McDonald's is expanding its use of artificial intelligence (AI) to set menu prices across the United..

McDonald's is expanding its use of artificial intelligence (AI) to set menu prices across the United States and in some global markets, according to the survey. McDonald's aims to increase its headquarters profits through the use of AI, but franchisees feel burdened by pressure to cut prices.

According to Reuters on the 1st (local time), McDonald's AI-based pricing engine uses machine learning algorithms to continuously analyze millions of transaction data occurring daily in 14,000 stores worldwide. Through this, the company calculates prices defined as "optimal prices" for menu items in various stores, from Big Mac to discount coffee for the elderly.

Even products with the same pricing engine are widening the price gap between stores and even neighborhoods within the same region, multiple franchisees told Reuters. For example, a message appears on the franchisee's interface that says, "Your store is sensitive to prices at a moderate level." The platform also includes price information extracted from online menus at nearby rival stores such as the U.S. hamburger franchise Wendy's and Burger King.

Reuters pointed out that the difference in menu prices was evident in the McDonald's mobile app. In fact, a direct store in Fresno, California, sells the Big Mac, its flagship menu, for $5.69 (about 7,700 won), while another store 3.2 kilometers away sells it for $6.89 (about 9,330 won), raising the price by more than 20%.

Franchisees said their headquarters are under pressure to use AI pricing tools. It is against the headquarters' announcement that franchisees are free to set prices. According to a June document for franchisees obtained by Reuters, the headquarters is recording in detail when franchisees deviate from the recommended price. In addition, an internal notice informed franchisees in January to make it mandatory to work with McDonald's-approved pricing consultants and tools as part of the new business.

"The cost and other factors vary from store to store," McDonald's said in a statement. "Even stores that are just a few miles away can belong to different markets." He said that the pricing engine "is not an obligation, but a tool, to provide value to customers and to provide store-specific recommendations to make informed management decisions."

Some franchisees have also caused friction between franchisees and their headquarters in recent months, with the system encouraging conservative pricing, including price cuts.

For the headquarters, there is an incentive to lower prices to attract more customers and increase sales. This is because it generates profits by receiving a certain percentage of the franchise's total sales as a commission, regardless of the individual store's profit rate. On the other hand, franchisees have seen significant increases in labor costs, rent and other restaurant operating costs since 2019, which is in contrast to the large incentive to raise prices.

Franchisees are being advised to follow AI pricing. Multiple franchisees contacted by Reuters have come under various forms of pressure from the company to follow pricing guidelines. In particular, the headquarters is not free from pressure from the headquarters because it has the authority to renew the franchise contract or approve the opening of a new store.

The headquarters also warns that such a system could pose a potential legal risk to franchisees. The terms and conditions of the pricing portal said, "The franchisees are in a competitive relationship with each other," adding, "It is important for all users who use this tool to understand and thoroughly comply with the antitrust law and competition law."

Experts also analyzed that what the headquarters said in the terms and conditions is an acknowledgment of potential problems.

McDonald's headquarters said in a statement, "We value compliance with anti-trust regulations," and that "the guidelines in our terms and conditions are not evidence of anti-competitive behavior."

Like McDonald's, other fast food brands are also using AI to set prices. Yum Brand, the world's largest restaurant company in terms of the number of stores, is also introducing AI, with huge restaurant franchise brands such as KFC and Taco Bell.

AI-based pricing may provoke a backlash from consumers. Wendy's was criticized for possible unfair price changes after the CEO announced plans to test its "dynamic pricing" policy in 2024. Later, Wendy's said that it did not introduce the system, saying its remarks were misunderstood.

U.S. grocery delivery company Instacart stopped using AI tools that show different prices for different shoppers in limited testing in December last year. This is because research that exposed the practice sparked criticism from consumers and legislators.