McDonald’s is using an artificial intelligence pricing system that analyzes millions of transactions to recommend menu prices based partly on how sensitive customers at individual restaurants are to price increases, while franchisees technically retain authority to set their own prices.
By yourNEWS Media Newsroom
McDonald’s is using artificial intelligence to help determine recommended prices for menu items across its nearly 14,000 U.S. restaurants, analyzing millions of transactions to estimate how customers at individual locations will respond when prices rise or fall.
The system gives franchisees recommendations for what it identifies as the “optimal price” for specific menu items, according to a Reuters investigation published Tuesday.
The pricing engine, operated by Tiger Analytics, evaluates transaction data and customer behavior across McDonald’s vast U.S. restaurant network. Its recommendations can vary by location, meaning customers purchasing the same Big Mac, fries or other menu item may encounter significantly different prices depending on where they order.
McDonald’s maintains that its independently owned franchise restaurants retain authority over their prices.
Some current and former operators, however, told Reuters that the company has increasingly pushed franchisees toward its recommended pricing structure.
“You don’t really have much of a choice [about pricing] anymore,” former McDonald’s franchise owner Karen King told Reuters.
Screenshots of the AI-powered interface reviewed by Reuters show that the system evaluates how responsive customers are to price changes.
One message displayed to restaurant operators read, “Your restaurant is showing MEDIUM SENSITIVITY to Price.”
The system can use those assessments to predict whether raising or lowering prices will increase restaurant revenue, balancing higher prices against the possibility that customers will purchase fewer items or stop visiting as frequently.
The technology represents an increasingly sophisticated approach to a longstanding practice in the restaurant business: setting prices based on local demand, competition, operating costs and customer behavior.
What is changing is the amount of data involved and the ability of artificial intelligence and predictive analytics to process millions of transactions and produce recommendations for individual restaurants.
McDonald’s executives have made clear that pricing is increasingly part of broader discussions with franchise owners.
“When we launch something like the EDAP [Every Day Affordable Price] menu … we provide recommended guidance to our franchisees. So we’re quite clear in terms of what we believe is the right pricing execution,” McDonald’s CEO Chris Kempczinski said during the company’s Aug. 4 earnings call.
“As we’re now doing our business reviews with franchisees, which affects things like growth and eligibility from a franchisee standpoint, pricing and pricing non-compliance in certain cases is part of those conversations.”
That comment underscores the tension between franchisee ownership and corporate pricing guidance.
Most McDonald’s restaurants in the United States are operated by franchisees, who own or operate their individual businesses under agreements with McDonald’s. Those operators traditionally have authority over the final prices charged at their restaurants.
The company, however, can analyze pricing across the system and recommend levels it believes will maximize sales, traffic and profitability.
Franchisees seeking additional restaurants or other growth opportunities also undergo business reviews by McDonald’s, giving the company leverage over operators beyond its formal ability to dictate individual menu prices.
The potential consequences of algorithmic pricing became particularly visible in Connecticut.
Franchisee George Michell alleged in a lawsuit against McDonald’s that pricing adviser Deloitte recommended he charge more than $18 for a Big Mac combo meal at his restaurant on the Darien Turnpike.
“By January 31, 2023, Deloitte had recommended to Michell that he price his Big Mac combo meal at the Darien turnpike restaurant above $18.00,” according to the amended complaint.
That recommendation was far above the approximately $10.19 price listed for a Big Mac meal in other McDonald’s pricing information.
Deloitte offers businesses consulting services incorporating artificial intelligence and data analytics. Its AI and analytics business promotes the use of technology to identify opportunities and improve business decisions.
“Explore how Deloitte can help you realize new value with AI,” the company states.
The Connecticut restaurant’s price subsequently became widely discussed online, with the $18 Big Mac meal drawing attention as an example of sharply higher fast-food prices.
McDonald’s pushed back against suggestions that such prices were representative of its restaurants nationwide.
In May 2024, McDonald’s U.S. President Joe Erlinger said the more than $18 price was “the exception”, not the norm across the company’s U.S. restaurants.
The AI system now being used by McDonald’s represents a broader effort to improve pricing precision across the chain rather than establish one national menu price.
Restaurant prices have long varied geographically because labor costs, rents, taxes, competition and customer incomes differ among locations.
AI gives McDonald’s and its franchisees another factor to consider: how much customers at a particular restaurant appear willing to pay before their purchasing behavior changes.
That distinction makes the technology different from a simple nationwide price increase.
A restaurant whose customers show relatively little response to previous price increases could receive different recommendations from a restaurant where customers sharply reduce purchases when prices rise.
The technology therefore allows McDonald’s to treat restaurants differently based on transaction history and predicted consumer behavior.
Tiger Analytics and McDonald’s did not immediately respond to Daily Caller News Foundation requests for comment about the system.
McDonald’s is not alone in turning to artificial intelligence to manage restaurant pricing and promotions.
Yum! Brands, whose restaurant portfolio includes Taco Bell and KFC and previously included Pizza Hut, has developed a technology platform called Byte that allows restaurants to manage menus, pricing and promotions with AI.
The company described the technology in its July 30 second-quarter earnings release.
Yum! Brands also identified “our ability to successfully and securely implement technology initiatives, including utilization of artificial intelligence” as one of the factors that could affect its financial performance.
The growing adoption of algorithmic systems comes as major restaurant chains attempt to manage a difficult balance between higher prices and customer traffic.
McDonald’s reported that U.S. guest counts declined during the second quarter of 2026 even though sales increased.
According to the company’s second-quarter financial results, U.S. sales increased 0.8% as customers spent more during each transaction, offsetting the decline in the number of customer visits.
That environment makes accurate pricing particularly important.
Raising prices can increase revenue from customers who continue purchasing, but excessive increases can reduce traffic or push customers toward lower-priced products and competing restaurants.
Lowering prices can attract additional customers but may reduce profit margins if additional sales do not compensate for the reduced price.
An AI pricing model is designed to evaluate those competing effects across enormous quantities of transaction data.
For McDonald’s, the scale is substantial. With nearly 14,000 restaurants in the United States and millions of transactions occurring each day, the company has access to an enormous amount of information about what customers purchase, when they purchase it and how sales change after prices move.
That data can be used to estimate what economists describe as price sensitivity — how much consumer demand changes in response to a change in price.
The result is a system capable of telling one restaurant that customers appear highly sensitive to price while concluding that diners elsewhere may tolerate higher prices without significantly changing their buying habits.
McDonald’s has not said that the technology sets prices automatically or changes them in real time for individual customers.
Instead, the system provides recommendations to franchisees, whose restaurants may already charge different prices because of local market conditions.
The distinction is important because the technology differs from individualized pricing in which two people visiting the same restaurant at the same time would necessarily be shown different prices based on their personal identities or purchasing histories.
The system described by Reuters focuses on restaurant-level pricing recommendations based on aggregated transaction and customer-response data.
Still, the technology potentially gives McDonald’s considerably more insight into how far individual restaurants can raise prices before customer behavior begins to change.
For franchise operators, the debate concerns how much of that guidance remains optional when corporate pricing compliance can factor into business reviews affecting their ability to grow within the McDonald’s system.
For customers, the result is increasingly sophisticated local pricing in which the cost of a familiar meal may depend not only on ingredients, wages and rent, but also on an algorithm’s calculation of how much diners in that market are willing to pay.
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