Are McDonald’s Franchisees Using AI For Price-Fixing?

I’ve written about AI and the franchise business before, but not in a situation like this. One in which a major franchisor like McDonald’s is being accused of using AI for illegal price-fixing between locations.

Key Takeaways

A consumer has sued McDonald’s in federal court.

From my reading of the news story, the suit claims McDonald’s AI pricing tool amounts to illegal price-fixing across franchise locations. McDonald’s denies it. The case is only at the allegation stage, but anyone thinking about buying a franchise should watch it closely.

For example, how much control a franchisor has over your prices as a franchisee is a question worth asking before you sign a franchise agreement.

What Happened With McDonald’s Using AI to Price Menu Items

A lawsuit filed Friday in Illinois accuses McDonald’s of violating antitrust law. The plaintiff is a consumer from DeKalb, Illinois, who noticed price differences between stores near his home.

The suit basically says McDonald’s runs an AI-enhanced pricing tool. It claims the tool pulls in store-level sales data that competing restaurants would not normally share with each other. It also says the system has pushed U.S. menu prices higher.

In a nutshell, the plaintiff wants class action status and damages. He also wants to stop McDonald’s from enforcing agreements that limit competition. This could get interesting.

McDonald’s Response

According to the Associated Press, McDonald’s calls the suit “filled with inaccuracies” and says it will fight it.

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The company says the McDonald’s technology tools for franchisees are optional and some of them have been in use for more than a decade. It also says franchisees set their own prices. About 95% of its 14,000 U.S. stores are franchisee-owned.

The suit argues McDonald’s has significant leverage over its operators and can pressure them to follow its recommendations. McDonald’s CEO has said franchisees do not always follow corporate guidance.

In addition, he noted that only about 60% of U.S. restaurants offered a proposed value menu this summer.

Fact: A franchisor can recommend prices. Whether it can effectively require them is a separate legal question, and courts will decide where that line sits.

Why Franchise Buyers Should Care About This McDonald’s AI Lawsuit

Pricing is one of the biggest levers in a small business. If you buy a franchise, you want to know who really controls it.

Ask these questions during your research:

• Does the franchisor supply a pricing tool or data platform?
• Is it optional, or tied to your franchise agreement?
• What data about your store does the franchisor collect, and who sees it?
• Has the brand faced legal challenges over pricing or franchisee relations?

Then call current franchisees. Ask whether they truly set their own prices. Their answers will tell you more than any sales presentation.

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Finally, have a franchise attorney review the Franchise Disclosure Document and franchise agreement before you commit. Pricing language can be buried in the operations manual.

The Bottom Line

This lawsuit is an allegation, not a finding. McDonald’s may win.

But the questions it raises apply to every franchise system, large or small. Know what you’re agreeing to, and know who holds the pricing power in your business.