Wendy’s needs AI to handle its $1 Frosty demand

Wendy’s (WEN-1.86%) customers might owe their next $1 Frosty to the power of AI.

The fast food chain is using AI to manage its supply chain and prevent ingredient shortages before they happen, with software company Palantir Technologies (PLTR+4.63%) supporting that effort, as reported by Bloomberg.

“Leveraging our Frosty has been a game changer,” Wendy’s CEO Kirk Tanner said during the company’s earnings call on Oct. 31.

Wendy’s revealed that this AI system helped power its recent $1 Frosty promotion, which took aim at competitors’ unreliable ice cream machines. Instead of stocking up on extra inventory, which can be expensive, Wendy’s says it’s deploying Palantir’s AI-powered system to predict potential shortages.

This way, stores can be ready when droves of customers stop by to grab their sweet fix. After testing the system in fall 2023, Wendy’s found it was “so much better” than the old methods.

It isn’t Wendy’s first AI experiment. In Dec. 2023, the chain expanded its FreshAI chatbot to assist employees working the drive thrus. It insisted it was “not a replacement,” but rather a tool to help improve efficiency. Initial test results are promising, with plans to implement the tool at more locations across the U.S. in 2025, executives said on the earnings call.

Taco Bell (YUM+0.12%) is also embracing AI and has rolled out a voice assistant at drive-thrus in 13 U.S. states. As the restaurant industry faces rising costs and higher consumer expectations, these tech innovations are quickly becoming essential for staying competitive.

Wendy’s did not immediately respond to Quartz’s request for comment on whether AI-driven supply chain improvements could lead to job cuts.

Of course, it’s not just about supply chain efficiency. Wendy’s has been capturing the attention (and wallets) of customers with quirky, limited-time promotions like its SpongeBob KrappyPatty burger and Pineapple Under the Sea Frosty. These “food gimmicks” helped drive sales during the third quarter, alongside deals like the $3 breakfast bundle and $5 Biggie Bag. In the coming weeks, Wendy’s plans to add a new salted caramel frosty flavor.

In just a few years, fast-food chains that don’t adopt AI could find themselves at a serious disadvantage, according to Wendy’s supply chain co-op. The independent group, which buys goods and supplies on behalf of the franchisees, is banking on Palantir’s system to optimize operations and keep pace with the competition.