Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Use Dynamic Pricing to Boost Margins
Transcript
- Lucas: So, Luna, you know how we always talk about squeezing more revenue out of the same four walls—better labor schedules, smarter marketing, tighter leases. Today I want to hit something that most franchisees never touch because it feels too risky: dynamic pricing. Luna: You mean like surge pricing for a burger joint? I can already hear the customer complaints. Lucas: Exactly, but here's the thing—hotels and airlines have done this for decades, and ride-share apps made it mainstream. Yet if you walk into a typical quick-service franchise, the menu prices are the same at eleven a.m. and six p.m., even when the line is out the door. That's leaving money on the table. Luna: But isn't there a difference between a hotel room and a burger? People might feel like you're gouging them when they're hungry. Lucas: You're right, and that's why the play isn't to just jack up prices across the board. The play is to be smart about when and how. I read about a franchise group running a regional chain of about forty quick-service locations. They tested a twelve percent price bump during their lunch rush, from eleven-thirty to one-thirty, on their top-selling combo meals. They kept the regular price on everything else. Luna: And what happened? Did the line shrink? Lucas: Surprisingly, no. Average order value went up, and while they did see a small dip in transactions—about three percent—the revenue per store jumped by roughly eight percent. And because the extra revenue flowed straight through, store-level EBITDA rose by almost nine percent. Luna: That's a meaningful bump. But how did they pull it off without a backlash? I feel like I would've seen the news story. Lucas: The key was framing. They didn't just change the numbers on the menu board. They introduced a 'Rush Hour Value' menu—actually the name was different, but the idea was that during peak hours, you pay a little more for the convenience of faster service, and they also added a guaranteed order-ready-in-five-minutes promise. So the higher price came with a tangible benefit. Luna: So it's not just about charging more; it's about giving something in return. That makes sense. Lucas: Exactly. And the thing is, most franchisees have the data to do this already. Your point of sale system tells you exactly when the rushes hit. If you're a coffee shop, it's seven to nine a.m. If you're a pizza place, it's Friday and Saturday night. You don't need a fancy algorithm. You just need to pick your busiest hours and test a small increase. Luna: But isn't there a risk that customers feel like you're taking advantage of them? Especially in a small town where everyone knows each other. Lucas: That's a real concern, and it's why you have to be careful. The franchise group I mentioned was in suburban markets, not tiny towns. But even there, they made sure the increase was modest—twelve percent, not fifty. And they only did it on combos, which are already a bundle, so the per-item price didn't change as much. Luna: So it's about testing and measuring, not just flipping a switch. I like that. But what about the operational side? If you have a rush and you raise prices, do you need to do anything differently in the kitchen? Lucas: That's a good question. In that case, the higher price was partly to manage demand—to nudge some people to come at off-peak times. But they also used it to cross-sell. When someone ordered a combo, the system prompted the cashier to offer a larger drink for just fifty cents more. That's a classic upsell, but combined with the price bump, it lifted the average check even further. Luna: So dynamic pricing isn't just about raising prices; it's about changing the whole revenue mix during peak times. Lucas: Right. And that's why I think it's one of the most underused levers in franchising. On this show, we've talked about referral programs, lease audits, labor analytics—those are all good. But pricing is the fastest way to improve margins because it doesn't require more staff, more marketing, or more square footage. You're just charging more for the same product at the right moment. Luna: Before we go deeper, I want to mention something that's been on my mind. We keep the show ad-free, and a lot of that is thanks to listeners who toss a few bucks our way. If today's conversation helped you think about your business differently, you can support the show at buy me a coffee dot com slash fexingo. It's a small way to keep these conversations going. Lucas: Yeah, that's a good reminder. And we're not talking about a big commitment—just whatever feels right. We appreciate anyone who's ever contributed; it genuinely keeps us going. Luna: Okay, back to pricing. So we've got the basics: test a small increase during your busiest hours, frame it with a benefit, and watch the data. But I'm curious—what's the biggest mistake franchisees make when they try this? Lucas: The biggest mistake is trying to be too clever. They install dynamic pricing software that changes prices every fifteen minutes based on real-time demand. And they don't tell the staff, or they don't explain it to customers. So you have someone at the counter who's clueless when a customer asks why the price changed. That's a recipe for disaster. Luna: So it's not about the tech; it's about the execution. You need buy-in from your team and a clear way to communicate value to the customer. Lucas: Exactly. And you have to be transparent. If you're raising prices because it's busy, you have to frame it as 'we're giving you faster service and a guaranteed experience.' If you just change the menu board, people feel ripped off. But if you offer a 'priority service' fee or a 'peak time convenience' line item, suddenly it's a value exchange. Luna: But doesn't that feel a bit… salesy? Adding a fee for something that used to be free? Lucas: It can, but think about it—airlines have been doing this for years. You pay more for a seat with extra legroom. You pay more for a checked bag. And consumers have accepted it because they get something in return. The same logic works in a sandwich shop. If you're guaranteed to get your order in five minutes during the lunch rush, that's worth something. Luna: I see. So it's about shifting the conversation from 'you're charging more' to 'you're offering a better product.' Lucas: Precisely. And the beauty is, you can test this without any new software. Just pick one store, one peak window, and one combo. Raise the price twelve percent. Add a small sign that says 'Rush Hour Guarantee: Order ready in five minutes or your next meal is free.' Then measure your sales, your guest counts, and your profit for two weeks. Compare that to the previous two weeks. Luna: That sounds simple enough. But what if you're in a franchise system where the corporate office sets the prices? Can you even do this on your own? Lucas: That's a real constraint, and it's worth checking your franchise agreement. Some brands have strict pricing guidelines, especially for advertised items. But many allow franchisees to set their own prices within a range. And if the brand doesn't allow it, you can still use the principles—like bundling or upselling—to achieve the same effect without changing the base price. Luna: So it's about working within the system. I like that. But let's talk about the bigger picture—this is August 2026, and the consumer is pretty price-sensitive right now. Isn't this the worst time to raise prices? Lucas: You'd think so, but actually, it might be the best time. When inflation is high, people expect prices to rise. They're used to seeing increases. The key is to be transparent and not look like you're profiteering. A small, well-communicated increase during your busiest hours is less likely to cause backlash than a broad price hike across the menu. Luna: That's a good point. And you mentioned the consumer is price-sensitive—so the value proposition becomes even more important. You have to show them what they're getting for that extra money. Lucas: Exactly. And that's why the five-minute guarantee works so well. It directly addresses the biggest pain point during lunch rush—waiting. If you can promise speed, people will pay for it. I've seen franchisees do this with a 'fast lane' for mobile orders—pay a little extra to skip the line. It's the same principle. Luna: So what's the takeaway for our listeners? If they want to try this, what's the first step this week? Lucas: First, pull your point of sale data and identify your busiest hour. Second, pick one core product—something with high volume and a known cost. Third, decide on a small increase, say ten to fifteen percent. Fourth, add a clear benefit—a guarantee, a freebie, or a faster service. Fifth, communicate it to your staff and your customers. And sixth, track the results for at least two weeks, including your transaction counts and your profit per order. Luna: Sounds like a manageable experiment. And if it doesn't work, you can always revert. Lucas: Right. The worst case is you learn something about your customers. And that's never wasted. The best case is you find a way to lift your margins without adding a single dollar of fixed cost. Luna: I love that. And it's a nice contrast to all those big-data discussions we have—sometimes the simplest pricing tweak can be the most powerful. Lucas: Absolutely. And it's something every franchisee can try, regardless of their tech budget. You don't need a data science team. You just need a point of sale, a watch, and the willingness to test. Luna: So, Lucas, if you had to sum it up in one sentence for a franchisee who's considering this, what would you say? Lucas: Don't think of dynamic pricing as a way to soak your customers; think of it as a way to match price to value, and you'll be surprised how many people are happy to pay a little more for a better experience. Luna: That's a great note to end on. Thanks for breaking this down, Lucas. And to our listeners, if this episode gave you an idea, maybe consider supporting the show at buy me a coffee dot com slash fexingo. We'll be back next time with another practical angle to help you build a better franchise.