AI effect: McDonald's charging different users different prices for same burger
Imagine opening the McDonald’s app, checking the price of a Big Mac and finding it costs more than what someone sees at another nearby outlet. That is already happening in the US, where McDonald’s is increasingly using artificial intelligence to help restaurants decide how much to charge for menu items.
A Reuters investigation has found that McDonald’s pricing system uses machine-learning technology to analyse millions of transactions and recommend what it considers the “optimal price” for individual menu items at different restaurants. One of the factors considered is how much customers in a particular area may be willing to pay.
The system has contributed to wider price differences between McDonald’s restaurants. Reuters, for example, found a Big Mac selling for $5.69 at one company-owned restaurant in Fresno, California, while another company-owned outlet about two miles away listed the same burger at $6.89. Reuters could not establish whether the AI system itself caused that particular difference.What is McDonald’s saying?
According to the report, McDonald’s says its franchisees have the final say over prices and describes its pricing platform as a recommendation tool rather than a mandatory system. However, several franchisees told Reuters that they faced pressure from the company to follow the AI-generated recommendations. Company documents also track instances where franchisees do not follow the suggested prices.
The technology is also raising questions about competition law. McDonald’s itself warns franchisees that they may be considered competitors and need to comply with antitrust rules while using the pricing platform. Regulators in the US have been examining whether algorithm-based pricing systems could create competition concerns.
The development does not necessarily mean every McDonald’s customer is being shown a personalised price. The system described by Reuters appears to recommend prices at the restaurant level, rather than simply charging each individual customer based on their personal profile.Could this happen in India?
There is currently no indication that McDonald’s is using the same AI pricing system in India. McDonald’s India’s own terms say that prices can vary across restaurants, but this is different from using AI to determine prices based on how much customers in a particular area are willing to pay.
The bigger question is whether McDonald’s will eventually extend more advanced AI-based pricing systems to markets such as India. The company has been expanding its use of AI across its global business, but there is no evidence yet that the US pricing model is being rolled out to Indian restaurants.- Ends
Ankita Garg is a tech journalist with more than 9 years of experience. She is always curious about new gadgets and loves writing about them. When not writing, you will find her painting or sketching.
