b2b news - McDonald's is now the latest victim of Iceland's economic collapse. Iceland's three McDonald's restaurants — all in the capital Reykjavik — will close next weekend, as the franchise owner gives in to falling profits caused by the collapse in the Icelandic krona.
"The economic situation has just made it too expensive for us," Magnus Ogmundsson, the managing director of Lyst Hr., McDonald's franchise holder in Iceland, told the Associated Press by telephone on Monday.
McDonald's required that all goods for the Iceland restaurants be imported from Germany. That included everything from meat and cheese to packaging.
However, costs had doubled over the past year due to the Krona's decline and high import tariffs on imported goods, Ogmundsson said, making it impossible for the company to raise prices further and remain competitive with competitors that use locally sourced produce.
A Big Mac in Reykjavik will cost you 650 krona ($5.29). But the 20 percent increase needed to make a decent profit would have pushed that to 780 krona ($6.36), he said.
That would make the Icelandic version of the iconic burger the most expensive in the world, a title currently held by both Switzerland and Norway where it costs $5.75, according to The Economist magazine's 2009 Big Mac index.
The decision was made with the agreement of McDonald's Inc. after a several month long review said Ogmundsson
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.
This is not the first time that McDonald's, which currently operates in more than 119 countries on six continents, has withdrawn from a country. The one and only McDonald's in Barbados closed after just six months in 1996 because of slow sales. In 2002, the company pulled out of seven countries, including Bolivia, that had poor profit margins as part of an international cost-cutting exercise.
