The Pulse
McDonald’s AI Pricing Engine Estimates What Diners Will Pay
McDonald’s uses an AI pricing engine to recommend menu prices by restaurant, drawing on transaction data, local demand and nearby competitors’ prices. Reuters found franchisees face pressure to use the recommendations, while the company say
AI.info Team · Written with AI ·
“You don’t really have much of a choice anymore”
Karen King, former McDonald’s franchisee
Karen King’s comment captures the tension at the center of McDonald’s expanding use of artificial intelligence in menu pricing. In a Reuters investigation published September 29, the company’s pricing engine emerges as a system that recommends item prices for individual restaurants, including by estimating how much local customers are willing to pay. McDonald’s says the tool offers guidance, not orders; franchisees interviewed by Reuters described pressure to follow it.
Recommendations for nearly 14,000 restaurants
The engine uses machine-learning algorithms to analyze data from millions of daily transactions across McDonald’s nearly 14,000 restaurants. It generates what the company calls an “optimal price” for each menu item at each location, from Big Macs to discounted coffee for seniors. The system also draws on public prices listed on nearby competitors’ online menus, including those of Wendy’s and Burger King.
Its recommendations are location-specific, not individual prices calculated separately for each customer. But the system does consider estimated customer willingness to pay in an area, according to screenshots Reuters reviewed. Three franchisees told Reuters that the engine has widened price differences for the same product between restaurants, including locations in the same area.
A September check of McDonald’s app prices found a Big Mac listed for $5.69 at one company-run Fresno restaurant and $6.89 at another company-run location two miles away—a 21% difference. Reuters said it could not establish whether the pricing engine caused that gap or whether other factors accounted for it. McDonald’s said costs and other conditions vary between restaurants, including those only a few miles apart.
McDonald’s says franchisees set the final price
The company says franchisees remain free to choose their prices. Its pricing portal describes itself as “a tool, not a mandate,” offering restaurant-specific recommendations to help owners provide value and make business decisions. Yet five store owners told Reuters that McDonald’s pressured them to use the tools, and a company document tracks how franchisees depart from recommendations.
McDonald’s began requiring franchisees in January to engage constructively with its approved pricing consultants and tools, according to an internal communication reviewed by Reuters. The company sends pricing guidance at least three times a year. King and other franchisees described calls from corporate officers after they diverged from the recommendations; CEO Chris Kempczinski told investors that pricing non-compliance can enter some franchisee business reviews.
The engine can recommend restraint as well as increases
The system does not simply push prices upward. Some franchisees said it recommended large increases during the pandemic and the inflation that followed, while in recent months it has called for more conservative pricing, including some reductions. Two former employees of Tiger Analytics, which runs the platform, told Reuters that McDonald’s sets targets and rules for the engine.
Those instructions can limit when the system recommends an increase: examples include concentrating increases on items that have gone at least two years without one, restricting increases to items already raised in at least 30% of stores, and excluding ice cream and drinks from summer price hikes. McDonald’s has used some form of AI pricing tool since at least 2019, Reuters reported.
The incentives differ across the system. McDonald’s corporate revenue largely comes from a share of franchisees’ sales, while restaurant owners must manage their own expenses. The National Restaurant Association estimates wages, rent and other restaurant costs have risen 36% since 2019. Lower prices may draw more customers and lift corporate revenue, even as individual franchisees weigh whether those prices cover their costs.
Pricing guidance brings legal and reputational questions
McDonald’s portal warns users that franchisees “may be competitors of each other” and tells them to follow antitrust and competition laws. William Kovacic, director of George Washington University’s competition law center and a former Federal Trade Commission commissioner, told Reuters that the warning acknowledges a potential problem. Other experts cited by Reuters said the legal risk may be limited, given courts’ history of allowing brands broad control over franchisee pricing.
McDonald’s said it takes antitrust compliance seriously and that the warning in its terms does not show anticompetitive conduct. The FTC and Justice Department did not respond to Reuters’ requests for comment. Meanwhile, the company’s pricing engine continues to produce recommendations, while its contract terms say franchisees remain responsible for the final number on the menu.