McDonald's Sued in Chicago Federal Court Over Alleged AI Menu Price Coordination, Denies Using AI to Set Prices

As Seattle's new ban on personalized grocery pricing takes the issue to city hall, a proposed class action in Chicago takes algorithmic pricing to federal court, with McDonald's as the defendant.

The suit, filed in federal court in Chicago, alleges the company illegally coordinates menu prices across its franchised and company-owned restaurants through an AI-powered pricing system. It claims McDonald's violated U.S. antitrust law by conspiring with independent franchisees to fix prices using algorithms trained on nonpublic data. These are allegations in a complaint. No court has ruled on them.

What Reuters found

The suit follows a Reuters investigation published last week. Reuters reported that McDonald's pricing engine uses machine-learning algorithms to analyze millions of daily transactions across its nearly 14,000 U.S. restaurants and generate an "optimal price" for each menu item at each location.

Reuters reviewed the interface franchisees use. One message read: "your restaurant is showing MEDIUM SENSITIVITY to price," based on "customer willingness to pay in your area."

Reuters also tested prices on the street. A Big Mac cost $5.69 at one Fresno, California, restaurant and $6.89 at another two miles away. That is a 21 percent gap. Three franchisees told Reuters the AI engine has widened price differences between nearby restaurants.

The franchisee pressure question

McDonald's says the tool is optional. Several franchisees told Reuters it does not feel that way.

"You don't really have much of a choice anymore," said Karen King, a former store owner.

Corporate documents reviewed by Reuters show McDonald's sends AI pricing guidance to franchisees at least three times a year and tracks deviations from the recommendations. An internal communication says franchisees must be "constructively engaging with McDonald's approved Pricing Consultant and Tools" under new business standards.

CEO Chris Kempczinski has told investors that "pricing non-compliance in certain cases is part of those conversations" about contract renewals. McDonald's controls whether franchisees can renew licenses or open new locations. That is real leverage.

The pricing portal's own terms of service warn that users "may be competitors of each other" and must "comply fully with antitrust and competition laws." The same document says franchisees are "always free to determine the final price."

Reuters also reported that McDonald's, working with the AI firm Tiger Analytics, has set targets such as raising prices on menu items that have gone at least two years without an increase.

The incentives are not tidy. McDonald's takes a cut of each restaurant's revenue, not its profit. Franchisees told Reuters that friction has grown because the models have recently recommended some price cuts, which can hurt an operator's margin.

McDonald's response

McDonald's flatly denies the central premise. The company disputes that it uses AI to set or change menu prices and says its recommendations are restaurant-specific. It says they do not "change prices in real-time or at different hours during the day."

The company also denies using AI to determine what individual customers will pay. It says it provides franchisees with "tools, resources, research and recommendations to help them make informed decisions."

"Businesses have long considered factors such as local costs, customer demand, competition and economic conditions when making pricing decisions," McDonald's said. "Pricing recommendation tools and analytics have been used across industries for decades."

That point has some factual footing. Franchisees have long set their own prices, and prices already differ by market. The chain's Big Arch Burger limited-time offer ran from $8 to $9 depending on location, per Restaurant Dive.

The Reuters findings describe location-level pricing, not a different price for each customer. The legal question is whether a corporate recommendation engine, fed by data from the whole system and enforced through renewal conversations, amounts to coordinated pricing among supposedly independent businesses.

McDonald's says its own review of franchisee pricing, begun at the start of the year, is meant to make sure operators deliver "reliable value."

The bigger tech push

The timing is awkward for the company. In September, McDonald's unveiled its "Next" strategy, including an $8.5 billion investment through 2036 in restaurant modernization and technology. It also introduced ArchIQ, an AI-powered restaurant operating system. Executives described ArchIQ in terms of drive-thru voice AI, automated inventory tracking and computer-vision order accuracy, not pricing.

Other companies have already been burned by pricing experiments. Wendy's backed off a planned dynamic-pricing test in 2024 after consumer backlash. In December, Instacart ended an AI pricing experiment on a group of customers after public criticism. An analysis found a family could have spent roughly $1,200 more a year on Instacart groceries under it.

Bank of England economists Clare Lombardelli and Rupal Patel warned in April that more sophisticated technology is making prices change faster and become more individualized. They said firms could move toward charging "as close to the maximum price a consumer is willing to pay," which they called "perfect price discrimination." They also noted it could make month-to-month inflation harder to measure, since the consumer price index relies on a representative sample of prices.

What comes next

The Chicago case is at the complaint stage. McDonald's has not yet had its answer tested in court, and no regulator has announced an investigation or charges.

The open question for the judge is narrow but consequential. Does a tool that franchisees say they are pressured to follow, and whose recommendations corporate tracks, make franchise prices a matter of independent choice or of coordination?