McDonald's Franchisees Push Back

McDonald's franchisees push back on 800K remodeling costs - Bloomberg

Another Fine Mess Management Has Gotten McDonald's Into

This is what you get when you have a CEO who thinks he can ignore decades of legal interpretation and generations of McDonald's policy.

McDonald's hit with class action alleging AI-powered menu price-fixing - Reuters

This Kind of Thing is Almost Universal in Franchising

Subway vendors caught stealing from franchisees

Maze on "X"

Jonathan Maze

@jonathanmaze

I think if I'm a McDonald's franchisee this week I'm probably really angry about this AI pricing stuff, and let me explain. McDonald's franchisees have for decades controlled their pricing, which is why the prices vary from one store to the next. (Our three closest McDonald's all price their Big Macs differently, for instance.) This is an important part of the franchise business. As local owners, they're supposed to have that control, because their costs vary and they need to generate a profit. The company provides a pricing recommendation tool, which was built by Deloitte and uses machine learning, and probably AI, to make those recommendations. Those recommendations are based on a variety of factors, and the use of AI to make them would be completely understandable because pricing is difficult business. Yet operators don't have to follow it, and sometimes don't. In recent years, as its traffic has declined, McDonald's has exerted some real pressure on operators to go along with national value offers. McDonald's has to do this because, again, franchisees control the pricing. This came up recently, when Chris Kempczinski blamed "inconsistent execution" for part of the failure of the $3 and Under Menu during the company's last earnings call, when he noted that 60% to 65% of operators followed the recommended prices. Earlier this year McDonald's added a new value standard to its franchise rules. So all the pressure on operators has been on value. As the AI story has played out on social media, it has played like AI is doing the pricing. And consumers are worried that AI pricing will mean dynamic pricing, much like we see in other industries. That is a legitimate concern. And many consumers are still very frustrated by fast-food prices, and McDonald's is at the epicenter of that frustration. But unless all my sources are flat-out lying to me, AI does not price McDonald's Big Macs or its other items. The company does not do dynamic pricing. And it doesn't price based on the customer. Yet the uproar is likely to intensify the anger not just at McDonald's, but at other fast-food chains, where franchisees have seen profits take a hit while bankruptcies are soaring.

McDonald's on the Price Fixing Defensive

McDonald's denies AI or Mc/HQ sets Big Mac prices - People

Reuters Article - Full Text

For those frustrated by paywalls, I have obtained special permission to post the text of this week's Reuters article about McDonald's AI pricing HERE.

The article includes a video by the reporter Waylon Cunningham. If anyone had trouble playing the video, here's a nice, clean copy on YouTube.

MCD Corporate Suit Defends Price Fixing

 

Jon Banner

@jon_banner1

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57m

For the record: AI does not set Big Mac prices, make automatic price changes, or determine what individual customers pay.

@Reuters

got it wrong.

@McDonalds

provides tools and recommendations, not automatic pricing. Franchisees set menu prices. We provide insights that help franchisees deliver better value for customers and run successful businesses.

Reuters Discusses Some of the Legal Issues Around Pricing

Here's the Reuters article that WallStreetApes mentions

You should get 2 or 3 free visits, and then Reuters will ask you to subscribe for a nominal fee. Waylon spent a couple of months working on this topic.

Taking Price Fixing to the Next Level

Opinion from @WallStreetApes on X 

Wall Street Apes

@WallStreetApes

HERE WE GO AI powered Dynamic Pricing comes to McDonald's McDonald’s is using an AI-powered pricing engine to help determine menu prices based on transaction data and "customer willingness to pay" The AI engine doesn’t just look at McDonald’s sales. It also scrapes public menu prices from nearby Burger King and Wendy’s and folds those into the “optimal price.” The algorithms estimate “customer willingness to pay” at each restaurant and according to Reuters, store franchise owners say the company pressures them to use AI pricing tools "McDonald’s pricing engine uses machine-learning algorithms to continually analyze data from millions of daily transactions across McDonald’s nearly 14,000 restaurants and generate what the company calls “the optimal price” at each location for each menu item” - Reuters It’s a big difference 2 McDonald’s locations just 2 miles apart in Fresno, California were selling the same Big Mac for $5.69 vs $6.89. That’s a 21% difference The franchisee dashboard literally grades stores on how much locals will tolerate: “Your restaurant is showing MEDIUM SENSITIVITY to Price” based on “customer willingness to pay in your area.” This is every nightmare we were worried about coming true

Maze Qoutes McDonald's Chief Financial Officer

"Ian Borden, the company's CFO, said that the sector is developing locations faster than demand can support that development."

Then why in the world are they rushing to open more stores in the USA? Didn't they know this when they launched Accelerating the Arches?

McDonald's has low expectations for fast food sector growth

Maze Quotes PJB

On McDonald's Investor Day, Restaurant Business editor-in-chief Jonathan Maze interviewed the McDonald's CEO. Some of the comments are in his articles. This interesting post appeared on Jonathan's "X" account.

Jonathan wrote: McDonald's stock is up a bit today, which is good. But the company's stock fell nearly 5% yesterday during the Investor Day presentation. Wall Street is skeptical for a few reasons, but the biggest is concern over whether the franchisee base is willing to go along with the modernization initiative. And the company will definitely need to overcome that operator skepticism. The Next upgrades would come along with typical remodels, so the typical store is looking at $1.2 million in upgrades over the coming years. The company believes that its own investments ($8.5 billion worth worldwide over the next decade), efficiency (250bp/$100k in cash flow), and perhaps remodel sales lifts plus market share gains will all help fund it. Efficiency and market share gains are definitely a good thing, and there's no question that McDonald's needs to do things to make itself more competitive in a flat traffic environment. And the previous remodels have made the company's estate look far better than any of its competitors. But cash flow among operators has taken a hit of late, and the weak sales results more recently have not helped. $1.2 million/per store for various remodels and upgrades is a big lift. We told CEO Chris Kempczinski that some operators are still repaying their debt from the previous remodel. Here's what he said. He said a lot of other things also.

Yes, He Said It:

 PJB on 8/04/26: (Franchisees) “They’ve got a lot of borrowing capacity still,” he said. “I feel very confident we’ll be able to get this thing done.”

Anonymous on 8/05/26: "Borrowing capacity is not cash flow"

Opinions From Seeking Alpha

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Skye and Her “Honest Conversations” with McDonald's Franchisees

McDonald's USA President comes in at a crucial time - Maze

MCD Shareholders Say:

MCD shares down $15 today. Four-year low of $235 - CNBC

At the close MCD traded at $238.32, down $12.

MCD Also Says:

 

Jonathan Maze

@jonathanmaze

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32m

The total cost for McDonald's U.S. store upgrades will be somewhere around $17 billion total, including typical remodels and Next improvements. Some will come from the company. Franchisees will fund the rest. Company planning efficiency improvement.