A Big Mac Priced by AI: McDonald's Has Begun Relying on Algorithms to Set Menu Prices

McDonald’s is increasingly using artificial intelligence to set menu prices in the U.S. and in some global markets. This strategy is intended to boost the company’s profits, but it carries the risk of alienating customers and drawing the attention of antitrust authorities, according to Reuters.

McDonald’s pricing system, which uses AI algorithms, analyzes millions of daily transactions across nearly 14,000 restaurants in the chain to determine the price of menu items. It sets what the company calls the “optimal price” at each location for every menu item—from Big Macs to discounted coffee for seniors, according to Reuters. The news agency examined screenshots from the company’s pricing system taken in August and discussed its role in setting prices at the chain’s restaurants with nine sources.

According to them, the implementation of this system has led to a wider price gap for the same product among restaurants, including variations between neighborhoods within the same zone. According to information gathered by Reuters, the main factor in pricing has been local assessments of customers’ willingness to pay for food in a specific area. As a result, for example, at one California location, a Big Mac sold for $5.69 in September, while just two miles away it sold for $6.89—21% more—journalists concluded, based on data from the McDonald’s mobile app. However, the agency itself was unable to confirm whether this difference was the result of the pricing algorithm’s recommendations or other factors.

Although McDonald’s states that franchisees are free to set their own prices, five restaurant owners told Reuters that the corporation had pressured them to use AI-based pricing tools. Company documents reviewed by the news agency showed that the corporation sends franchisees price recommendations—developed using AI—at least three times a year. One former franchisee noted that he did not feel compelled to follow the prices, but five others described various forms of pressure from the company aimed at forcing them to use the system.

In an official statement, McDonald’s noted that costs and other conditions vary by location, and restaurants located just a few miles apart may belong to completely different markets. “Our pricing portal is a tool, not a directive, designed to provide recommendations for specific restaurants to help franchisees offer customers great deals and make informed business decisions,” the company stated. Company representatives also called the Reuters report “speculative and unfounded” claims that “attempt to portray standard business practices as something controversial.”

McDonald’s continued foray into AI-powered pricing carries potential regulatory and reputational risks, Reuters notes. A similar approach has already sparked a wave of criticism when other brands have attempted to implement it. For example, in 2024, Wendy’s faced customer backlash after its CEO announced it was testing “dynamic pricing.” And the delivery service Instacart scaled back tests of algorithms that displayed different prices for different customers.

As the use of AI becomes increasingly widespread, U.S. courts and regulators are examining whether certain algorithmic pricing practices could facilitate illegal coordination among competitors—a category that sometimes includes franchisees, according to Reuters.

McDonald’s itself warns that partners who gain access to the pricing algorithm portal risk facing antitrust investigations, since restaurant owners “may be competitors,” according to screenshots of the portal’s legal terms of use reviewed by Reuters in August.

Such statements confirm: McDonald’s acknowledges that the Federal Trade Commission and other antitrust regulators could potentially raise concerns about collusion, according to William Kovacic, director of the Center for Competition Law at George Washington University. Other experts, however, have argued that the legal and regulatory risks for McDonald’s are minimal, since its competitors are franchisees, and courts in recent decades have granted brands broad authority to control their partners’ pricing, according to Reuters.

The desire to keep prices low in order to attract customers and boost sales can increase the corporation’s revenue, since the corporate office earns the lion’s share of the money by taking a percentage of the franchisees’ total revenue—regardless of the profit margins at individual locations, as Reuters points out. Restaurant owners, on the other hand, have greater incentives to raise prices to cover rising wages, rent, and other expenses, which have increased by 36% since 2019, according to estimates by the National Restaurant Association.

However, despite the company’s efforts to focus on the customer, foot traffic at McDonald’s locations in the U.S. has been declining on a year-over-year basis every full month since March, according to data from the analytics firm Placer.ai.

Some franchisees note that the pricing assessment program for individual restaurants, developed by the corporation in 2023, recommended significant price increases during and after the pandemic amid a surge in inflation. However, in recent months, the software has been promoting a more restrained pricing policy, including some price cuts, which has caused friction between franchisees and McDonald’s headquarters, Reuters reports. The agency found that the company has been using some form of AI-powered pricing tools since at least 2019.

This article was AI-translated and verified by a human editor