Brian Reed: Hey. Did you catch the Reuters piece this morning?
Eliza Ward: The McDonald's thing. Yeah, I did.
Brian Reed: So Reuters published September 29th — reviewed screenshots, talked to nine sources — and the headline is that McDonald's has an AI system generating pricing recommendations. For the Big Mac. In real time. Across the network.
Eliza Ward: Which — okay, hold on — that's the Reuters framing. McDonald's came out the same day and called the reporting 'speculative and uninformed.'
Brian Reed: Right, and — this is the part that got me — the same day they're telling reporters the story is wrong, CEO Chris Kempczewski is at an investor meeting calling the engine 'industry-leading.'
Brian Reed: Same day. Two audiences, two — I mean, not exactly two different stories, but two very different framings of the same tool. And Reuters also found a corporate document — not a source claiming this, an actual document — showing McDonald's tracks which franchisees deviate from the platform's recommendations.
Eliza Ward: That word 'adherence' is doing a lot of work in a company that says this is advisory.
Brian Reed: And that tracking piece is what makes me want to slow down on the 'this is new' framing — because it's not, really. McDonald's has been building toward this for years.
Eliza Ward: Right — March 2019. Steve Easterbrook. McDonald's pays three hundred million dollars for Dynamic Yield, an Israeli AI firm, and everyone kind of files it under 'tech acquisition' and moves on.
Brian Reed: Then they sell it. To Mastercard, in 2022. But — and this is the part I keep circling back to — they say they retained derived capabilities. What does that mean, exactly?
Eliza Ward: Nobody's answered that. Did they keep the code? The model? A licensing deal with Mastercard? Because if there's ever litigation around this pricing engine, that contract with Mastercard is going to be exhibit A, and I haven't seen anyone look at it yet.
Brian Reed: Wait, no — let me just try to say what this system actually does, because I think the headline makes it sound like a sudden pivot and it isn't. Think of it like a navigation app. Waze doesn't know your road. It knows every road, every driver, every jam happening right now — and it tells you which lane to take. McDonald's system reads millions of daily transactions and tells each restaurant what price the Big Mac can bear right now. That's it. That's the whole thing.
Eliza Ward: That's a good frame. And by December 2023 they'd wired Google Cloud into individual restaurants — the Restaurant Platform Edge — processing around a hundred and twenty signals per order at the store level. That's not a cloud dashboard someone checks once a week.
Brian Reed: A hundred and twenty signals. Per order.
Eliza Ward: Per order. And as of August this year, they've pooled two hundred and twenty million loyalty records into a single AI training system. So the infrastructure — I mean, the capability itself isn't new. What's new is the paper trail Reuters found showing it's becoming mandatory.
Brian Reed: Which reframes the whole story. The question isn't whether McDonald's built something impressive. It's whether franchisees have any real choice about using it.
Eliza Ward: And the take I keep seeing push back on that — the one circulating — is 'it's advisory, franchisees can ignore it.' Which, okay, let me just say: the paper trail doesn't support that.
Brian Reed: That's the take I want to pull on. Because McDonald's spokesperson literally said the portal is 'a tool, not a mandate' and 'does not set the price of a Big Mac.' That's a direct quote. So — on what basis do we say that's wrong?
Eliza Ward: January 2026. McDonald's requires franchisees to 'engage constructively' with its approved pricing tools. That's not — I mean, that's not optional language.
Brian Reed: Right, and 'engage constructively' is the tell. You don't track adherence to a suggestion. Reuters reviewed the actual corporate document — deviations get logged. And then — wait, this is the part that closes it for me — Chris Kempczewski, August 2026 earnings call, names non-compliant franchisees as underperformers. By name. On a call investors are listening to.
Eliza Ward: That's the coercion mechanism. Not a fine, not a contract clause — reputational. You get flagged to Wall Street as the problem store.
Brian Reed: So picture this: a franchisee in Tucson prices her Quarter Pounder two dollars below what the algorithm recommends, on a Tuesday afternoon. By Thursday that deviation is in a corporate spreadsheet. And the next earnings call, she's in the underperformer bucket Kempczewski is referencing. That's — I mean, tell me how that's advisory.
Eliza Ward: Five store owners told Reuters they felt pressured. That's not a legal finding, but it's consistent with exactly that scenario.
Brian Reed: No, I don't buy 'it's just advisory' anymore. The tracking document kills it.
Eliza Ward: And the communication posture on September 29 — going on offense against Reuters rather than just explaining the system — that actually has a known failure mode, given what happened to Wendy's and Instacart. We'll get to that.
Brian Reed: And we know the failure mode because we've seen it twice already. Wendy's, 2024 — CEO announces dynamic pricing, the internet melts down, and within days they're saying the comments were mischaracterized and the system never went live. Never implemented. Full retreat.
Eliza Ward: Instacart, December 2024. Different prices to different shoppers — AI-assisted, limited test — consumer blowback, lawmakers start calling, and they kill it.
Brian Reed: Both pulled back. McDonald's went the opposite direction — dispute the story, then tout the system to investors the same afternoon. I mean, that's not the posture of a company that thinks the Wendy's outcome is coming for them.
Eliza Ward: Or it's exactly that posture and it backfires the same way. Because William Kovacic — former FTC commissioner, runs the competition law center at George Washington — he looked at McDonald's terms-of-service language and called it, quote, 'an acknowledgment there's a potential problem.' That's not a critic reaching. That's an antitrust expert reading the fine print and saying the company already knows.
Brian Reed: Wait — Kovacic said that about the terms of service specifically?
Eliza Ward: The terms-of-service language. And the FTC has been looking at pricing algorithms broadly for collusion concerns — not McDonald's by name, not yet — but that's the regulatory environment this lands in.
Brian Reed: And Yum Brands is moving the same direction — KFC, Taco Bell — so if the FTC does sharpen its focus, it won't just be McDonald's holding the bag. Which actually — I don't know if that makes McDonald's safer or just means the scrutiny gets bigger.
Eliza Ward: The affordability piece is the other watch item. The system estimates local willingness to pay — that's the mechanic. Which means in higher-income zip codes it pushes prices up. McDonald's can't simultaneously run that logic and claim the tool serves low-income customers. Those two objectives cancel each other out, and nobody from the company has explained how they coexist.
Brian Reed: So the thing to watch is whether Kovacic's read gets picked up by an actual FTC filing — or whether a franchisee lawsuit gets there first, because that Mastercard contract over the Dynamic Yield IP still hasn't surfaced publicly.
Eliza Ward: And that contract is where my focus keeps going. Not the algorithm, not the affordability claim — the Mastercard paperwork. Because McDonald's says it retained derived capabilities after the sale, and nobody can say yet whether that means code, model weights, a licensing agreement — we genuinely don't know. And if a franchisee files a civil suit arguing they were coerced into a system built on IP they never consented to, that's the document a judge is going to ask for first.
Brian Reed: And the franchisee civil litigation risk — I mean, that's actually the thing that doesn't get resolved by an FTC inquiry. Those run on different tracks. The antitrust question is about market competition. The franchisee question is about whether a corporation used a 'tool' to override contractual autonomy while legally claiming it didn't. Those are separate problems McDonald's might be holding simultaneously.
Eliza Ward: Right — and the affordability question just... doesn't close either. McDonald's has never actually explained how willingness-to-pay optimization and a stated affordability strategy coexist. That's not inference, that's a gap in their own public position.
Brian Reed: And Yum Brands moving the same direction means — wait, actually that's the part that shifts the frame for me. Because once KFC and Taco Bell are running similar systems, the question stops being whether McDonald's is being fair. It becomes whether fast food's whole value proposition — the cheap, predictable meal — can survive optimization at scale. I don't know the answer to that.
Eliza Ward: Neither do I. The Dynamic Yield contract surfaces, or it doesn't. A franchisee files, or they don't. That's where it actually is right now.
