McDonald’s Uses AI to Recommend Menu Prices, Raising Franchise and Antitrust Concerns

Summary

McDonald’s is expanding its use of artificial intelligence to recommend menu prices across the United States and some other markets. Its pricing engine analyzes millions of daily transactions from nearly 14,000 restaurants and uses local customer willingness-to-pay signals, competitor menu prices and corporate rules to generate an “optimal price” for each item and location. Reuters reviewed pricing-engine screenshots and interviewed nine people with first-hand knowledge of the strategy. The system has produced wider price differences between nearby restaurants; one September comparison found a Big Mac priced at $5.69 at one company-run Fresno store and $6.89 two miles away, although Reuters could not establish that the engine caused the difference. McDonald’s says franchisees remain free to set final prices, but five owners told Reuters they faced pressure to use the tools, while company documents track deviations from recommendations and classify pricing non-compliance as a possible business-review issue. The company has used an AI pricing tool in some form since at least 2019, and its recommendations have shifted from large increases during and after the pandemic toward more conservative pricing and occasional decreases. Corporate targets can include attracting customers, increasing profit, limiting which items may rise in price, and excluding ice cream and drinks from summer increases. The approach creates different incentives: McDonald’s headquarters receives a percentage of franchise revenue, while franchisees must cover wages, rent and other store-level costs, which the National Restaurant Association estimates are 36 percent higher than in 2019. The system also carries reputational and legal risks after criticism of algorithmic price differences at companies such as Wendy’s and Instacart. McDonald’s portal warns that franchisees may be competitors and should comply with antitrust law. Experts disagree over the level of risk: some see the warning as evidence of a potential problem, while others say franchise law gives brands broad pricing control. McDonald’s denies that the tool is mandatory or anticompetitive and describes it as a restaurant-specific aid for informed decisions.