Restaurants Are Adapting Uber's Surge Pricing Model

Surge pricing, a controversial tactic made famous by Uber that jacks up prices based on demand, is now quietly sneaking into the restaurant business. A bunch of small chains and indie restaurants across the country are using data-driven systems to play with menu prices during rush hours.

According to startup Sauce Pricing, which sells the dynamic pricing software, inflated lunch prices scored some restaurants thousands in extra profits. The LA tech company said in a blog post that " restaurants can hike prices 10-20% during busy hours, forcing customers to pay additional $1-$2 for a typical $10 menu item."

One Sauce Pricing customer, Rachel's Kitchen in Las Vegas, pulled in an extra $64,000 a year across its three locations. Customers may (and should, in my opinion) complain about paying more for popular dishes like burgers and fries, but supporters say surge pricing lets restaurants make more money and cut the expenses and fees from delivery apps like UberEats, Grubhub and Doordash.

Earlier this month, Wendy's announced plans to test a similar demand-based pricing system. But so far, most price hikes have only happened online, protecting in-store diners from getting gouged.

While data-driven approaches are old news for airlines and hotels, it's pretty new for restaurants. However, as costs keep rising in the industry, smaller chains and family-owned spots may soon have to take this route too.