Abstract:
McDonald's is reportedly using an artificial intelligence pricing system in some stores in the United States to adjust food prices based on the location of the restaurant. Stores in the same area, or even stores just a few kilometers apart, may have significant price differences for the same product. According to one case, a customer in Fresno, California, saw a Big Mac on the McDonald's app for $5.69, while another store two miles away sold it for $6.89, about 21% higher.
A burger in one store in New York costs $7.17, while another store operated by the same franchisee sells it for $8.05, an increase of about 11%.
According to reports, McDonald’s AI pricing system analyzes transaction data from millions of orders at more than 13,000 stores and references prices from competitors such as Wendy’s, Burger King and Chick-fil-A to calculate what the company calls the “optimal price” for each store. Existing cases show that the system provides suggested prices based on store location; reports do not indicate that it has set prices individually based on each customer's personal income or status.
McDonald's franchisees are legally allowed to determine store prices on their own, but some franchisees say the company continues to pressure them to follow the pricing software's recommendations. The system will record in detail each franchisee's decision to deviate from the AI's recommended price; if the operator does not adopt the system's recommendations, he or she will sometimes receive a call from the company. Since January this year, McDonald's has also required store operators to cooperate with pricing consultants; if they fail to comply, renewal of store contracts may be affected.
Leveraging location or user data for dynamic pricing is not a new phenomenon. U.S. airline JetBlue and ride-hailing platform Uber have both come under scrutiny over allegations that their systems may raise prices based on situations such as when a user has a low battery on their phone, urgently needs a ride, or needs to take a flight to attend an important funeral.
In 2019, Minneapolis TV station KARE 11 discovered that product prices in the Target app may change depending on the user's geographic location. When the app detects that a customer is in a store parking lot, the system may infer that the customer is more likely to purchase and display a higher price to the customer. According to the report, a Samsung 55-inch smart TV priced at US$499.99 at the reporter's home increased to US$599.99 after the reporter arrived at the parking lot, a difference of US$100.
Walmart plans to promote electronic price tags to 4,600 stores across the United States by the end of 2026 so that prices can be adjusted remotely multiple times a day; the company has also applied for a patent describing an AI system that can use purchase records, online browsing or mouse-over behavior to dynamically adjust prices. This type of technology could result in two customers shopping side by side seeing different prices when scanning the same TV. However, Walmart’s CEO recently promised that the company will not use electronic price tags to implement such personalized pricing.
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