McDonald's Utilizes Machine Learning for Menu Pricing
McDonald's has adopted a machine-learning system to optimize menu pricing across approximately 14,000 locations, utilizing customer price tolerance data specific to each restaurant. This innovative tool calculates what McDonald's calls the "optimal price" for menu items by analyzing millions of transactions daily.
The system also incorporates competitor pricing data from nearby fast-food chains like Wendy's and Burger King, which confirmed they do not use AI for their pricing strategies. Franchisees have reported that this AI-driven approach has resulted in significant price discrepancies for identical products in close proximity, with a recent example highlighting a Big Mac priced at $5.69 at one location in Fresno, California, compared to $6.89 at another, marking a 21% difference.
Operated by Tiger Analytics, the AI system is guided by McDonald's operational objectives, which include strategies for price adjustments based on historical trends. Franchise owners have expressed concerns about the pressure to align their pricing with company recommendations, despite being responsible for their own pricing decisions. A document from June indicates that McDonald's closely monitors any deviations from these guidelines, and CEO Chris Kempczinski has noted that pricing compliance affects franchisee evaluations.
