did not immediately confirm to Restaurant Dive if it has already started implementing dynamic pricing, or the range of changes in pricing it would consider implementing as part of the test.
“Pricing during the fourth quarter was approximately 9% related to pricing actions taken during the first half of 2022,” Carl Lukach, Noodles’ CFO, said on the earnings call. “In February of 2023, we took incremental price of approximately 5% across our core menu, which we expect to result in first quarter pricing just above 10%.”
While digital technology makes it easier to shift menu prices, regulatory authorities are beginning to look at the practice with a more critical eye. Earlier this week, buried in a detailed set of proposed price gouging rules, New York State hinted that it would consider some forms of dynamic pricing to be price gouging if it exceeds certain percentage changes to median prices during times of emergency, such as the COVID-19 pandemic. Consumer and regulatory resistance to dynamic pricing may increase if inflation continues to be relatively high, especially as restaurant companies including Noodles are still raising pricing.
