What Exactly Is Dynamic Pricing?
Before diving into the controversy, it’s important to understand what “dynamic pricing” actually means. Think of it as flexible pricing that changes in real-time based on demand. Airlines use it for flights, and ride-sharing apps use it to implement “surge
pricing” during peak hours. The fear among consumers was that fast-food chains could adopt this model, making a combo meal more expensive at noon than at 2 PM. This concern was amplified in 2024 when rival chain Wendy's announced it would test digital menu boards that could allow for price changes, sparking widespread consumer backlash.
McDonald's Sets the Record Straight
Following reports that it was using artificial intelligence to adjust what customers pay, McDonald's released a clear statement rejecting the claims. The company stated unequivocally that it does not use dynamic pricing. “AI does not set the price of a Big Mac or any other menu item. It does not change prices. And it does not determine what an individual customer pays,” the company clarified. The fast-food giant stressed that prices do not change in real-time or at different hours during the day based on demand.
So, Why the Different Prices?
If dynamic pricing isn't the cause, why might a McSpicy cost more at one McDonald's than another just a few kilometres away? The answer lies with the franchisees. McDonald's reiterated that its thousands of franchise owners are independent operators who make their own pricing decisions. The company provides them with a pricing portal, which it describes as a “tool, not a mandate,” that offers recommendations based on local market conditions. These conditions include factors like local operating costs, competition, and customer demand, which can vary significantly even between nearby restaurants. The tool uses data analytics—a common practice across many industries—to provide information, but the final pricing decision is made by a person.
The Real Role of Tech and AI
While McDonald's isn't using AI to surge prices, it is investing heavily in technology to modernize its restaurants. The company is in a partnership with Google to test a new generative AI system called “ArchIQ” in its drive-thrus. This technology, nicknamed “Archy,” is designed to take customer orders with high accuracy, freeing up employees to focus on other aspects of service. The goal is to make the ordering process faster and more efficient. Digital menu boards are also being used, but their purpose is to highlight promotions or suggest items based on factors like the weather, not to secretly inflate prices.
