McDonald's is using machine-learning algorithms to analyze millions of daily transactions across nearly 14,000 U.S. restaurants and generate location-specific "optimal prices" for every menu item, according to a Reuters investigation published by CNBC1,2. The system factors in an estimate of how much each store's patrons are willing to pay.
Reuters reviewed screenshots of the pricing engine taken in August and interviewed nine sources with firsthand knowledge of the chain's strategy. The interface displays messages such as "Your restaurant is showing medium sensitivity to price" based in part on "customer willingness to pay in your area". The platform also pulls public price information from online menus of nearby competitors including Wendy's and Burger King.
Widening price gaps
Three franchisees told Reuters the engine has widened existing price differences for the same product between restaurants, including from neighborhood to neighborhood within the same area. A Reuters check in September found a company-run store in Fresno, California, sold a Big Mac for $5.69, while another company-run restaurant two miles away sold the same sandwich for $6.89.
McDonald's sends AI pricing guidance to franchisees at least three times a year. In January, McDonald's started requiring franchisees to be "constructively engaging with McDonald's approved Pricing Consultant and Tools" as part of new business standards. The company also tracks "pricing non-compliance" by franchisees.
McDonald's said its pricing portal is "a tool, not a mandate," designed to provide restaurant-specific recommendations to help franchisees deliver value for customers and make informed business decisions. The portal's terms state that franchisees are "always free to determine the final price".
Antitrust friction
The pricing portal's own terms warn that restaurant owners "may be competitors of each other" and should comply fully with antitrust and competition laws. McDonald's has used some form of an AI pricing tool since at least 2019. In 2023, CEO Chris Kempczinski told investors the company had developed proprietary tools to evaluate pricing at individual restaurants. At an investor meeting on Wednesday, McDonald's said its "industry-leading" pricing engine was important to a larger corporate bet on affordability.
McDonald's works closely with Tiger Analytics, which runs the AI platform, regularly providing rules and corporate targets such as attracting more customers or boosting profits. Parameters for the engine have included excluding ice creams and drinks from price increases during summer months, focusing increases on items that had not had a price increase in at least two years, and only raising prices on items that had seen recent increases in at least 30% of stores.
ANALYSIS The system occupies an unusual position in enterprise AI deployment: McDonald's formally maintains that franchisees set their own prices, yet the company tracks non-compliance with the engine's recommendations and has embedded engagement with the tool into its business standards. The portal's own antitrust warning underscores the legal tension inherent in a franchisor channeling centralized, algorithm-driven pricing guidance to nominally independent operators.
Wendy's endured criticism in 2024 after its CEO announced plans to test "dynamic pricing" and later said it did not implement the system. Instacart ended a limited test of AI tools that showed different grocery prices to different shoppers in December and said it will never use personal information to determine item prices.