McDonald's is pushing machine-learning pricing across nearly 14,000 restaurants, setting prices by location from willingness to pay. The same logic is heading for Australian tills, where the ACCC watches pricing more closely than the US does. Set your price floor and fairness rules before a model sets them for you.
The Take: Artificial intelligence has spent a decade setting your ad bids. It is now being pointed at your prices. McDonald's is pushing algorithmic pricing across its restaurants, and the same logic will reach Australian tills, so decide where your price floor sits before a model decides it for you.
The setup: McDonald's runs machine-learning pricing across nearly 14,000 restaurants with analytics firm Tiger Analytics, setting an "optimal price" for each item by location from demand, competitor menus and what a customer will pay, according to Reuters reporting carried by Inside Retail Australia. Franchisees said they were pushed to follow the recommendations even as the chain called them voluntary, with "pricing non-compliance" tracked in business reviews.
The price you don't see: The result is prices that move by postcode. One example had a Big Mac at $5.69 in one store and $6.89 in another two miles away, a 21% gap for the same burger, on the same reporting. A franchisee lawsuit cited a suggested $18 Big Mac meal. When the price is set by what a location will tolerate rather than what the product costs, the customer works it out eventually. Trust is far slower to rebuild than a margin is to bank.
Price gap for the same Big Mac two miles apart under algorithmic pricing
The legal line: Regulators in the United States are already asking whether shared pricing algorithms help competitors coordinate. In Australia the ACCC has been sharpening its focus on pricing transparency and personalised pricing, so a local rollout would land in a tighter consumer-law setting than the American one. The reputational bill also tends to arrive well before the regulator does.
For Australian operators: