McDonald’s AI Pricing Raises Questions as Big Mac Prices Vary 21% Between Nearby U.S. Stores

[Photo for illustrative purposes. Clipart Korea]

McDonald’s is expanding a system that uses artificial intelligence to recommend different menu prices at individual restaurants. As the company’s headquarters suggests prices to franchisees based on AI-analyzed data, the same item can now cost different amounts at outlets in the same area.

McDonald’s franchisees in the United States said the company pressured them into using the AI pricing system, Reuters reported on the 1st. McDonald’s said the system only recommends prices for each restaurant and that final pricing decisions rest with the operators.

The company uses AI and machine learning to analyze millions of daily transactions from roughly 14,000 U.S. restaurants and propose an “optimal price” for each menu item. The system estimates how much local customers are willing to pay and also factors in publicly posted menu prices at nearby competitors.

Price gaps between stores have already surfaced. Checking the McDonald’s app, Reuters found that two company-operated restaurants in Fresno, California, about 3 kilometers apart, listed the Big Mac at $5.69 (about 7,700 won) and $6.89 (about 9,400 won) — a difference of roughly 21% for the same product. Reuters said it could not confirm whether the gap stemmed from the AI recommendations.

The system for franchisees also displays “price sensitivity” guidance based on local customers’ willingness to pay, along with online menu prices at nearby rivals such as Wendy’s and Burger King. Both Wendy’s and Burger King said they do not use AI to set prices.

Friction between headquarters and franchisees over the AI system is also emerging. Some operators said the system recommended steep price increases during the period of surging inflation after the COVID-19 pandemic. More recently, they said, recommendations to lower prices on some items or to scale back increases have added to their burden.

Because McDonald’s headquarters takes a fixed share of sales regardless of a franchise’s profit margin, lowering prices to attract more customers can work in its favor. For operators, however, lower prices can erode profitability. The National Restaurant Association estimated in July that restaurant operating costs, including wages and rent, had risen 36% between 2019 and this year.

AI-driven pricing could also raise antitrust concerns. Under U.S. antitrust law, competitors coordinating prices in advance can be problematic. U.S. courts and regulators are watching whether prices set by AI algorithms could serve as a tool for price collusion among businesses.

McDonald’s does not currently use AI to offer different prices to individual customers at the same restaurant. But if the approach of analyzing regional demand and willingness to pay to recommend store-by-store prices advances further, it could lead to “price personalization,” in which prices vary according to each consumer’s buying patterns and willingness to pay.