Tuesday, October 27, 2009

McDonald’s Pulls Out of Iceland

This is an object lesson in how fast things can change in an economy.

Iceland was until recently one of the world’s wealthiest nations per capita until the collapse of its banking sector last year. Now, they literally can't get a Big Mac.

Albania, Armenia and Bosnia and Herzegovina are the only other European countries without a McDonald’s.

McDonald’s blamed the closures on the “very challenging economic climate” and the “unique operational complexity” of doing business in an island nation of just 300,000 people on the edge of the Arctic Circle.

Most ingredients used by McDonald’s in Iceland are imported from Germany – leading to a doubling in costs as the krona has collapsed while the euro has strengthened.

According to FT, Magnus Ogmundsson, managing director of Lyst, the McDonald’s franchise holder in Iceland, said that price rises of at least 20 per cent were needed to produce an acceptable profit. That would have pushed the price of a Big Mac burger well above the $5.75 .

Sometimes economics is more powerful than weapons, we will learn that in the U.S. soon enough with Obamacare.

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