AI could soon determine cost of a burger and fries
· Toronto Sun
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While dynamic pricing is already being used to determine the cost of flights, hotel rooms and ride-hailing services, artificial intelligence may soon affect what you might pay for a quick meal.
A recent investigation by Reuters revealed the price of a McDonald’s Big Mac south of the border could depend on where the restaurant is located and what customers are willing to pay, all powered by AI.
The news service said it reviewed screenshots of the company’s pricing engine provided by several franchisees in August, which uses algorithms to regularly analyze data and set prices for each menu item at all of its nearly 14,000 eateries in the U.S.
Its pricing engine also displayed information from online menus of nearby competitors Wendy’s and Burger King, which told the outlet that they do not use AI.
In addition, McDonald’s provides franchisees AI pricing guidelines at least three times a year, according to company documents reviewed by Reuters.
Digital-first future
In a second-quarter earnings call in August, McDonald’s Chairman Chris Kempczinski said the company has done a lot of hard work integrating their systems for a digital-first future.
“We’re now close to having all our major markets on one app, one loyalty program, one pricing engine, one HR system, and one finance system,” Kempczinski said .
“This will drive cost savings, accelerate innovation, harden security and enhance stability. Critically, with all our data soon to be pooled in a global data lake, we’ll also be well positioned to capitalize on the new opportunities afforded by artificial intelligence.”
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In January, as part of the popular burger joint’s new business standards, the company started requiring franchisees to be “constructively engaging with McDonald’s approved Pricing Consultant and Tools,” according to internal communications.
A McDonald’s spokesperson said in a statement to Reuters that costs and other factors can vary across its restaurants, even if their stores are a short distance apart.
Bottom lines given a boost
It appears the burgeoning information technology can do wonders for bottom lines.
California-based consulting firm Master of Code Global, an AI and software engineering company, says dynamic pricing can improve margins by 10% and increase sales by 13% during peak periods.
“AI is the engine of this revolution,” says Kateryna Cherniak , the company’s head of marketing.
“The algorithms use vast data — sales history, competitor strategies, real-time demand, external factors — to create a system that’s deeply informed, future-focused, and strategic.”
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Cherniak says businesses are shifting away from rule-based automation to AI agents that can quickly adjust pricing decisions without waiting for human authorization.
“Imagine your pricing strategy acting as a highly sensitive market weather vane, constantly attuned to the shifting winds of commerce,” says Cherniak.
“AI algorithms continuously ingest and analyze vast streams of data, from the ebb and flow of customer demand and competitor price moves to seasonal trends, breaking news, and even granular factors like local weather patterns.”
However, companies can face backlash over AI pricing if consumers feel they are being gouged.
Surveillance pricing worries
One fear is the use of surveillance pricing after major grocery chains in Canada such as Loblaw, Sobeys, and Metro rolled out digital price labels at some stores to replace paper tags.
Surveillance pricing is a practice where companies use data collected from individual consumers, including their digital behaviour, to set a maximum price a person is willing to pay.
In July, Toronto Mayor Olivia Chow directed city staff “to identify all possible mechanisms for the City of Toronto to ban and regulate surveillance pricing that increases prices on groceries, including those sold online and delivered within the city.”
The mayor also asked that a report be submitted to council in the new year for options that city hall can take to keep the technology at bay.
So far, there is no evidence that surveillance pricing is occurring in Canada. If it has, it would also be difficult to determine how much retailers are leaning on AI to set their prices.
But in this digital age, gaining a financial edge among competitors could be the difference between barely surviving and thriving for many companies.