From: lessgovt@gmail.com   
      
   How America’s Largest Restaurant Franchisee Decides When to Raise Prices   
   By Heather Haddon, May 21, 2023, WSJ   
   When some McDonald’s restaurants last year raised soft-drink prices, many   
   diners bemoaned the loss of the chain’s long-running $1 drinks deal. At   
   Flynn Restaurant Group, Ashley Fenn started running numbers.   
      
   Fenn and her team of data scientists decided Flynn’s Wendy’s locations in   
   Delaware, Maryland and Virginia could bump up their own drink, fry and dessert   
   prices and not risk losing customers to rival McDonald’s stores. After   
   determining that the    
   move helped cover costs without dragging down customer counts, the restaurants   
   slightly increased drink prices again this year, executives said.   
      
   San Francisco-based Flynn, considered the largest U.S. restaurant franchisee   
   with more than $4 billion in annual sales, is harnessing reams of internal and   
   competitor data to take a more surgical approach to selling fast food and   
   sit-down meals.   
      
   The company’s two-year-old data team has sought to better track what   
   competitors are charging. And as inflation wears on consumers, Flynn is also   
   studying whether prices can come down for certain items without hurting   
   profit.    
      
   “It speaks to the growing sophistication of our business. There’s a lot of   
   money at stake,” said Greg Flynn, who owns more than 2,350 restaurants   
   spanning Applebee’s, Taco Bell, Panera Bread, Arby’s, Wendy’s and Pizza   
   Hut chains.    
      
   Many restaurants increased their prices three to five times last year, up from   
   a typical two to three cost hikes annually, according to industry consulting   
   firm Revenue Management Solutions. Fast-food prices were up 8.2% in April   
   compared with last year,    
   outpacing annual inflation at grocery stores for the first time since early   
   2022, according to the Labor Department.    
      
   Many restaurant chains say they are planning to further increase menu prices   
   this year as inflation persists. Some chain executives have warned that   
   consumers might have a harder time bearing price increases later in the year,   
   with an economic downturn    
   looming.   
      
   Retailers have long employed sophisticated data tools to study the impact of   
   pricing, built with data gathered from frequent checkout-counter purchases and   
   from prices posted online. Hotels and airlines for decades have crunched   
   numbers to help set    
   prices for individual markets and adjust them based on demand.    
      
   Restaurant operators have traditionally lagged behind other industries in   
   integrating data to help set prices, as their customers don’t come as   
   frequently as they do to grocery stores, industry executives said. To assess   
   competitors’ prices,    
   restaurant owners typically visited other area restaurants and usually raised   
   their own prices once or twice a year across multiple locations.   
      
   “We had local marketing teams that would go out and steal all the menus and   
   enter them into an Excel file,” said Ron Bellamy, Flynn’s chief operating   
   officer.   
      
   In 2019, as Flynn’s restaurant holdings grew, executives discussed how they   
   could build a better system to guide their restaurant managers on prices. The   
   pandemic put the work on pause, but as sales started to stabilize in 2021,   
   Flynn began to put    
   together a business analytics arm in its support center outside of Cleveland.    
      
   Flynn that year hired Fenn, who earned a Ph.D. in neuroscience and was working   
   in consulting at McKinsey. They recruited other industry pricing and marketing   
   specialists to build a nine-person team. Flynn invested in computer servers to   
   warehouse reams    
   of data.    
      
   Data scientists collected prices for individual items across Flynn’s   
   restaurants, then layered on variables that could impact sales, such as bad   
   weather or a change in restaurant hours. They began regularly monitoring   
   prices for competitor restaurants    
   within a three-mile radius of their stores.   
      
   Pandemic-driven growth in online ordering helped the effort, Mr. Bellamy said,   
   making more of rivals’ menus publicly available and allowing Flynn to   
   monitor prices down to individual items sold by a chain and across different   
   markets.    
      
   The data team discovered instances when Flynn’s restaurant managers had   
   boosted prices too much for individual items or too little compared with other   
   types of food. At Flynn’s roughly 290 Taco Bell restaurants, for example,   
   some stores had increased    
   prices for the brand’s popular Doritos Locos Tacos by around a dollar more   
   than the regular version, and some customers were starting to resist,   
   executives said. The team advised managers to stop raising prices on that   
   item.    
      
   The data team also found that prices at hundreds of Pizza Hut restaurants   
   acquired by Flynn in 2021 trailed competitors in many of their markets.   
   Restaurant managers have since lifted pizza prices by small increments to try   
   to help cover costs without    
   turning customers away, executives said.   
      
   Flynn now gets monthly reports on the pricing moves of its competitors, which   
   it uses to inform its own restaurant menus, executives said. It has developed   
   dozens of levels of pricing for its brands tailored to individual geographies.   
   Mr. Bellamy said he    
   hopes the team can eventually provide pricing suggestions down to an   
   individual restaurant.     
      
   Flynn said it pays millions of dollars a year for its data analytics team and   
   its infrastructure, but executives said the results are worth it. Company   
   profit increased around 35% in the first three months of this year compared   
   with 2022, and executives    
   attributed some of the gain to its data team.    
      
   Bellamy said the pricing experts might advise reducing some prices this year   
   if the economy falls into a recession. Some restaurant companies have   
   experimented with increasing prices hourly depending on time of day and   
   demand. Fenn said that Flynn is    
   evaluating how such surge pricing could work when customers order on delivery   
   apps serving its locations.    
      
   John Peyton, CEO of Applebee’s owner Dine Brands Global, said Flynn’s   
   quantitative approach has helped its locations raise prices enough to improve   
   profits while staying below some competitors’ increased prices.    
      
   “It was their data and analysis that gave them the insight as to that sweet   
   spot,” Peyton said.   
      
   https://www.wsj.com/articles/how-americas-largest-restaurant-fra   
   chisee-decides-when-to-raise-prices-178d3295   
      
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