On September 29, Reuters reported that McDonald's uses a machine-learning pricing system to calculate an "optimal price" for each product at roughly 14,000 U.S. restaurants. Since January 2026, the company has asked franchisees to use the tool or take part in pricing discussions. The franchisee-facing screen also includes the phrase "willingness to pay" for local customers. Read on its own, that wording makes the system look like an AI that estimates how much customers will pay and sets prices as high as possible.
There is another way to see it. The system may function less as a way to read each customer's finances and more as a mechanism that lets a franchisor, which earns income tied to franchisee sales, get involved in how franchisees set prices. That reading rests on two things: McDonald's corporate revenue structure, which rises and falls with sales, and the CEO's remark that failing to follow pricing guidance can, in some cases, come up in franchisee business reviews.
$5.69 vs. $6.89: A Big Mac Price That Changes Within Two Miles
According to Reuters, the system uses machine learning to analyze millions of daily transactions from about 14,000 U.S. restaurants (13,706 at the end of 2025). It then calculates what the company calls "the optimal price" for each restaurant and product. The system is run by Tiger Analytics. Reuters reviewed screens captured in August 2026 and interviewed nine people familiar with the matter.
The screens show information such as "customers at this restaurant show moderate price sensitivity," with local customers' "willingness to pay" listed as one input. They also show publicly posted online prices at nearby Wendy's and Burger King locations. Both companies told Reuters they do not use AI to set prices.
When Reuters checked the app in September, a company-owned restaurant in Fresno, California, priced the Big Mac at $5.69, while another company-owned restaurant about two miles away charged $6.89. That is a difference of about 21%.
Using the exchange rate applied in The Economist's Big Mac Index for July 2026, ¥162.135 to the dollar, those prices come to about ¥923 and ¥1,117. The index puts the U.S. Big Mac price at $6.22 (about ¥1,008), so one is below that figure and the other above it. However, Reuters was unable to confirm whether the gap resulted from recommendations made by this system.
A screen that puts local willingness to pay next to nearby competitors' prices can look like a tool for pushing prices toward what customers can bear. But the people using this screen are franchisees, not customers.
A Franchisor That Earns on Franchisee Sales, and Franchisees Who Need Profit
About 95% of McDonald's restaurants worldwide were franchised at the end of 2025, and the U.S. share is roughly the same. According to the company's annual report (10-K), under traditional franchise agreements franchisees pay rent and royalties based on sales. The 10-K also says the franchisor's revenue is largely determined by franchisee sales.
The same 10-K says franchisees manage their own marketing and pricing.
In the U.S. in 2025, McDonald's corporate revenue from franchisees, including rent and royalties, was $7.371 billion, against franchisee sales of $51.946 billion. That works out to about 14.2%.
This 14.2% is an overall average our editorial team calculated from two figures in the 10-K, not a rate set in any individual franchise agreement. The company also bears $1.293 billion in occupancy costs for U.S. franchised real estate, so 14.2% cannot be treated as the franchisor's profit margin.
What matters is that the franchisor and franchisees do not necessarily want to maximize the same thing through pricing.
A franchisor earning income tied to sales tends to benefit from the price that maximizes total sales, which is price multiplied by volume. Franchisees, who bear costs such as food and labor, care about the profit left after subtracting those costs from sales.
Even if a price increase reduces traffic somewhat, profit per item can rise enough to increase a franchisee's profit. But if lower traffic reduces total sales, the sales-linked income of the franchisor falls. Because of these differing interests, there are cases where franchisees choose higher prices than the franchisor would.
Economists Lafontaine and Slade have likewise noted that in U.S. disputes over franchisee pricing, franchisors have often been the ones pushing franchisees to lower prices.
The National Restaurant Association estimates that the average restaurant's total costs rose 36% from 2019 to 2026, with employee hourly wages up 41% and wholesale food prices up 35%. McDonald's U.S. same-store sales rose 0.8% in the second quarter of 2026. Higher spending per customer contributed, but same-store traffic declined.
According to an internal notice Reuters reviewed, in January 2026 McDonald's began requiring franchisees to engage "constructively with approved pricing consultants and tools" as one of its new business standards.
On the August 4 earnings call, CEO Chris Kempczinski said pricing discussions had been added to business reviews that affect franchisee growth and eligibility. "In some cases, not following pricing guidance can be part of the discussion," he said. Reuters reports that these reviews also affect franchisees' eligibility for contract renewals and new restaurant openings.
Two former Tiger Analytics employees told Reuters that McDonald's corporate set goals in the system, such as increasing traffic and profit, along with rules about which products could be targeted for price increases. According to Reuters, a June 2026 document for franchisees also recorded in detail how far prices deviated from recommended ones.
Franchisees' reactions vary. Former franchisee Karen King said, "There's not much choice anymore." Another former franchisee said they did not feel pricing was being forced on them.
On the same earnings call, Kempczinski discussed the low-price menu introduced in April, "10 items under $3." Only "60–65%" of restaurants have implemented the recommended pricing structure, he said, and those that have not are performing "quite weak."
He also said the $3 cap leaves some room, and that some franchisees are adjusting individual item prices.
It has not been disclosed whether those recommended prices were calculated by the machine-learning system. What can be confirmed is that since January 2026 McDonald's has required franchisees to engage with pricing tools, and that departures from pricing guidance can in some cases come up in franchisee business reviews.
It is not clear whether deviation from the machine-learning system's recommended prices is itself used in these reviews. Linking the two would require inference.
The Engine Also Recommended Price Increases: Where the Analysis Holds
There is significant evidence against this reading. The pricing engine has not always recommended lower prices.
According to some franchisees who spoke to Reuters, the system recommended sizable price increases during the pandemic and the inflationary period that followed. The two company-owned Fresno restaurants also show a 21% gap in the Big Mac price.
For a franchisor whose income tracks sales, raising prices can certainly increase total sales in areas where traffic does not fall much.
In a statement to Reuters, McDonald's said the pricing portal is "a tool, not a mandate," and noted that cost structures differ by restaurant. It also criticized Reuters' reporting as "based on speculation and lacking full understanding of the facts." The portal's terms of use also state that franchisees are "always free to set final prices."
Given these facts, it cannot be said that the system pushes franchisees in only one direction, such as lower prices.
The price that maximizes total sales for the franchisor can mean an increase in areas where customer price sensitivity is low. Reuters reports, however, that in recent months the system has been recommending relatively restrained prices, including cuts, which has caused friction with some franchisees.
So what deserves attention is not only whether recommended prices go up or down. It is the sequence of the system offering a recommended price, recording deviations from it, and the company in some cases raising pricing guidance in franchisee business reviews.
McDonald's itself describes the pricing system as a tool, not a mandate. At the same time, the CEO has explained that not following pricing guidance can in some cases be a subject of discussion with franchisees.
The disclosure requirement in New York General Business Law § 349-a (effective November 10, 2025), the One Fair Price Act (passed by both chambers of the New York legislature on June 4, 2026; the governor's signature has not been confirmed), and the FTC's proposed enforcement policy (comment period announced August 19) all mainly target pricing that varies by customer using personal data.
Based on what has been confirmed, the system Reuters described estimates prices at the individual restaurant level, so it is unlikely to fall directly within these rules.
California's AB 325, meanwhile, makes it unlawful to "coerce" others into adopting recommended prices when multiple businesses use a pricing algorithm that draws on competitors' data (§ 16729(b)).
However, the statute does not define the specific scope of "competitor data" or "coerce," and no court decisions yet show how it would apply to franchisors.
Some experts Reuters spoke to believe McDonald's is unlikely to face legal trouble, since franchisees compete with one another and U.S. courts have traditionally allowed franchisors some latitude in managing franchisee prices.
Will Pricing Drop Out of Franchisee Reviews, or Will Personal Data Enter?
There are two things to watch in testing this view going forward.
First, whether compliance with pricing guidance remains part of franchisee business reviews in future earnings calls and similar disclosures. If McDonald's explained that it had removed pricing from those reviews, the case for seeing the company as shaping franchisee pricing through recommended prices would weaken.
Second, whether McDonald's app in New York or elsewhere begins showing a § 349-a disclosure such as "This price was set by an algorithm using your personal data."
If such notices appeared, it would mean that, at least for those prices, personal data is being used in pricing, not just restaurant-level demand estimates. The premise of the current analysis would need to be reconsidered.
McDonald's has also said it plans to strengthen personalized digital offers, particularly for its most frequent customers. It has not, however, said explicitly that personal data will not be used in pricing itself.
McDonald's Japan announced that from July 19, 2023, it would introduce "city-center pricing" at 184 restaurants (about 6% of its roughly 3,000 nationwide) in central Tokyo, Osaka, and Nagoya, where rent and labor costs are especially high. In that case, the reason for the price difference is stated openly as the restaurant's location conditions.
Under the Japan Fair Trade Commission's franchise guidelines, a franchisor suggesting prices in order to maintain a uniform business image is itself permitted. However, unduly restricting franchisees' selling prices can amount to a restrictive trading condition under the Antimonopoly Act.
Japan's system also recognizes the distinction between a franchisor "recommending" prices and effectively making franchisees "comply."
If McDonald's clarifies what it actually does in business reviews when franchisees set prices that differ from its recommendations, the role this pricing engine plays will become easier to assess.
The clue lies not only in the price printed on a customer's receipt but in the pricing policies and evaluation criteria applied to franchisees.