Fast food chains' credibility problem

McDonald’s has a credibility problem right now, and so does the fast-food sector.

The Chicago-based giant was subject of a report in Reuters about the use of AI in its pricing recommendation. The report, and much of the reaction, conflated the use of AI in a pricing recommendation tool with the use of AI to set prices.

All our sources, including the company and its operators, steadfastly maintained that McDonald’s only uses the tool to recommend prices, and that franchisees are the ones who make the determination. Franchisees often don’t follow the recommendations, much to the chagrin of company executives.

It didn’t necessarily matter on social media. More than a few commenters on our posts said the company was flat-out lying. Our feed was filled with debates between some operators and customers convinced that McDonald’s uses AI to set prices, and that it employs dynamic pricing, meaning it raises or lowers prices based on demand and time of day.

Much of this is rooted in mistrust of AI, especially when it comes to pricing. And plenty of industries, like airlines, use the technology to adjust prices all the time. Consumers also loathe the concept of dynamic pricing and push back hard on any industry that does it. These reactions are understandable.

Fast-food chains could probably benefit in some capacity from dynamic pricing, but are skittish about it, for this very reason. After this, and a previous incident involving Wendy’s, no executive in their right mind would go forward with a public pronouncement about dynamic pricing anytime soon.

But the bigger issue here may simply be the fast-food sector’s credibility. Consumers are ready to believe that McDonald’s will do dynamic pricing because it’s a big company and they are frustrated generally about prices. This frustration extends to much of the broader sector.

Not only are they ready to believe the worst when it comes to pricing, they refuse to change their perception when presented with evidence to the contrary. Maybe that’s a broader social media problem. But it’s an issue that the fast-food sector is going to have to overcome in the coming years.

We published an extensive look into Crumbl, where stores are closing and the company is laying off workers. The chain’s challenges have exposed some of the franchise’s more unique requirements, notably the way it uses in-store cameras.

Speaking of crumbling, Chip City shut down despite multiple funding rounds. This is a bad time to be a cookie concept, apparently.

Another wild story comes courtesy of Subway, where the longtime former CEO of the nonprofit Independent Purchasing Cooperative was indicted in connection with an $80 million bribery scheme.

Two other leftovers from our coverage of McDonald’s Investor Day: The company has low expectations for fast-food sector growth. And the company is getting into the advertising business.

The K-shaped economy is a big reason for this, and it doesn’t appear to be getting any better.

Fat Brands is now OHG Brands. I think I miss Fat Brands.

Crumbl’s average-unit volumes were still over $1 million last year, but they’ve been trending downward. They’ve been worse this year, according to franchisees.

“At the end of the day, I’m the CEO and the buck stops with me. It’s my fault where we are today.” -Jason McGowan, Crumbl’s CEO and cofounder, to franchisees.

For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.