Legal/Law/Criminal Justice and Reform

Golden Arches Used AI To Nickel-And-Dime Customers ‘Down To The Last French Fry,’ Suing Attorney Claims

McDonald’s at Pandora & Vancouver. Photo: Andy Nystrom

The artificial intelligence tool behind a fast-food giant’s menu prices is now at the center of a federal price-fixing lawsuit.

An Illinois resident and frequent customer, Michael Thomas, filed a lawsuit against McDonald’s in Chicago federal court on Friday, alleging the chain conspired with its franchise owners to fix menu prices through an AI-powered pricing system, according to the complaint reported by Reuters. The lawsuit landed days after Reuters reported that the company was pressuring franchise owners to utilize AI to determine menu prices.

McDonald’s uses a machine-learning pricing engine, trained on competing restaurants’ sales data, to determine how much customers will pay for products at a given franchise, the complaint alleged.

“[The pricing engine] estimates how much each restaurant’s likely customers are willing to pay and tells each franchisee how sensitive its likely customers are to prices using competing [sic] the nonpublic data of competing McDonald’s to do so,” the complaint stated in part, which cites Reuters’ initial report on the AI tool. “The algorithm is programmed with rules tying one restaurant’s price increases to whether other McDonald’s restaurants have already raised prices on the same item.”

McDonald’s is “leveraging its troves of data and its franchised system to nickel-and-dime consumers down to ⁠the last ​French fry,” Lark Turner, a lawyer representing the plaintiff said in a statement to Reuters.

McDonald’s rejects the claims of the lawsuit.

“The complaint is filled with inaccuracies and we will vigorously defend against this lawsuit. AI does not set menu prices at McDonald’s restaurants — McDonald’s franchisees do,” McDonald’s Corporation said in a statement to the Daily Caller News Foundation. “Optional tools are available to franchisees to help them make the best decisions for their businesses and customers, but these tools do not automate, coordinate or fix pricing in any way.”

Tiger Analytics operates the AI system McDonald’s relies on, which mines the chain’s sales records to suggest what each of its nearly 14,000 U.S. restaurants should charge, Reuters reported Sept. 29.

The discrepancy in Big Mac prices, as a result of the AI tool, was demonstrated by Reuters in a video posted Sept. 29 on X.

The company sometimes raises pricing with franchise owners who don’t follow its recommendations, McDonald’s CEO Chris Kempczinski said on an Aug. 4 earnings call.