McDonald’s using AI to “dynamically” price its burgers

 McDonald’s has instituted a new AI driven algorithm that estimates “customer willingness to pay” at each location.

The new algorithm is live in the U.S. and some global markets, according to a report , with the AI algorithm finding the “optimal price” to match what a particular store’s patrons would be willing to pay.

According to the report, the prices fluctuate according to the location of the branch with stores in the same city having different cost amounts for the same exact items; effectively introducing surge-pricing to the fast food industry.

We found cost differences to be more than negligible, with a Big Mac at a Fresno, California costing $5.69, but the same burger costing $6.89 at another branch two miles down the road – marking a 21 percent increase.

The algorithm when used shows messages like “your restaurant is showing MEDIUM SENSITIVITY to price” based on “customer willingness to pay in your area.”

According to McDonald’s policy, franchisees are free to set their own prices, the owners, however, said that the company pressures them to use the new AI tools, instead.

McDonald’s instructed the owners to be “constructively engaging with McDonald’s approved Pricing Consultant and Tools” with the company noting any deviations from the algorithm’s price recommendations.

“You don’t really have much of a choice anymore”, said former store owner Karen King.

McDonald’s called the Reuters report “speculative and uninformed,” adding that the pricing portal is “a tool, not a mandate, designed to provide restaurant-specific recommendations ⁠to help franchisees deliver value for customers and make informed business decisions.”

McDonald’s has been incrementally implementing the technology since 2019, with the algorithm recommending one location to charge $18 for a single Big Mac, the recommendation went viral and led to a lawsuit which is still ongoing.