Collapse in krona makes McDonalds too hot for Iceland

Published on Monday 26 October 2009 21:09

THE Big Mac has become the latest victim of Iceland's overexposure to the world financial crisis.

The country'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 in the Icelandic krona.

"The economic situation has just made it too expensive for us," Magnus Ogmundsson, managing director of Lyst Hr, holder of the McDonald's franchise in Iceland.

Lyst was bound by McDonald's requirement that it import all the goods required for its restaurants – from packaging to meat and cheese – 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 remain competitive with rivals that use locally sourced produce.

A Big Mac in Reykjavik retails for 650 krona (3.24). But the 20 per cent increase needed to make a decent profit would have pushed that to 780 krona (3.89), he said. That would have made the Icelandic Big Mac the most expensive in the world.