Fast food pricing games are ridiculous
This morning I found a receipt in my kitchen. It was from my roommate, who had ordered pizza from Dominoes the night before. When I looked at it, I was shocked. There was a single line item on the order, two large pizzas for the sum of $75.98 USD. I thought, "what the hell is this? How is he spending so much on pizza? And the junk they sell at Dominos? They don't even make the crust there!"
But then I looked down to the actual amount paid and it had a discount: $54.00 off the price for buying two of them. So the effective price was a much more reasonable $10.99 each. That's less than a third of the sticker price. After tax and an in-house delivery fee, it was still under half of that price.
I don't eat out that often, and fast food is especially rare for me, so I've been fairly insulated from this, but it seems that this kind of thing is happening everywhere. One pizza place I do get food from occasionally is Pieology. Their pizzas were roughly $10 not too long ago, but in recent years those prices have ballooned, with some locations asking for $15 for the same pizza order. But the secret is that they are actually still selling pizzas for those prices if you use their app - it's just that instead of giving you the real price, you get free "perks", which is your choice of a drink, cookie, and things to that effect. I never go to McDonalds, but I've heard endless complaining about how expensive it is. The retort I hear is, "you better get the app". The app is a privacy nightmare that requires practically every permission it could ask for in order to function, so rather than actually getting deals you're just subsidizing the cost of your food with the sale of your personal data.
There's almost no way to definitively prove this, but one argument that I find compelling as to why restaurants are doing this is because of delivery apps. Delivery apps take omission from the purchase price, and people really don't like seeing that they're paying more for things on the apps than they would be in the stores, so shops are raising the base price of their food in order to make things seem more fair, while offering in-store discounts so that they don't lose out on revenue from lower-income people who wouldn't order from delivery apps. If that's the case, that would mean that people ordering from those delivery apps are not only paying more for the privilege, but they are actively pushing up the prices for everyone else as well. And that's just ridiculous.
I buy your argument for delivery apps as a cause, but I would also point out that coupons and discounts have always been a low-key form of price discrimination. They know there are a certain percentage of people that will never open the app, the mailed coupon ads, etc, but will still buy the food at high prices.
I'd argue the sole reason for it is the price discrimination. It's a roundabout way of asking "what's your time worth?"
Are rich people going to talk with their friends and discover the tricks to get a reasonable price? No, it's not worth their time and the risk of being seen as cheap. On the other hand, poorer people are absolutely going to spend 20 minutes figuring out the coupon game.
Having worked at McDonald's, plenty of rich people will take whatever economic advantage they can get, and plenty of poor people just want to eat and go. There was no correlation between wealth and app usage.
I worked fast food before apps (and just around when cell phones were becoming a layman option), and rich people would often be the ones sporting all the physical cut-out coupons.
I'd see poor folks paying full price just as often, so it never seemed like the financial background had any correlation.
For more well-off customers...probably? Isn't this just the credit card game? If one has the time and knowledge, one can really benefit and make money from having and using credit cards. But who most likely are those people? The people who already have money and a great credit score.
On the other hand, less well-off folks may just be signing up for Credit One's terrible cards via a random mailer, where they get a $400 credit limit, but the card has an annual fee of $199, and an interest rate of 40% with no grace period.
That said, you're right not all better-off people do any of that. Just like not all less well-off get involved in predatory credit cards. Like on reddit, both r/personalfinance and r/povertyfinance are basically the same: trying to keep their dollars and ideally get more of them. It's just the starting points are different.
Sure, I would agree to that, but it's something that has been part of commerce for at least the last 100 years. But I think that locking those discounts behind apps that require you to sell your data or asking for more than triple the price goes far beyond the norm. And the thing that's really bugging me is that it's become so widespread and common.
Is it lowkey? It is price discrimination. Price discrimination is generally considered a good thing. There’s no reason to hide it.
That’s a big statement… it (often, but not always) makes sense in abstract economic modelling, and usually helps companies to maximise profit, but that doesn’t necessarily make it good for the consumer. And that’s without even touching on ideas of equality, information asymmetry, and just a general sense of fair play that many people would consider “good” above and beyond the simple economic case.
I've seen online-specific items or combos in a couple of scenarios (Taco Bell comes to mind), but when buying direct from the restaurant/fast food place (app, online, or in-person), I haven't observed any extreme pricing differences.
Additionally, from the places I've purchased from, almost every one allows you to order from a web browser, with the ability to sign in and use offers without having to download an app. And I think the most that these mega companies would be doing (based on what the permissions allow them to) would be identifying common location areas where people make purchases to strategically expand to new locations, and identifying the effectiveness of how they position specials and other items in the app. But they could do this without an app too - billing address from your card + web interface being similar to the app as an example.
Now where the absurd pricing takes place is third party delivery apps - Uber Eats, DoorDash, GrubHub, etc. If you compare to a menu from the actual restaurant, each item is usually marked up by at least $1. I'm pretty sure they're doing this to compensate for the fees these services charge them (the restaurants), and I'm actually fine with that, as it wouldn't be fair to increase their direct prices too. But if you choose to buy from them, unless you are strategically using an offer from one of these delivery apps, you will likely play an extra ~$20, not including tip. It's pretty nuts.
I helped develop the backend for the app that taco bell uses. In 2020 there was no difference in pricing between the app, the kiosk, and the pos that the employees use to take orders. The only up-charge was the few dollars that Doordash added to the final order.
That being said, its been years, and its certainly possible to use the order source value to change the price of the items. They’d just have to build a feature to use that value instead of a discount value.
I actually did place an order on the website a while back. I don't do delivery apps, but the website had the same price as the store; it actually adjusts based on which location you have selected. The thing that they are doing, though, is that they have web/app exclusive menu items that are a better value than what they offer on their in-store menu. While I still don't care for it, I find it preferable to some of the other things happening. I seem to remember Chipotle doing something like this but much worse; you can only order their quesadillas online. Don't know if they're still doing that.
I thought this was because they took much longer to make (melting cheese etc), and they don't want someone in-person to mess up the assembly line of burritos.
Perhaps. I only saw this when it was first put in and it was before this trend of price craziness began.
Oh interesting, a web exclusive item is a lot easier to create than what I was thinking with just hijacking the discounts feature. Neat.
It may have been around 2021 that they started online exclusive items in the app. But they make it very transparent- here's a link to Online Exclusives in the menu on their ordering site. But it probably varies a bit per franchise.
The main reason I know that is because they had a build your own combo for $5 that could include a Crunchwrap and beefy five layer burrito, both of which alone would cost more than $5. Their pricing has gone way higher since then, which is another story entirely.
I can say that while there are online deals like that (and boy do I miss the breakfast crunch wrap meal box for 5 bucks) the rest of their pricing seems identical.
McDonald's offers more coupons/special deals - and I can hardly beat 2 bucks for a breakfast sandwich elsewhere. And while eggs were expensive it was almost cheaper than homemade.
But I don't see menu items with different prices outside of those specific offers, which I see as exchange for them getting my info.
Interesting. They wouldn’t have even had to change much to just add the ability to create items that only appear on the web. The combo item would be an item with a plu, and then the ui takes you through changing the default options same as any other item.
I am curious if there was any other difference you may have noticed in the app vs in-person implementation that you noticed? Just 100% curiosity - I refuse to use any app for most anything, but I know these days points and loyalty and all those shenanigans are huge selling points. I'm wondering if maybe you noticed something before the trend?
They were always giving away free stuff, when the app first came out you could get free crunchy tacos with your meal. This was like 2014.