McDonald’s AI pricing engine is widening price gaps between restaurants just miles apart

The next time a McDonald’s order looks unusually expensive, it may be worth checking another location before paying. In Fresno, California, Reuters found one company-run McDonald’s charging $5.69 for a Big Mac while another company-run restaurant just two miles away wanted $6.89 for the same sandwich.

Reuters could not determine whether McDonald’s AI pricing engine caused that specific 21% difference. However, three franchisees told the outlet that the company’s pricing system has widened existing gaps between restaurants, including locations serving the same general area.

Behind those recommendations is a machine-learning system that analyzes millions of transactions and estimates what customers around each restaurant may be willing to pay. It does not appear to set personalized prices for individual diners or change them minute by minute, but it can recommend a different price for the same menu item depending on the location.

Your neighborhood can influence what McDonald’s thinks you will pay

McDonald’s pricing engine draws from data across nearly 14,000 restaurants and recommends what the company calls an “optimal price” for individual menu items, according to Reuters. The system covers everything from Big Macs to discounted senior coffee.

The technology also looks outside McDonald’s. Screenshots Reuters reviewed showed that the platform pulls publicly available menu prices from nearby competitors such as Wendy’s and Burger King while judging how sensitive customers in a particular area may be to higher prices.

One screen labeled a restaurant as having “MEDIUM SENSITIVITY to Price” and cited “customer willingness to pay in your area.” In other words, McDonald’s is not only looking at what an item costs to sell. Its system is also trying to determine how much people around a particular restaurant might tolerate paying for it.

McDonald’s says there are legitimate reasons for two nearby restaurants to charge different prices. Stores only a few miles apart can operate in separate markets with different costs and customer behavior, the company told Reuters, and franchisees still make the final pricing decision.

The company also rejects the idea that the system amounts to surge pricing. McDonald’s sends pricing guidance to franchisees at least three times a year, according to company documents, rather than constantly changing what customers pay as demand rises and falls.

For customers, though, the end result can still be noticeable at the register. If nearby restaurants receive different recommendations based partly on what their local customers appear willing to spend, driving a few extra miles could mean paying a different price for an identical order.

Franchisees say those AI recommendations are getting harder to brush aside

McDonald’s describes the pricing engine as “a tool, not a mandate,” but some restaurant owners say the recommendations come with pressure. Five franchisees told Reuters that the company pushed them to use its pricing tools, while an internal document showed McDonald’s tracks when owners stray from the suggested prices.

The company made pricing part of its business standards in January, requiring franchisees to “constructively” engage with approved pricing consultants and tools. Former franchisee Karen King also described receiving calls from corporate officials when her restaurants moved away from the recommendations.

“You don’t really have much of a choice anymore,” King told Reuters. McDonald’s did not respond directly to her account, although CEO Chris Kempczinski has acknowledged that “pricing non-compliance” can come up in some franchisee business reviews.

There is also a financial reason corporate McDonald’s and individual restaurant owners may not always want the same price. McDonald’s makes most of its money by taking a percentage of franchisee revenue, so attracting more customers with lower prices can help the company even when a restaurant earns less on each sale.

Franchisees have their own bills to cover. Wages, rent, and other restaurant expenses have climbed 36% since 2019, according to National Restaurant Association estimates cited by Reuters, which can give owners a reason to resist recommendations that push prices down.

McDonald’s own pricing portal even warns franchisees that they “may be competitors of each other” and tells users to follow antitrust and competition laws. McDonald’s says that language reflects its commitment to antitrust compliance and does not show that the system encourages anticompetitive behavior.

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