McDonalds Has Secretly Deployed AI Models to Determine Exactly What to Charge You for Its Mid Fast Food Burgers

Recent investigative reporting by Reuters has revealed that McDonald's employs artificial intelligence models to determine exact pricing for its mid-range fast food burgers across the United States. The AI-driven system estimates the maximum amount customers from each store's area are willing to pay for the items. This process involves analyzing millions of daily transactions and subsequently generating an optimal price for each menu item at all its nearly 14,000 restaurants.

The implementation of this AI pricing engine has led to broader disparities in pricing between neighboring stores, with one instance of a Big Mac costing $5.69 in Fresno, California, and another just two miles away selling it for $6.89, representing a 21% price difference. McDonald's claims that the AI pricing tool is merely a "tool, not a mandate", but several franchisee owners indicated that they were pressured into utilizing the AI pricing scheme.

The fast food giant has become increasingly transparent in its use of AI-driven dynamic pricing in the food industry, although they typically remain discreet about such practices due to potential reputational risks. Instacart, a grocery delivery service, was recently caught experimenting with an AI pricing tool that resulted in increased costs for families, highlighting the potential financial ramifications of such technologies.

The AI-driven pricing system at McDonald's has also sparked tension between franchisees and corporate headquarters, as the AI models have recently recommended price cuts, which could negatively impact the revenue of individual store locations. McDonald's takes a percentage of each store's revenue, not profit, meaning they profit even if the franchisee is losing money.

The AI price recommendations are sent to franchisees at least three times a year, with compliance tracked and non-compliance considered in franchisee evaluations. The AI pricing strategy is informed by corporate objectives, such as raising prices on menu items that haven't had a price increase in at least two years, as determined by their partnership with the AI firm Tiger Analytics.

This isn't McDonald's first foray into using algorithms to streamline operations; they have previously experimented with AI-powered drive-thrus and an AI hiring system.