Inside McDonald’s push to have AI price your Big Mac

McDonald's is increasingly leveraging artificial intelligence to determine the pricing of its menu items, including the iconic Big Mac, across the United States and other global markets. This initiative aims to increase profits for the company but may also result in customer dissatisfaction and potential antitrust concerns. One of the key factors influenced by AI in this pricing process is an assessment of how much customers at each individual store are willing to pay.

Reuters conducted an investigation, reviewing screenshots of McDonald's pricing engine from August and interviewing nine sources familiar with the company's strategy. According to these sources, the AI-powered pricing engine continuously analyzes data from thousands of transactions made daily at McDonald's nearly 14,000 restaurants, generating an "optimal price" for each menu item at each location.

The use of AI in this pricing system has led to wider price disparities for the same product between restaurants, even within the same area. Franchisees have reported that the pricing engine categorizes restaurants as having varying levels of price sensitivity based on the customer's willingness to pay in their area. This data is also derived from public price information obtained from online menus of competitors such as Wendy's and Burger King, who assert that they do not employ AI in their pricing decisions.

A review of prices on McDonald's mobile app in September revealed price differences for the same product. For instance, a company-operated store in Fresno, California, charged $5.69 for a Big Mac, while another company-run restaurant located two miles away charged $6.89, representing a 21% premium. However, it cannot be confirmed if this price difference is due to the AI pricing engine's recommendations or other factors.

McDonald's maintains that its franchisees have the freedom to set their prices; however, five store owners informed Reuters that the company has pressured them to utilize the AI pricing tools. McDonald's records of franchisees' deviations from these recommendations are detailed, as documented in a June franchisee document reviewed by Reuters. In January, McDonald's began mandating franchisees to engage with an approved Pricing Consultant and Tools as part of its updated business standards.

In response to the Reuters' report, McDonald's stated that costs and other factors vary across its stores, and that even restaurants a few miles apart may belong to different markets. The company further described the pricing portal as a tool, not a mandate, designed to provide restaurant-specific recommendations to help franchisees deliver value to customers and make informed business decisions.

McDonald's also dismissed the Reuters report as "speculative and uninformed" and characterized it as an attempt to portray a standard business practice as controversial.

The implementation of AI pricing practices in the fast-food industry has raised potential regulatory and reputational risks. Other consumer companies, such as Yum Brands (owners of KFC and Taco Bell), have also turned to AI for pricing and other operations. Yum did not immediately respond to a request for comment. In a recent investor meeting, McDonald's highlighted its AI pricing engine as a critical component of its affordability-focused strategy, emphasizing that franchisees recognize the need for affordable menu items to attract low-income consumers.

However, this shift toward AI pricing in the fast-food sector carries potential legal and reputational risks. Other companies have faced public backlash after disclosing the use of algorithms to price the same product differently. In 2024, Wendy's faced criticism over its potential "dynamic pricing" plan, but later clarified that it did not implement the system.

In December, Instacart ended its use of AI tools displaying different grocery prices to different shoppers following criticism from consumers and lawmakers. Instacart announced it would never use personal information to determine item prices.

As AI becomes more prevalent in various industries, U.S. courts and regulators are closely examining whether algorithmic pricing practices facilitate illegal coordination between competitors – a concern that may extend to franchisees, who are sometimes considered competitors. McDonald's warns that franchisees accessing its pricing engine portal risk scrutiny related to antitrust prohibitions, as the restaurant owners "may be competitors," according to screenshots of the legal terms for the portal reviewed by Reuters in August.