Big Macs off the menu in beleaguered Iceland
By Gudjon Helgasonand Jane Wardell |
October 28, 2009, Wednesday
|
Print Edition
Print Edition
THE Big Mac, long a symbol of globalization, has become the latest victim of Iceland's overexposure to the world financial crisis.
Iceland's three McDonald's restaurants - all in the capital of Reykjavik - will close this weekend, as the franchise owner gives in to falling profits caused by the collapse of 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.
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, 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 already retails for 650 krona (US$5.29). But the 20 percent increase needed to make a decent profit would have pushed that to 780 krona, he said.
That would have made the Icelandic version of the burger the most expensive in the world, a title currently held jointly by Switzerland and Norway where it costs US$5.75, according to The Economist magazine's 2009 Big Mac index.
The decision to shut the Icelandic franchise was taken in agreement with McDonald's Inc.
"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 Illinois, said.
Iceland's three McDonald's restaurants - all in the capital of Reykjavik - will close this weekend, as the franchise owner gives in to falling profits caused by the collapse of 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.
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, 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 already retails for 650 krona (US$5.29). But the 20 percent increase needed to make a decent profit would have pushed that to 780 krona, he said.
That would have made the Icelandic version of the burger the most expensive in the world, a title currently held jointly by Switzerland and Norway where it costs US$5.75, according to The Economist magazine's 2009 Big Mac index.
The decision to shut the Icelandic franchise was taken in agreement with McDonald's Inc.
"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 Illinois, said.
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