Big Macs 'too costly' for Iceland as McDonald's outlets shut
Published 27/10/2009 | 08:29
The Big Mac, long a symbol of globalisation, has become the latest victim of Iceland's overexposure to the world financial crisis.
Iceland's three McDonald's outlets - all in the capital Reykjavik - will close next weekend as the franchise owner gives in to falling profits caused by the collapse of the krona currency.
"The economic situation has just made it too expensive for us," Magnus Ogmundsson, managing director of Lyst Hr, McDonald's franchise holder in Iceland, said.
Lyst was bound by McDonald's requirement that it import all the goods required for its restaurants - from packaging to meat and cheeses - from Germany.
Costs had doubled over the past year because of the fall in the krona and high import tariffs on imported goods, Mr Ogmundsson said, making it impossible for the company to raise prices further and remain competitive with rivals using locally-sourced produce.
A Big Mac in Reykjavik already costs £3.25. But the 20% increase needed to make a decent profit would have pushed that to £3.90, making the Icelandic version of the burger the most expensive in the world, Mr Ogmundsson said.
That title is currently held jointly by Switzerland and Norway where it costs £3.53, according to The Economist magazine's 2009 Big Mac index.
"The unique operational complexity of doing business in Iceland combined with the very challenging economic climate in the country makes it financially prohibitive to continue the business," Theresa Riley, a spokeswoman at McDonald's headquarters in Oak Brook, Illinois, said.
"This complex set of challenges means we have no plans to seek a new partner in Iceland."
McDonald's, the world's largest chain of hamburger fast food restaurants, arrived in Reykjavik in 1993 when the country was on an upward trajectory of wealth and expansion.
The first person to take a bite out of a Big Mac on the island was then prime minister David Oddsson, who went on to become governor of the country's central bank, Sedlabanki, before being forced out earlier this year amid public outcry about his inability to prevent Iceland's financial crisis.
Lyst plans to reopen the stores under a new brand name, Metro, using locally-sourced materials and produce and retaining the franchise's current 90-strong staff.