Restaurant Pricing Gets Smart in the Information Age

Uber’s delivery platform, UberEATS, features a dashboard where operators can make pricing adjustments on the fly.
Uber’s delivery platform, UberEATS, features a dashboard where operators can make pricing adjustments on the fly.
UBEREATS

An ongoing challenge for many a restaurant is maintaining a steady stream of foot traffic and meal orders, especially when any number of uncontrollable factors—bad weather, nearby construction, traffic jams, and more—has the potential to derail what could be a lucrative business day.

To protect against so-called “rainy day” sales slumps, many brands offer deals and special promotions to incentivize customer visits and delivery orders. These situational price adaptations aren’t new. But in 2017, many restaurants—particularly those with delivery—are beginning to consider how they can implement smart adaptive pricing on a daily basis to encourage customer business throughout the day.

The National Restaurant Association’s 2016 restaurant technology survey polled more than 500 restaurant operators and found that 36 percent of respondents would adopt automatic, demand-based menu-price adjustments if such technology were easily available. That was the second-highest desired tech improvement operators cited, after 53 percent who reported they would be interested in predictive ordering technology.

Many tech companies are now working to build products that meet this operator interest. Mobile app Gebni, a New York City–based startup, uses its own proprietary software to analyze demand for meals and constantly update those meal prices based on demand level. The system saves users money when demand is not at its highest, says Mohamed Merzouk, cofounder and CEO of Gebni.

He describes Gebni as a “stock market” for food delivery, with prices increasing and decreasing for specific items depending on what the demand is. Gebni uses machine learning and language processing to break down menu items by ingredients at each individual restaurant’s location, Merzouk says.

For example, if a chicken sandwich is in heavy demand during the dinner delivery rush, it will be comparatively more expensive than another dish that doesn’t share any of the chicken sandwich’s ingredients. Other sandwich options—a fish sandwich or a burger—with less demand than the chicken sandwich would also be cheaper, but not by as much since they share ingredients with the chicken sandwich (buns, tomato, lettuce, etc.).

Chris Pizzimenti, operator of Al Horno Lean Mexican Kitchen, a small Mexican quick-service chain in New York, says using Gebni helps incentivize customers to order throughout the day, not just during dinner or lunchtime. Pizzimenti knows his customers appreciate being able to order meals at a discount during off-times, and said he thinks college students and younger customers especially are interested in Gebni. Pizzimenti himself recalls eating bean burritos from Taco Bell to save money when he was a student at Hunter College in New York.

Meanwhile, the Uber empire is quickly growing its UberEATS platform, which has brought sharing-economy standards to online food ordering and delivery. Laura Zapata, an Uber spokeswoman, says operators who are UberEATS partners have full control of their menu and pricing. They can also use the UberEATS restaurant dashboard to make price adjustments on the fly, such as when the restaurant sells out of a particular item or has limited-time offers to introduce.

“There are some restaurants that test out new dishes on UberEATS because they have access to actionable data and feedback with tools like UberEATS Restaurant Manager,” Zapata says.

For example, Los Angeles–based Umami Burger offers an exclusive, UberEATS-only burger for users of its platform. Umami Burger COO Gregg Frazer says UberEATS comes up with innovative ways to incentivize users and restaurant partners to participate in special offerings to drive sales.

“These promotions allow for increased visibility of the brand, exposure to the brand, and increased sales,” Frazer says. “Examples include our exclusive burger with UberEATS, burger giveaways on select days, [and] promotions built around popular events like March Madness.”

Another aspect of the sharing economy that UberEATS has adopted is a “busy area fee,” which some in the media have likened to Uber’s surge pricing. The fee is tied to certain areas where demand is high and supply is low. Customers can avoid the uptick by ordering from a restaurant in a different geographic area. Zapata says the fee—which is added onto the booking fee associated with each order—ensures that delivery partners are still available to transport food even during busy times.

“UberEATS has a busy area fee at restaurants in areas where demand is high but delivery partners are scarce to ensure reliability,” Zapata says, adding that an an arrow below the restaurant name notifies customers about the additional fee.

Nevertheless, Frazer says that while the busy area fee can affect business, it’s not a big worry. “It seems to be more of a deterrent during the lunch daypart, when users are looking for a quick value-based offering, as opposed to the dinner daypart, when users might have more flexibility and larger spending budget,” he says.

Merzouk says adjustable pricing also aligns with restaurants’ increasing concern over their environmental impact. “Gebni helps prevent excess inventory from taking place, which avoids food waste,” he says.

Gebni has 300 restaurants on its network in Manhattan alone, and the company plans to expand to Brooklyn, Queens, and beyond in the near future.

Pizzimenti says that as Al Horno’s expands in the coming years, a price-adaptive tool will help support growth.

This story originally appeared in QSR's July 2017 issue with the title "Pricing Gets Smart."