McDonald's uses machine-learning software to calculate what it considers the optimal price for each menu item at each of its nearly 14,000 U.S. restaurants, and franchisees say they are being pushed to follow its advice, a Reuters investigation published Tuesday found. McDonald's rejected the reporting as speculative.

What Happened

The pricing engine analyzes millions of daily transactions, according to Reuters reporter Waylon Cunningham. It is operated with Tiger Analytics and factors in an estimate of customers' willingness to pay in a store's area, along with public prices drawn from the online menus of nearby Wendy's and Burger King restaurants.

McDonald's sets the rules the system works within. Reuters described guidance that concentrates increases on items whose prices have not changed in two years, requires at least 30% of stores to take part before a price rises, and keeps ice cream and drinks out of summer increases. The company has used some form of AI pricing tool since at least 2019, and in January it began requiring franchisees to engage constructively with its approved pricing consultant and tools.

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Prices can vary sharply over short distances. Reuters found a Big Mac priced at $5.69 at one company-run store in Fresno, California, and $6.89 at another about two miles away, a 21% gap, though it could not confirm whether the engine produced the difference. Connecticut franchisee George Michell alleged in a lawsuit that the tools suggested roughly $18 for a Big Mac meal at a turnpike location; Reuters said it could not independently establish what the tool recommended.

Pressure on Franchisees

Five store owners described pressure from corporate to use the pricing tools. Chief Executive Chris Kempczinski told investors in August that pricing non-compliance, in certain cases, is now part of business review conversations with franchisees. He also said about a third of franchisees were not following guidance on under-$3 menu pricing and that their results were softer, without explaining how that was measured.

McDonald's told Reuters the engine is a tool rather than a mandate, meant to help franchisees make informed decisions, and called the reporting uninformed.

Why It Matters

Algorithmic pricing that coordinates decisions among independent businesses has drawn antitrust scrutiny from the Federal Trade Commission and the Justice Department. McDonald's franchisees are independent operators, and the pricing portal's terms warn them that they "may be competitors" and must comply with antitrust law. William Kovacic, a former FTC chairman now at George Washington University, told Reuters that the language amounts to an acknowledgment of a potential problem. The FTC and DOJ did not respond to requests for comment.

The tool also arrives at a sensitive moment for the chain. McDonald's U.S. traffic has declined year over year in every full month since March, while restaurant costs have risen 36% since 2019, Reuters reported.

Context

Rivals have taken a more cautious public line. Wendy's and Burger King told Reuters they do not use AI pricing; Wendy's faced a backlash in 2024 over talk of dynamic pricing, which it said was misconstrued and never implemented. Yum Brands, owner of KFC and Taco Bell, is exploring AI pricing, and Instacart ended AI tools that showed different shoppers different prices in December after criticism.

What to Watch

The Michell lawsuit is ongoing and could surface more about how the tool's recommendations are delivered. Watch for any response from antitrust regulators to pricing systems shared across franchise networks, and for whether franchisees push back on having compliance with AI recommendations tied to their reviews.