A new report claims McDonald’s is using an AI-powered pricing engine to analyze data from millions of transactions across thousands of restaurants to create the “optimal price” for food items at each location. This has reportedly led to McDonald’s locations a few miles apart charging vastly different prices for the same burger.
On September 29, Reuters reported that it had talked to multiple franchise owners and examined screenshots of the pricing engine. In those screenshots, it spotted messages that mention some McDonald’s locations were labeled “MEDIUM SENSITIVITY to Price” based on “customer willingness to pay in your area.” The outlet also checked prices of two corporate-owned stores that were just two miles apart in California and found that one was selling a Big Mac for $5.69 and the other was selling that same burger for $6.89.
McDonald’s, which has been using some form of algorithm-powered pricing systems since 2019, told the outlet that franchise owners are free to set their own prices and dismissed the report as being inaccurate and uninformed. But in recent years, the company seems to be pushing harder for all locations to use the new AI tools.
According to Reuters, five store owners told the outlet that they felt pressured to use the AI-pricing tools, and it was reported that McDonald’s HQ keeps track of stores that deviate from recommended pricing. This has sometimes led to tension between store owners and McDonald’s corporate, but not always over raising prices. Many owners are pushing back against McDonald’s reportedly wanting lower prices on cheaper-to-make items to entice people into their stores.
In January, McDonald’s reportedly began requiring franchise owners to begin “constructively engaging with McDonald’s approved Pricing Consultant and Tools” as part of new rules and standards. However, McDonald’s is aware that AI-powered pricing systems are not only bad PR, but could also be breaking the law.
At some locations, other McDonald’s franchises are considered competitors, and owners could get in legal trouble if they begin changing prices as part of a larger coordinated effort with nearby stores. McDonald’s is well aware of this risk, and Reuters reports that the pricing engine software contains a message to owners that they “may be competitors” and advising them to speak to their own lawyers about any legal issues or concerns.