Gone are the days of colourful restaurants and affordable fast food McDonald’s once championed. Now, its mission is to squeeze every last cent out of its customer base, who, admittedly, feed the soul-sucking beast. A report from Reuters suggests that McDonald’s next money-making scheme is underway — dynamic pricing.
If that sounds particularly scummy to you, you wouldn’t be wrong. The global chain known to nearly every person in the world is reportedly employing AI using data from millions of transactions to generate what McDonald’s calls “the optimal price”. In theory, this could lead to cheaper burgers if you’re visiting a location in a… lower-income area.
Old McDonald had a farm, now he’s got an empire
Unfortunately, the inverse is also possible. Reuters claims to have seen screenshots of the company’s pricing engine in August and interviewed several sources with first-hand knowledge. “The engine has widened existing price differences for the same product between restaurants, including from neighborhood to neighborhood within the same area,” three franchises told the outlet. It’s the same principle Uber uses.
The difference is that Uber implements surge pricing based on the area, number of available drivers, and distance being driven. In other words, it’s a fluid system from the ground up. McDonald’s is adjusting the price for the same ingredients, labour, and the same end product. Reuters spotted messages reading: “Your restaurant is showing MEDIUM SENSITIVITY to Price”, based in part on “customer willingness to pay in your area.”
McDonald’s says its franchisees are allowed to set their own prices. But five restaurants told the outlet that the burger brand pressured them to use the AI-pricing tools. In January of this year, McDonald’s began requiring franchises to be “constructively engaging with McDonald’s approved Pricing Consultant and Tools”.
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Reuters added that McDonald’s has used some form of AI-informed pricing since 2019, at least. In 2023, McDonald’s CEO Chris Kempczinski explicitly bragged about the proprietary tools the company had built to influence pricing at individual locations. The tool reportedly also takes competing prices into consideration.
The company called Reuters’ reporting “speculative and uninformed” and claimed it’s attempting to “recast a standard business practice as something controversial.” It said that the pricing scheme was “a tool, not a mandate, designed to provide restaurant-specific recommendations to help franchisees deliver value for customers and make informed business decisions.” Yeah, right. Even if it has been in use since 2019, McDonald’s has worked to keep this system quiet from the general public while it works out the kinks and expands.
McDonald’s AI-powered pricing system is reportedly in use in the US and “some” global markets, though it’s unclear what those are. With much of the public unaware of these practices ’til now, it could lead to some form of revolt. Consumers may be unwilling to visit their local McDonald’s for fear of being taken advantage of. McDonald’s stock is down 29%. Dynamic pricing may not be the saviour it was hoping for.
