McDonald's uses AI to set menu prices at 14,000 US restaurants, Reuters says
A Big Mac costs $5.69 in one Fresno company store and $6.89 two miles away, and five franchisees told Reuters McDonald's pressures them to follow the AI's price recommendations.
McDonald's is using machine learning to recommend what it calls the "optimal price" for each menu item at each restaurant, Reuters reported on Tuesday. The system analyses millions of transactions from about 14,000 US restaurants and weighs customers' estimated willingness to pay, competitors' menus and targets set by McDonald's, according to the report.
https://x.com/Reuters/status/2104883299428770111
Reuters said the platform is run with Tiger Analytics. Former Tiger employees told the agency McDonald's supplies rules such as focusing increases on items that have not risen in at least two years, and keeping ice cream and drinks out of summer rises. Reuters said it could not confirm whether local price gaps come from the algorithm or from other factors.
Those gaps are wide. A company-run Fresno store sells a Big Mac for $5.69, Reuters said, while another company-run store two miles away charges $6.89, a 21% premium. One franchisee was reportedly recommended $18 for a Big Mac meal at a Connecticut turnpike location.
McDonald's calls the engine "a tool, not a mandate" and described Reuters' reporting as "speculative and uninformed". Five franchisees told Reuters they felt pressed to comply. Retired franchisee Karen King said, "You don't really have much of a choice anymore." Reuters said McDonald's has required franchisees since January to be "constructively engaging" with approved pricing tools, and tracks "pricing non-compliance".
The pricing portal warns franchisees they "may be competitors of each other" under antitrust law. Former FTC commissioner William Kovacic told Reuters that wording acknowledges "a potential problem", while other experts said courts have given brands wide latitude over franchisee pricing. The FTC and Justice Department did not respond to Reuters. Only Reuters has published these details so far.