The company says artificial intelligence does not set its menu prices and that franchisees decide them independently.

  • The lawsuit alleges McDonald's used non-public franchisee pricing data to influence menu prices through an algorithm.
  • Wells Fargo and Guggenheim cut their price targets on the stock on Monday.
  • McDonald's is down nearly 25% year-to-date, with retail sentiment on Stocktwits turning 'bearish.'

McDonald’s Corp. (MCD) faces a proposed nationwide class action in federal court in Chicago alleging the fast-food giant illegally coordinated menu prices across its company-owned and franchised restaurants using an AI-powered pricing system. 

The lawsuit alleges violations of U.S. antitrust law, while McDonald’s has rejected the claims and said franchisees set menu prices independently.

MCD shares traded marginally higher in overnight trading early Tuesday, although the stock is on track for its worst annual performance since 2002. 

McDonald’s Accused Of Price-Fixing

The lawsuit alleges that McDonald’s conspired with independent franchisees to fix prices using algorithms trained on non-public data. It said McDonald’s has, since at least 2019, replaced independent pricing with a “coercive price-fixing agreement” across its corporate and franchised stores.

According to the lawsuit, the system collects non-public pricing data from restaurants, feeds it into an algorithm, and alters menu prices accordingly. The lawsuit also alleges that franchisees that do not follow the shared pricing tool face losing the significant investments they have made in their restaurants.

How McDonald’s Pricing Engine Works

Reuters reported last week that McDonald’s pricing engine uses machine-learning algorithms to analyze millions of daily transactions across nearly 14,000 restaurants and suggest the “optimal price” for each menu item at each location. Three franchisees told Reuters that it has widened price differences for the same products between restaurants, even within the same area. The lawsuit cited the Reuters report.

MCD Pushes Back On AI Pricing Claims

McDonald’s called the allegations speculative and uninformed. “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 said.

McDonald’s added that it provides franchisees with “tools, resources, research and recommendations” to help them make informed decisions, while franchisees independently set menu prices at their restaurants.

McDonald’s Price Targets Cut

On Monday, Wells Fargo cut its McDonald’s price target while keeping an ‘Overweight’ rating, saying the company’s Analyst Day message remains “hard to digest,” citing pricing and value concerns, limited trend visibility, and risks from its strategy. Despite the concerns, Wells Fargo said McDonald’s remains attractive for the long term. Guggenheim also cut its target and lowered its EPS estimates on weaker U.S. same-store sales, slower global unit growth, and higher capital spending.

Wendy’s Brush With Dynamic Pricing 

Wendy's Co. (WEN) faced social media criticism in 2024 after then-CEO Kirk Tanner said the chain could start testing "dynamic pricing." Wendy's later said it had no plans to raise menu prices during peak demand.

How Fast-Food Chains Are Using AI

Chipotle Mexican Grill (CMG) began testing a food safety platform developed with Palantir Technologies (PLTR) in September. The system uses health inspection data, pest incidents, and employee illness reports to identify potential risks at its restaurants.

Earlier, in 2023, Wendy’s began testing Google Cloud’s large language models to take voice orders at its drive-thrus. The company said then that 75% to 80% of its customers preferred the drive-thru, giving it an opportunity to improve the ordering experience with AI. 

MCD Stock: Stocktwits Retail Sentiment

On Stocktwits, retail sentiment for MCD fell to ‘bearish’ from ‘neutral’ over the past 24 hours, while message volume declined to ‘low’ from ‘normal’ during the same period.

According to Koyfin data, 19 of the 34 analysts covering MCD rate it ‘Buy’ or ‘Strong Buy’, while 14 rate it ‘Hold’ and one rates it ‘Sell’. The 12-month average price target is $294.62, representing potential upside of about 27% from the last close.

MCD stock is down nearly 25% year to date. WEN shares have declined around 27%, while the Consumer Discretionary Select Sector SPDR Fund (XLY) has fallen around 9% over the same period.

For updates and corrections, email newsroom[at]stocktwits[dot]com.<