McDonald’s in the U.S. Has Begun Using AI to Set Menu Prices — Reuters
McDonald’s in the U.S. uses artificial intelligence to make pricing recommendations for its restaurants. The system takes into account local demand, competitors’ prices, and customers’ willingness to pay, which is why the price of the same Big Mac may vary depending on the location.
Reuters journalists found that the system analyzes millions of daily transactions at approximately 14,000 McDonald’s restaurants in the U.S. Based on this data, the algorithm calculates what is known as the “optimal price” for a specific restaurant. It takes into account customers’ price sensitivity in a given area, competitors’ prices, and other local conditions.
As a result, the same menu items can cost different amounts even within the same city. Reuters cited the example of Fresno, California: at one restaurant, a Big Mac sold for $5.69, while at a location 3.2 km away, it sold for $6.89. The difference was about 21%. However, journalists were unable to determine whether the algorithm’s recommendation was the direct cause of this discrepancy.
An even more telling case occurred in Connecticut. According to the publication, the system recommended setting the price at nearly $18 for a Big Mac meal. Reuters was unable to independently confirm whether the restaurant itself implemented this recommendation.
The system also compares McDonald’s with competitors, including Wendy’s and Burger King. The system was developed for the company by Tiger Analytics and has been in operation since 2019.
The system relies on more than just sales data. McDonald’s set a series of corporate guidelines for it. In particular, the company advised prioritizing price increases for items whose prices had remained unchanged for at least two years. Another condition is not to raise prices on ice cream and beverages in the summer.
Restaurant owners receive recommendations from the corporate system, and the corporate office can track any deviations from the suggested prices. Five franchise owners told Reuters about pressure from the corporation. According to them, McDonald’s takes such deviations into account when evaluating the performance of its restaurants.
The publication also cites McDonald’s CEO Chris Kempczinski, who told investors how important these pricing recommendations are for continued cooperation with franchisees.
The company denies that it forces restaurant owners to set specific prices. It emphasizes that franchisees determine menu prices independently, and the algorithm merely provides recommendations.
Following the publication of the investigation, the company separately explained how the system works. According to the company, artificial intelligence does not set or change prices, does not determine the amount for an individual customer, and does not operate on the principle of personalized pricing.
McDonald’s emphasized that the algorithm assesses the situation at the restaurant level, specifically its location and local market conditions. The company also rejected accusations of dynamic pricing, where the cost of the same dish depends on the customer or the time of the order.
At the same time, McDonald’s acknowledges that it uses technological tools for pricing recommendations. The company attributes price differences between locations to local conditions: a restaurant near a transportation hub, in the suburbs, or in a small town has different costs, demand, and competition.
A single pricing tool also creates legal risks. The system itself includes a disclaimer that franchisees may compete with one another. Therefore, a shared pricing tool could potentially attract the attention of antitrust authorities.
The issue gained further traction following a Reuters investigation. On October 5, a proposed class-action lawsuit was filed against McDonald’s in the U.S. The plaintiff accuses the company of violating antitrust laws through a pricing system based on artificial intelligence and data from millions of transactions. McDonald’s called these allegations speculative and reiterated that prices are set by franchisees.
Algorithmic pricing isn’t used only by McDonald’s. Reuters also mentions other companies that have experimented with technologies that determine the cost of goods based on local demand and customer behavior.
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