On Tuesday, McDonald's (MCD) announced its plans to leave Iceland. This weekend, the global restaurant's three franchises, all located in Reykjavik, will close their doors, as the country's weak economy has made Big Mac's prohibitively expensive.
McDonald's has only been in Iceland for a few years. The first golden arches arrived on the island in 1993, and then-Prime Minister David Oddsson ate the country's first Big Mac. Ironically, the Big Mac outlasted Oddsson by a few months; the Prime Minister later went on to become governor of the country's central bank, but was fired by Iceland's Parliament in February of this year.
Oddsson and the Big Mac fell victim to the same force: Iceland's economic meltdown, which reached crisis proportions in the fall of 2008, when the government had to take control of the country's three largest banks. Oddsson, the country's longest-serving prime minister, was once beloved for his economic policies, which energized the country's economy in the 1990s. However, as the country's involvement in the world economy soured, so did its relationship with Oddsson.
Iceland isn't the first country that McDonalds has left. In 2002, it bade farewell to Bolivia and six other South American countries where its outlets had poor profit margins. In the case of Iceland, McDonald's' food has simply become too expensive for the market. As part of its contract in Iceland, the chain required that its restaurants had to import their ingredients from Germany. As the Icelandic krona has fallen in value, the cost of importation has driven prices through the roof. Currently, a Big Mac in Reykjavik sells for approximately $5.29, but the price increase required to make a decent profit pushes the price tag to $6.36, making it the most expensive Big Mac in the world. (Currently, Switzerland and Norway share that honor, with $5.75 Big Macs).
This isn't to say, however, that McDonald's is leaving Iceland bereft of fast food options. Lyst Hr, the owner of the franchise's three outlets, has decided to reopen them under the name "Metro." The new restaurants with feature a similar menu that uses locally-sourced ingredients. Given the country's heavy emphasis on fish, lamb, and unaged cheeses, it seems likely that a MetHaddock with yogurt may soon be on the menu.
In the meantime, as McDonalds faces the indigenous resentment and economic shortcomings of running America's most prominent worldwide face in the middle of an international recession, it seems likely that the Iceland departure may be a sad portent of things to come.
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