McDonald's AI pricing engine estimates what customers will pay, Reuters reports
In brief
- McDonald's uses machine-learning models to guide menu prices at nearly 14,000 restaurants, Reuters reported.
- One model input estimates how much customers at each restaurant will tolerate paying.
- Fresno Big Macs were priced $5.69 and $6.89 two miles apart; Reuters couldn't confirm the engine's role.
- McDonald's called the portal "a tool, not a mandate" and the reporting "speculative and uninformed."
How the engine sets a price
Screenshots of the franchisee interface reviewed by Reuters included messages telling an owner their restaurant showed "MEDIUM SENSITIVITY to price" (based partly on customer willingness to pay in the area). The platform also pulls competitors' published menu prices from online listings of nearby Wendy's and Burger King outlets. Both chains told Reuters they don't use AI in pricing decisions.
Two former Tiger Analytics employees, cited by Reuters, said Tiger Analytics runs the platform, with McDonald's supplying rules and corporate targets. Those parameters reportedly included concentrating increases on items whose prices hadn't risen in two years, and keeping ice cream and soft drinks out of summer increases. Tiger declined to comment.
Two stores, two miles apart
Three unnamed franchisees told Reuters the engine has widened price gaps between restaurants selling the same product, including between neighborhoods in the same area. In September, Reuters found a company-run Fresno, California store selling a Big Mac for $5.69 while another company-run restaurant two miles away charged $6.89 (a 21% premium).
Reuters couldn't confirm whether the engine caused that difference.
Franchisees, pressure and the company's response
Officially, franchisees set their own prices. Five owners told Reuters the company pressures them to follow the recommendations, and a June document showed McDonald's recorded deviations in detail. Since January, franchisees have been required to engage "constructively" with the approved pricing consultant and tools. CEO Chris Kempczinski reportedly told investors in August that "pricing non-compliance in certain cases" forms part of franchisee business reviews. The portal's legal terms warn owners they "may be competitors" of one another and should comply with antitrust law.
McDonald's described the portal as "a tool, not a mandate,"
The company said the portal provides restaurant-specific recommendations, and that costs vary between stores in distinct markets even a few miles apart. It called Reuters' reporting "speculative and uninformed" and said it takes antitrust compliance seriously.
Wendy's drew criticism in 2024 over reports it intended to charge more at busy times; it said those reports misconstrued an earnings update about digital menuboards. Instacart, for its part, ended a limited test of AI tools that showed different grocery prices to different shoppers in December.
Frequently asked questions
How does McDonald's AI pricing engine work?
According to Reuters, the system analyzes millions of daily transactions across nearly 14,000 restaurants and produces an 'optimal price' for every menu item at every location. Its inputs reportedly include an estimate of local willingness to pay and competitors' published menu prices from nearby Wendy's and Burger King outlets.
Did the AI engine cause the Fresno Big Mac price gap?
Reuters found one company-run Fresno store selling a Big Mac for $5.69 and another two miles away charging $6.89, a 21% premium. Reuters said it could not confirm whether the pricing engine caused that difference.
What did McDonald's say about the Reuters report?
McDonald's described the pricing portal as 'a tool, not a mandate' that provides restaurant-specific recommendations, and said costs vary between stores even a few miles apart. It called Reuters' reporting 'speculative and uninformed' and said it takes antitrust compliance seriously.
