McDonald's AI Sets Big Mac Prices by Willingness to Pay — SkimNews
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- McDonald's uses machine-learning models to recommend menu prices at nearly 14,000 restaurants, with one input being an estimate of how much customers at each location will tolerate paying, and screens telling owners their restaurant shows 'MEDIUM SENSITIVITY to price' based on 'customer willingness to pay in your area.'
- The pricing platform also ingests competitors' published menu prices from nearby Wendy's and Burger King online listings; both chains told Reuters they do not use AI in pricing decisions.
- Three franchisees told Reuters the engine has widened price gaps between nearby stores, and a September check found a company-run Fresno McDonald's selling a Big Mac for $5.69 while another two miles away charged $6.89, a 21% premium, though Reuters could not confirm the engine caused the difference.
- Tiger Analytics runs the AI platform according to two former employees, with McDonald's supplying rules including concentrating increases on items whose prices haven't risen in two years and avoiding ice cream and soft drink hikes over the summer; Tiger declined to comment.
- Franchisees have been required since January to engage 'constructively' with the company's approved pricing consultant, and CEO Chris Kempczinski told investors in August that 'pricing non-compliance in certain cases' forms part of franchisee business reviews.
- McDonald's called the portal 'a tool, not a mandate' and Reuters' reporting 'speculative and uninformed,' while noting costs vary between stores in distinct markets; the portal's legal terms warn owners they 'may be competitors' of one another and must comply with antitrust law.
Why it matters: McDonald's positions the AI portal as advisory, but the company actively tracks deviations from its recommendations and CEO Kempczinski said 'pricing non-compliance in certain cases' feeds into franchise reviews. The 21% Big Mac gap between two company-run Fresno stores two miles apart shows willingness-to-pay modeling can produce sharply different prices for identical products.
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