McDonald's AI ‘Pricing Engine’ Gauges What Customers Will Pay for a Big Mac: Report

In brief

• McDonald's is using machine-learning models to recommend menu prices across nearly 14,000 restaurants, Reuters reported.
• One input is an estimate of how much customers at each location are willing to pay.
• Franchisees say the system has widened price differences between nearby stores, and McDonald's tracks deviations from its recommendations.

McDonald's is using machine-learning models to guide what it charges for menu items, with one input being an estimate of how much the customers at each individual restaurant will tolerate paying, the Reuters news agency reported.

The system analyzes millions of daily transactions across nearly 14,000 restaurants and produces what the company calls an “optimal price” for every menu item at every location. Screenshots of the interface franchisees use, reviewed by the agency, include messages telling an owner their restaurant is showing “MEDIUM SENSITIVITY to price,” based partly on "customer willingness to pay in your area."

The platform also ingests competitors' published menu prices, pulled from the online listings of nearby outlets such as  Wendy's and Burger King. Both chains told Reuters they do not use AI in pricing decisions.

Three franchisees said the engine has widened price gaps between restaurants selling the same product, including between neighborhoods in the same area. Reuters’ check of the McDonald's app in September found a company-run store in Fresno, California selling a Big Mac for $5.69 while another company-run restaurant two miles away charged $6.89, a 21% premium. The agency could not confirm whether the engine caused the difference.