Key points
- McDonald's says AI doesn't set the price of a Big Mac
- Its pricing engine recommends a price for every item at every store
- Some franchisees say they're pressured to follow it
McDonald's (MCD) says franchisees decide menu prices, even as an AI-powered system recommends prices for individual restaurants. A Reuters investigation published Sept. 29 found that some franchisees feel pressured to follow those recommendations.
"AI does not set the price of a Big Mac or any other menu item," the company told People on Sept. 30. "The 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." McDonald's also called the reporting "speculative and uninformed."
The engine recommends a price for every item at every store
The pricing engine uses machine learning to analyze millions of daily transactions across nearly 14,000 US locations and recommend prices for everything from Big Macs to senior coffee discounts, according to the report, which cited screenshots from August and nine people who know the strategy. McDonald's has used some form of AI pricing since at least 2019.
One factor is how much customers will pay. Screenshots of the franchisee interface showed messages such as "Your restaurant is showing MEDIUM SENSITIVITY to Price," based partly on "customer willingness to pay in your area." The system also pulls public menu prices from nearby Wendy's and Burger King restaurants. Both chains said they don't use AI to set prices.
McDonald's told People the tool doesn't set prices based on an individual customer's willingness to pay. The screenshots describe a store's area, not each customer. That's an important difference. Nothing in the report says McDonald's charges you more because of who you are.
I remember when a Big Mac cost about $2. What caught my attention here was the difference between two nearby stores. A Reuters check of the McDonald's app in September found one for $5.69 at a company-run store in Fresno, California, and $6.89 at another company-run store two miles away. The report said it couldn't confirm whether the pricing engine caused the gap. McDonald's said costs vary across its stores, and restaurants a few miles apart can belong to different markets.
Franchisees say they're pressured to follow it
Five franchisees said McDonald's pressured them to use the tools. Since January, the company has required franchisees to be "constructively engaging with McDonald's approved Pricing Consultant and Tools" under its business standards, according to an internal message cited in the report. A June document showed McDonald's records when franchisees deviate from the recommendations.
"You don't really have much of a choice anymore," said Karen King, a former franchisee who retired from the system last summer. McDonald's didn't address her claims. In August, Chief Executive Chris Kempczinski told investors that in franchisee business reviews, "pricing non-compliance in certain cases is part of those conversations."
Some franchisees say the engine has recently recommended smaller price increases and, in some cases, cuts. That can put headquarters and franchisees at odds. McDonald's collects a share of franchisees' sales, so lower prices can benefit the company if they bring in enough business. Store owners still have to cover wages, rent, and other rising costs, and more sales don't necessarily mean more profit.
The tool's own terms mention antitrust law
The pricing portal's terms of service warn that franchisees "may be competitors of each other" and must comply with antitrust laws, according to the report. Former Federal Trade Commission commissioner William Kovacic said that language is "an acknowledgment there's a potential problem." Other experts said the legal risk is low because courts have given brands wide latitude over franchisee pricing. McDonald's said the terms aren't evidence of anticompetitive behavior.
Pricing experiments have drawn backlash elsewhere. Wendy's faced criticism in 2024 over plans to test "dynamic pricing," which it says it never implemented. Instacart ended a test in December that showed different shoppers different prices for the same groceries. McDonald's system, as described by Reuters, recommends prices for each restaurant.
What I want to know is what happens when a franchisee says no. McDonald's says owners make the final decision, but it tracks departures from its recommendations, and five franchisees told Reuters they felt pressured to follow them. The company hasn't explained exactly how those departures affect an owner's standing.
