Key facts
- McDonald's is using artificial intelligence to guide menu prices across U.S. and some global markets.
- The AI pricing engine analyzes millions of daily transactions to determine optimal prices for each menu item at each location.
- Screenshots show the pricing engine messages indicating "customer willingness to pay in your area" and competitor pricing.
- A Big Mac sold for $5.69 at one company-run store in Fresno, California, and $6.89 at another two miles away.
- Five franchisees told Reuters the company pressured them to use the AI pricing tools.
- McDonald's states its pricing portal is a "tool, not a mandate" designed to help franchisees make informed business decisions.
McDonald's is increasingly leveraging artificial intelligence to set menu prices across its U.S. and some international locations, a strategy that aims to increase corporate profits but carries risks of alienating customers and attracting antitrust scrutiny. The company's AI-powered pricing engine analyzes millions of daily transactions from its nearly 14,000 restaurants to determine what it calls "the optimal price" for each item at each location.
This system has reportedly widened price differences for identical products between restaurants, even within the same neighborhoods. Screenshots reviewed by Reuters show the pricing engine informing franchisees about their restaurant's "SENSITIVITY to Price" based partly on "customer willingness to pay in your area" and competitor pricing data. For instance, a Reuters check in September found a Big Mac priced at $5.69 at one company-run store in Fresno, California, and $6.89 at another just two miles away.
While McDonald's states franchisees are free to set their own prices, five store owners told Reuters they felt pressured to adopt the AI pricing recommendations. An internal document from June indicates McDonald's tracks franchisees' deviations from these recommendations. In January, the company began requiring franchisees to "constructively engaging with McDonald’s approved Pricing Consultant and Tools" as part of new business standards.
McDonald's defended its practices, stating that costs and market conditions vary among its stores, and that the pricing portal is a "tool, not a mandate" to help franchisees make informed decisions. The company described Reuters' reporting as "speculative and uninformed." Competitors like Wendy's and Burger King stated they do not use AI for pricing decisions. Wendy's previously faced criticism for discussing "dynamic pricing" but stated it did not implement such a system. Instacart discontinued its use of AI pricing tools for different shoppers after public backlash.
The use of AI in pricing also raises potential regulatory concerns. U.S. courts and regulators are examining whether algorithmic pricing can facilitate illegal coordination among competitors, a risk McDonald's itself acknowledges in its legal terms for the pricing portal, noting that restaurant owners "may be competitors."
In 2023, McDonald's CEO Chris Kempczinski mentioned the development of proprietary pricing tools. One Connecticut franchisee, George Michell, alleged in a lawsuit that the tool suggested an $18 Big Mac meal price off a state turnpike. McDonald's disputed the lawsuit, stating Michell breached his franchise agreements. The company has used some form of AI pricing tool since at least 2019. While the engine has recently pushed more conservative pricing, including some decreases, to attract customers, U.S. foot traffic at McDonald's has declined year-over-year since March, according to Placer.ai estimates.