McDonald’s May Implement AI for Personalized Burger Pricing

A recent report reveals that McDonald’s is leveraging an AI-driven pricing engine to sift through data from millions of transactions across its numerous locations, aiming to establish the “optimal price” for menu items at each restaurant. This strategy has resulted in significant price variations for the same burger at locations just a few miles apart.

On September 29, it was reported that several franchise owners were consulted, and screenshots of the pricing engine were analyzed. These screenshots indicated that certain McDonald’s outlets were categorized as having “MEDIUM SENSITIVITY to Price,” reflecting the “customer willingness to pay in your area.” For instance, a comparison of two corporate-owned stores merely two miles apart in California revealed a Big Mac priced at $5.69 at one location and $6.89 at the other.

While McDonald’s has utilized algorithm-based pricing systems since 2019, the company stated that franchise owners have the autonomy to set their own prices and dismissed the report as inaccurate. However, there appears to be a growing push from the company for all locations to adopt these AI tools.

According to the report, five store owners expressed feeling pressured to implement the AI pricing tools, and it was noted that McDonald’s headquarters monitors stores that stray from suggested pricing. This has occasionally created friction between franchise owners and corporate, not solely over price increases. Many owners are resisting McDonald’s inclination to lower prices on less expensive items to attract customers.

In January, McDonald’s reportedly mandated that franchise owners start “constructively engaging with McDonald’s approved Pricing Consultant and Tools” as part of new operational standards. Nonetheless, the company recognizes that AI-driven pricing systems could lead to negative public perception and potential legal issues.

In some instances, nearby McDonald’s franchises are viewed as competitors, and owners could face legal repercussions if they alter prices in a coordinated manner with other stores. McDonald’s is aware of this risk, and the pricing engine software includes a warning to owners that they “may be competitors,” advising them to consult their own legal counsel regarding any legal concerns.