McDonald's is reportedly using AI to "dynamically" price its burgers
Algorithms estimate "customer willingness to pay" at each location.
McDonald's has been using artificial intelligence to dynamically price menu items in the US and some global markets, according to a report by Reuters. This involves finding the "optimal price" to match what a particular store's patrons would be willing to pay.
This fluctuates according to location, and even stores in the same city can have different cost amounts for the same exact items, according to information reviewed by Reuters. This is basically surge pricing, like with ride-share platforms, but for fast food items.
Reuters got a look at the interface that franchisees use to access this technology. Messages show stuff like "your restaurant is showing MEDIUM SENSITIVITY to price" based on "customer willingness to pay in your area." Cost differences at nearby locations can be stark. Researchers found that a Big Mac at a Fresno, California store cost $5.69, but the same burger cost $6.89 at another branch two miles down the road, marking a 21 percent difference.
McDonald's says that franchisees are free to set their own prices. This could be true in theory, but a handful of store owners told Reuters that the company pressures them to use the new AI tools. A corporate document reviewed by the publication shows that McDonald's tracks adherence to the platform, and notes any deviations from the algorithm's price recommendations.
Additionally, the company has begun requiring franchisees to be "constructively engaging with McDonald's approved Pricing Consultant and Tools" as part of its new business standards. This is according to an internal communication sent to franchisees. Company documents reportedly show that McDonald's sends AI pricing guidance to franchisees at least three times a year.
Store owners also described phone calls with corporate after they strayed from those recommendations. Former store owner Karen King noted that store owners do not have much of a choice anymore. McDonald's corporate holds significant power over franchisees regarding license renewals and opening new locations. CEO Chris Kempczinski recently told investors that pricing non-compliance is part of those conversations.
The company acknowledges that using this dynamic pricing system could open up franchisees to legal hurdles. The pricing portal's terms of service reportedly warns that owners may be competitors and must comply fully with antitrust and competition laws, while reiterating that franchisees are free to determine final prices.
The document also suggests that these store owners should seek independent legal counsel. Former FCC commissioner William Kovacic told Reuters that the language in the service agreement acknowledges a potential problem given recent scrutiny of pricing algorithms.
McDonald's has decried Reuters' reporting as speculative and uninformed. The company states the pricing portal is a tool rather than a mandate, designed to provide restaurant-specific recommendations to help franchisees deliver value for customers.
The company has been using some version of this technology since at least 2019, according to Reuters. In 2023, CEO Kempczinski boasted to investors that it had developed proprietary tools to evaluate pricing at individual restaurants.
These tools have previously caused friction by maximizing for price. The platform suggested to a Connecticut franchisee that the location should charge $18 for a single Big Mac, leading to a viral response and an ongoing lawsuit alleging discriminatory practices.
Other franchisees have alleged that these tools recommended large price increases during the pandemic and afterward as inflation continued to soar. McDonald's makes a significant portion of its money by taking a percentage of each store's total revenue.
Other companies have faced public backlash over similar concepts. Wendy's faced criticism in 2024 after mentioning plans for dynamic pricing, leading the company to clarify that it does not use customer data for pricing. Instacart and Walmart have also faced consumer pushback regarding algorithmic pricing models and digital price tags.
Instacart tested a platform showing different prices depending on algorithmically decided variables before ending its use of AI pricing tools due to consumer outcry.
Walmart faced consumer pushback over digital price labels, with executives vowing not to use personal information to influence prices based on the time of day or consumer identity.
Despite pushback, some corporations continue implementing AI technologies. Yum Brands, owner of KFC and Taco Bell, has developed AI platforms including a dynamic drive-thru menu that changes based on approaching vehicles.
As for McDonald's, business has faced recent declines with low-income consumer traffic dropping over preceding years, highlighting ongoing economic challenges for fast-food chains.
