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You Are Here: Home » Africa/International » MacDonalds closes in Iceland as economy shrinks
Icelanders will be saying “vertu blessaður” to any future cravings for a Big Mac or Chicken McNuggets.
The three McDonald’s (MCD) restaurants in Iceland will close at midnight on Oct. 31 because of surging costs as a result of the country’s economic collapse over the past year. All three stores are in the country’s capital, Reykjavik.
“We would have to raise our prices by 20% to get the margin needed on our products,” Magnus Ogmundsson, managing director of Lyst Hr., McDonald’s franchise holder in Iceland, told Bloomberg News. “That would have sent a Big Mac to 780 kronur” ($6.36), he said.
Bing: Iceland’s economic collapse
Of the 120 countries that produce the McDonald’s Big Mac sandwich, Switzerland and Norway currently sell the most expensive ones, at about $5.75, according to the Economist 2009 BigMac index. The cheapest are sold in South Africa, at $1.68, and China, at $1.83.
Lyst had to import everything for its McDonald’s restaurants, per the company’s protocol, from Germany, getting slammed by high taxes on imported food. “Our competitors all use domestic meat and lettuce and so on, while we are flying in these materials, which is extremely expensive,” Ogmundsson told Reuters.
Iceland’s three biggest banks collapsed at the height of the global credit crisis, slamming the nation’s economy, sending its currency tumbling and forcing it to rely on a $10 billion aid package led by the International Monetary Fund.
Lyst plans to reopen the stores under a new brand name, Metro, which will use local materials and produce. It expects to keep the 90-person staff as well.
McDonald’s Europe said it has no plans to seek a new partner in Iceland, because of the economy and the difficulty in doing business there.
The IMF estimates that Iceland’s economy will shrink 8.5% this year, with consumer prices rising 11.7% — both of which would be the worst performances among the world’s 33 advanced economies.
Source: MSN Money
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