McDonald’s is fleeing the country — citing the weakness of the krona.
Oct. 26 (Bloomberg) — Iceland’s McDonald’s Corp. restaurants will be closed at the end of the month after the collapse of the krona eroded profits at the fast-food chain, McDonald’s franchise holder Lyst ehf said.
McDonald’s in Iceland, which imports most of the ingredients it uses in its meals, will shut after costs doubled over the past year, Lyst said in an e-mailed statement today. The franchise holder said it doesn’t expect the situation to change in the short term.
“We would have to raise our prices by 20 percent to get the margin needed on our products,” Magnus Ogmundsson, Lyst chief executive officer, said in a phone interview. “That would have sent a Big Mac to 780 kronur” ($6.36), compared with the 650 kronur it costs today, he said.
The island’s currency collapsed last year following the failure of Iceland’s biggest banks. Offshore, the krona slumped as much as 80 percent against the euro, while capital restrictions this year have failed to prevent an 8.1 percent decline, making the krona the second-worst performer of the 26 emerging-market currencies tracked by Bloomberg.
Deprivation of cardboard-like burgers — things really are bad in Iceland.
(H/T to the FT’s Paul Davies for pointing out the story and giving us the title).
Related links:
Are there any McDonalds in Iceland? – Yahoo Answers
Iceland is now better off than Ireland, German bank says – FT Alphaville
Iceland’s crisis “just like” Madoff, judge says – FT Alphaville
Wall Street on the tundra – Michael Lewis, Vanity Fair
