McDonald's AI Sets 'Optimal' Prices Across 14,000 Restaurants

McDonald's runs a machine-learning pricing engine that generates what the company calls 'the optimal price' at each of its nearly 14,000 restaurants, Reuters reports. The system feeds on millions of daily transactions plus scraped menus from nearby Wendy's and Burger King locations, and one input it weighs heavily is an estimate of how much a given store's patrons are willing to pay.

The clearest signal that the engine changes things sits in Fresno, California. A Reuters check of McDonald's mobile-app prices in September found one company-run store selling a Big Mac for $5.69 while another company-run restaurant two miles away sold the same sandwich for $6.89, a 21% premium. Reuters could not confirm the pricing engine caused the gap.

Three franchisees told the wire the engine has widened existing price differences between neighboring stores. Five owners said the company pressured them to use the tools. In January, McDonald's began requiring franchisees to be 'constructively engaging with McDonald's approved Pricing Consultant and Tools' as part of updated business standards, and on the August earnings call CEO Chris Kempczinski told investors that 'pricing non-compliance in certain cases is part of those conversations,' calling out roughly a third of owners who had not adopted the chain's under-$3 menu guidance.

McDonald's calls the portal 'a tool, not a mandate, designed to provide restaurant-specific recommendations to help franchisees deliver value for customers and make informed business decisions.' It also warns owners logging into the portal that they risk antitrust scrutiny because franchisees 'may be competitors,' language Reuters describes as 'an acknowledgment there's a potential problem' given recent Federal Trade Commission attention to pricing algorithms.

The most concrete window into how aggressive the recommendations can get comes from a lawsuit by Connecticut franchisee George Michell, who alleges the tool suggested he charge about $18 for a Big Mac meal at a state turnpike location. Reuters says it could not independently verify what the tool recommended. McDonald's disputes the suit and says Michell repeatedly breached his franchise agreements.