McDonald’s: AI determines how much customers should pay for burgers
McDonald’s has long been considered the epitome of getting a clearly defined meal for a fixed price. But that is changing now. The company has prices set dynamically by an AI according to various criteria.
Strong differences in one city
McDonald’s is relying on artificial intelligence in the USA and apparently also in other markets to adjust the prices of individual dishes to the customers’ assumed willingness to pay. That reports Reuters citing internal documents and conversations with franchisees. This means that prices for identical products can differ significantly even within the same city. The software analyzes, among other things, how price-sensitive a restaurant’s customers are perceived to be. Franchisees then receive recommendations for so-called optimal prices. In Fresno, California, for example, a Big Mac cost $5.69 (around 5 euros), according to research by the news agency. In a branch just three kilometers away, the same product was charged at $6.89 (around 6 euros). That’s a difference of around 21 percent.
McDonald’s emphasizes that restaurant operators can continue to decide their own prices. However, several franchisees describe the situation differently. Accordingly, the group monitors whether the system’s recommendations are implemented and speaks to operators if their prices deviate significantly from the specifications. Company boss Chris Kempczinski also told investors that price deviations also played a role in discussions about contract extensions in certain cases.
Internal documents should also warn of possible legal problems. Since franchisees compete with each other, they would have to pay particular attention to competition and antitrust law. The operators are therefore requested to obtain their own legal advice if necessary. William Kovacic, former chairman of the US competition authority FTC, interpreted the information to Reuters as a sign that the company was aware of possible legal risks.
Big Mac for $18
McDonald’s rejects Reuters’ account, calling it speculative. The pricing system is simply a tool that provides location-specific recommendations and is intended to enable franchisees to make informed business decisions. An earlier version of the technology has been in use since at least 2019. In 2023, Kempczinski spoke of his own tools for analyzing the prices of individual restaurants. The system’s suggestion that a restaurant in Connecticut should sell a single Big Mac for $18 (around 15 euros) has already caused a stir.
The case went viral and resulted in ongoing litigation. McDonald’s isn’t the only company experimenting with dynamic pricing. Other retailers and catering chains are also testing such a method – and their plans have met with resistance from customers. The debate also comes at a time of declining sales at McDonald’s. According to Kempczinski, the number of low-income customers in particular has declined significantly in the past two years.
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