McDonald's AI Pricing Sparks Customer Surprise in California
Fast-food giant uses AI to recommend prices, leading to significant cost differences between nearby locations.
McDonald's is leveraging artificial intelligence to suggest menu prices, a practice that has led to noticeable price variations for the same items at different restaurant locations in Fresno, California. Customers have expressed surprise at the discrepancies, with some noticing a difference of a dollar or more for items like a Big Mac within a short distance.
The fast-food chain has been encouraging franchisees to utilize an AI-powered algorithm designed to analyze data from its approximately 14,000 restaurants. This system aims to estimate "customer willingness to pay in your area," according to Reuters. While the AI provides recommendations, McDonald's maintains that franchisees retain the final decision-making authority on their menu prices.
For instance, at two McDonald's locations in Fresno, separated by just over a mile, a Big Mac was priced at $5.69 at one restaurant via the company's mobile app, while the other charged $6.69 for the same burger. Similar price differences have been observed for other menu items, including an M&M McFlurry and various McCrispy chicken sandwiches.
Customers interviewed in Fresno highlighted their surprise at these price variations. Some, like Adam Ramos, stated they check the app for lower prices and are willing to drive further to a less expensive location. Others, like Gabriel Corral-Cardenas, expressed dismay at paying more when a cheaper option was nearby, vowing to check prices in the future given the current economic climate.
Customers at the higher-priced locations were particularly taken aback. Leticia Oliva noted she had no idea prices differed and found it unfair, stating it would make her less likely to return to a pricier establishment. Another customer, who preferred to remain anonymous, echoed the sentiment, admitting he always assumed prices were uniform across all McDonald's.
Franchisees have reported that the AI algorithm has widened the price gap between identical items at restaurants in close proximity. The platform also considers public pricing data from competitors such as Wendy's and Burger King, neither of whom have stated they use AI for pricing decisions.
McDonald's has contested the notion that its AI is setting prices covertly. A company spokesperson stated that the AI does not adjust prices in real time but rather provides recommendations that franchisees can accept or reject. "These speculative and uninformed claims attempt to recast a standard business practice as something controversial. AI does not set the price of a Big Mac or any other menu item," the spokesperson said, adding that the pricing portal is a tool, not a mandate, meant to assist franchisees in making informed business decisions and delivering value.
The revelations come as consumers are increasingly scrutinizing AI-driven and dynamic pricing strategies. Previously, Wendy's abandoned plans for dynamic pricing tests after customer backlash, and Instacart also faced criticism and ultimately ended a program that offered different prices for the same products to customers ordering from the same store.