With the collapse of the Icelandic currency, the krona, McDonald’s licence holder Lyst has decided to shut down the three McDonald’s restaurants in Iceland and reopen them as Metro.
The reason for McDonald’s closing is that costs doubled over the past year and even though sales have never been better the margin is so low that they feel they cannot sustain the business. A statement sent out by Lyst today said prices would need to go up by some 20 percent for McDonald’s to survive.
“The reason for us closing McDonald’s is the difficult economy and the collapse of the Icelandic krona,” Jon Gardar Ogmundsson, the owner of Lyst, told MBL.is.
McDonald’s will be replaced by a new Icelandic brand, Metro owned and operated by Lyst and will serve similar products as McDonald’s did before. The primary difference will be that Metro will use more local products, including bread, meat and vegetables; whereas McDonald’s currently forces Lyst to import the goods.
These changes are being made in co-operation with McDonald’s and the Metro restaurants will serve food in the same spirit and speed as has been done with McDonald’s over the past years.
This means that both McDonalds and Burger King (as reported by Icenews in Dec. 2008) have given up on Iceland – or more accurately, that their Icelandic franchise holders have given up on them. But all is not lost for globalised fast food lovers: you can still find Subway, KFC and Taco Bell in the country.
There is perhaps a slight irony in the fact that McDonald’s first ever customer in Iceland in 1993 was David Oddsson, the free-market championing Prime Minister at the time and recently-dismissed Central Bank manager.
At the time of writing, it is not yet known who will be the last McDonald’s customer. But there are already individuals planning to claim the accolade.
@Bromley86
Yes, that’s what I assumed (ie McDonald’s extracts profit from its Icelandic operations via franchise fees and supplies). However, if the cost of supplies exceeds fair value, then McDonald’s is intentionally circumventing the currency restrictions. Otherwise, any foreign company could extract profits by simply overcharging its Icelandic operations for supplies.
I interviewed Jón Garðar Ögmundsson, who runs the McDonald’s chain in Iceland earlier this week.
The difference between McDonald’s and Metro is that Metro will be using healthier and fresh ingredients from Iceland, and not your standard plastic, made in a lab, food.
Metro prices will be cheaper than McDonald’s. By about 5% because they got a better deal than expected.
I read in that McDonalds article about shifting to to Switzerland
“was prompted by a desire to simplify the ownership of intellectual property rights”,
This is one of the big corporate tax avoidance scams currently in Europe. This so called “intellectual property” and the setting up of a subsidary office in a tax haven, in order for the Corporation to repatriate funds to a lower corporate tax environment.
Microsoft’s back street office in Dublin (one such tax haven) has shaved billions from it’s tax bill
http://www.finfacts.ie/irelandbusinessnews/publish/article_10005150.shtml
When we talk about profits, I assume that we’re talking about a franchise fee and any mark up on the supplies purchased from McGermany.
Isn’t the ISK freely accessable, but you just have to buy & sell at the set rate?
If so, the latter is easy. The Icelandic McDs had to purchase those supplies in euros, so McGermany gets its mark up.
Likewise the former just involves exchanging at the set rate. The difference here is that the Icelandic francises presumably pay their fees in ISK, so it’s the McCorp that gets the exchange shaft.
BTW, I’ve got a huge feeling of deja vu with this post. It’s going to be really creepy if one of you corrects me :) .
Jim,
That is exactly the point I mentioned.
With the currency restrictions it is next to impossible for foreign investors to repatriate their profits.
It is a big dilemma: lifting the restrictions would lead to an even further dive of the value of the kronur.
But keeping them in place will chase away foreign investors.
Keep in mind however that some creativity might help.
McD started up in Hungary in communist times, when there was no free conversion of the hungarian forint yet .
Still McD was able to repatriate profits (basically Hungary was bartering other assets, like wine or poultry).
Iceland could do similar things.
I am not talking about fishing rights (the thing most icelanders are so affraid of), Iceland has other things to offer.
Are McDonald’s allowed to take profits out of Iceland? I thought the currency restrictions prevented that.
Niels wrote:
>I do think that one consideration for McD to leave Iceland are the currency restrictions.
Although the reasons for the Icelanders here who did buy the francise for not wanting to continue is clear, I have to agree that the ridiculous currency restriction are doing so so much to harm investment into Iceland.
Why crazy Red-Green government did make them +more+ strict in April this year still does boggle my mind.
And also just thoughtlessly aaying they are putting a tax on this and that. And that. And that.
No investor is going to put money in as long as these clown remain in charge of government seats.
>Krona’s do not have any value anymore outside of Iceland
>Te moldovan lei does have a value, the krona has not.
Well of course it does because this managed exchanging of Icelandic Crowns by Icelandic banks has been going on. But it needs to be freed up floating again.
After a short term dive it will become clear that in fact current offshore rate and managed rate are both higher now than reality of international trade in things Iceland has that people want indicates.
Jón Danielsson is right about this.
Brumley did reply :
>>So is there truely any significance to the fact that Iceland no longer has Mcd’s anywhere?
>Nope. The McDonalds business model demands that Icelandic franchises import goods.
Actually that is not quite so. It is possible for McDonalds to approve local manufacturing of the burger patties and items. But of course it is expensive process for all those paperworks of ISO this and that by McDonalds corp.
The franscise holders decided that it was simply not cost effective to do that again in recent years for just three McDonalds restaurants we had here.
So since then they had to import the certified ingredicents from Germany until that again prove to be too expensive because of exchange controls.
So instead a new Icelandic brand is born.
But really the most recent significant story on McDonalds pulling out of any coutnry is that they have pulled out of the UK.
http://online.wsj.com/article/SB124741673870428581.html
( Moving they corporation out of UK to Switzerland. )
They are following the exodus of other companies out of UK. Hedge funds are next thanks to this crazy EU regulations that at least that Boris Johnson is fighting against.
Brown and Darling really have put the UK into the EU commisson regulated toilet.
Alex wrote:
>Thank you as always for your comments.
>
>There was certainly no libellous intent with the insider trading article and >hence the title has been changed.
I thank you Alex for you attnetion to this. It is an appreciation by people by IceNews does correct these things.
Now please please please can you make it in WordPress so we can search by blog poster names to find they posts.
This search facility is just horrible here.
The rule of thumb is, if they have a football team then they exist.
“RESPONSE TO JIM: Northern Cyprus is not a country, it is a de facto state and neither is the Vatican City”
With respect, it appears you don’t understand what the word “country” means! Note that:
– states can be countries (that is probably the most common type of country);
– countries can contain other countries (eg England is a country, yet it is also part of another country, the United Kingdom).
>So is there truely any significance to the fact that Iceland no longer has Mcd’s anywhere?
Nope. The McDonalds business model demands that Icelandic franchises import goods. As we all know that the exchange rate has fallen off a cliff, it is no surprise that businesses are turning to local produce, where possible.
Note that the McDonalds restaurants (if I may use that word) are not being closed. They’re just changing their name to Metro and selling the BigMetro (or whatever they want to call it) made from local meat. Whether this represents an increase or decrease in “quality” is not really important, as no one was going to buy a >$6 Big Mac.
See I have to do current events in my AP geography class and I’m the “owner” [not really of course] of Iceland. So is there truely any significance to the fact that Iceland no longer has Mcd’s anywhere?
Yep: Vatican is equal to Reign of Hell so it’s truly a State. ( ‘Helvete’ for old norse heathens )
Hail to the Illuminati !
>neither is the Vatican City.
Wiki disagrees. As a sovereign state, city or otherwise, I think they’re correct.
http://en.wikipedia.org/wiki/Vatican_City
RESPONSE TO JIM:
Northern Cyprus is not a country, it is a de facto state and neither is the Vatican City.
At least they still have the good chains, KFC and Taco Bell!
Personally, I think Mcdonalds is completely over-rated and does well in most countries because of the whole Mcdonaldisation effect on modern society.
McD is trash, don’t cry.
>There is not McDonals in Cuba.
Actually, I think Jim is correct. Of course, your average Cuban would have to crawl through minefields and over razor wire and walls to get near it. Either that or convert to Islam :) .
Bsì is miles better anyhoo’s..
:)
Hey, just a correction: There is not McDonals in Cuba.
@Jim
and a Burger King in Torshavn ! lmao
I do think that one consideration for McD to leave Iceland are the currency restrictions.
Krona’s do not have any value anymore outside of Iceland so how is it possible to transform the turnover in Iceland into a currency that has any value?
There is even a McD in Moldova, the poorest country in Europe.
Te moldovan lei does have a value, the krona has not.
“leave the biased and libel comments to us that is posting”
Oh come on, a little editorial bias in articles gives them some character!
[…] More on this Mcstory and even more. […]
“There is perhaps a slight irony in the fact that McDonald’s first ever customer in Iceland in 1993 was David Oddsson, the free-market championing Prime Minister at the time and recently-dismissed Central Bank manager.
At the time of writing, it is not yet known who will be the last McDonald’s customer. But there are already individuals planning to claim the accolade.”
Perhaps Oddsson could be the last McDonalds customer! And, some Icelanders – his sheep … sorry his fans-, would applaud!
//////////////////////
When a Central Bank governor, position of great responsibility, knows risky actions could damage, even irreversibly, the economy, the currency and the banking of his country, this one must denounce these facts, take measures, even go to a tv. Otherwise, keep silence is complicity, and the governor/s must be judged per high treason.
////////////////////////
Oddsson has been a tyrant and a dummy of itself and his system and, he would have to be judged, and deportee per the Icelanders outside Iceland. Icelandic Court must judge men of great responsibility that were silent when the avalanche was foreseeable.
McDonalds has been kicked out of Dodge.
Hi Fisy,
Thank you as always for your comments.
There was certainly no libellous intent with the insider trading article and hence the title has been changed. My personal bias on the story is probably more positive towards Baldur than you assume: when warned of an impending total loss of share value, I think many (if not most) people would also have sold up. I also think he was quite brave and did the right thing in resigning when he did.
With regard to this particular article here, the irony we refer to is that Davíð Oddsson championed McDonald’s by being their first customer, but he has since become an internationally recognised figurehead (rightly or wrongly) for Iceland’s kreppa. So the irony is that McDonald’s reign in Iceland should so closely have matched his own.
I hope this helps, and thanks for reading IceNews!
Alex, editor
Jim writes :
>Does this mean that Iceland is now officially a third-world country?
No this article mean that IceNews is becoming a third rate news source thats editors is again allowing to dip down into the depths of individual bashing that sounds cheap.
IceNews editors, really you should change the title here in this post. It is misleading and unfair at best and libelous most likely :
https://www.icenews.is/index.php/2009/10/24/insider-trading-icelandic-ministry-worker-resigns/
Really when are you IceNews editor going to realize that it pays more to treat this articles as neutral news wire and sometimes have clearly indicated op-ed instead of this mixing in of op-ed to articles.
You can leave the biased and libel comments to us that is posting. There are plenty that can post they left wing bias or they right wing bias here. And improve you SEO.
Excercise some actual editing of you main aritcle contributer posts — that is what editor job is all about.
Or are their no editors here any more ?
https://www.icenews.is/index.php/2009/02/24/david-oddsson-says-david-oddsson-doing-well-at-cbi/#comment-67856
>”There is perhaps a slight irony in the fact that McDonald’s first ever customer in Iceland in 1993 was David Oddsson, the free-market championing Prime Minister at the time and recently-dismissed Central Bank manager.”
I’m all into reading irony into things that happens but I couldn’t detect any ” irony “. Please spell that out some one for me.
Get those Kaupthing and Exista directors in gaol and we might have some sympathy – assuming you take steps to get back all the stolen cash too and distribute it to those who have suffered.
Only thing that this really means ( as pointed out in other place ) is The Economist cant use Krona in its big Mac index any more.
( Although we can do the math no problem just put the ” BigMetro ” in there instead to see if krona is over valued or under valued against other currency later.
As before we had the most expensive Big Mac in the world. )
Julien writes :
>”Metro prices won’t be cheaper than McDonald’s.”
Probably not because of our protectionism has kept prices up so our farmers– while they efficient — charge a high price.
>” But all is not lost for globalised fast food lovers: you can still find Subway, KFC and Taco Bell in the country. ”
>” Metro will use more local products, including bread, meat and vegetables; whereas McDonald’s currently forces Lyst to import the goods. ”
Which is obvious point — even with the agricultural protection we have here in Iceland the ingredients are cheaper to be sourced from here now.
But McDonalds operations insist ingredients are imported. So that doesnt make sense to do in current climate of exchange controls.
And from other article on this subject :
http://www.icelandreview.com/icelandreview/daily_news/?cat_id=16539&ew_0_a_id=351036
” Metro will have Icelandic hamburgers with Icelandic ingredients on the menu, which will create up to 15 new jobs among Icelandic producers. ”
So good bye to the three Icelandic McDonalds franscises and hello to a new brand. Most likely is that in a few years Metro or a new regional brand will be coming to Nordic countries.
More likely than McDonalds being applied to again for a francise in Iceland again.
Even main Spanish newspaper made echo of the news: quite surprising!
I’d like to emphasize:
– No return.
– Similar to Albania, Armenia, Bosnia-H (the most poor european countries).
– Two reasons for the decision: ‘economic climate highly changing’ (Richest-poorest. I would say: it is a ruined country) and ‘operative unique complexity’ (it is only a country of 300k people)
It is positive news for me: farmers will have more opportunities; more Icelanders with healthful diet; trade balance and icelandic pockets of the parents will thank for it. Fantastic!
I would recommend the mediterranean diet: the best! I never went to a McDonald’s, and, I will never go to a McDonald’s!
By the way, Jim, Greenland and Northern Cyprus are not countries, and, they do not have own foreign policy: their foreign policies are controlled by Denmark and Turkey!
>Once again it will be an excuse to increase profit margins. Icelandic customers are just “milking cows”.
Not really fair. If people are willing to pay that much, there is (in theory!) no impediment to someone opening up another McD/Metro-like business and charging less. So the final selling price is what the market will bear.
Regarding profit, what is wrong with making more profit using locally produced goods? Win-win, as far as I can see. Unless as has been suggested elsewhere (with no evidence, it must be said), this is a possible kennitala change, dump debts move.
@Jim.
“Does this mean that Iceland is now officially a third-world country?”
Yes, thats exactly what it means, we still have the infraestructure of a first world country but we have the economy and the problems of a thirld-world… well acctually fourth-world country, because not even latinamerican countries are in the possition of iceland today, I said it in octuber last year, that Iceland has been diagnosed with a terminal desease and terminal deseases are exactly that TERMINAL, there is no cure for Iceland.
Off course we have the optimistic ones, and we can use the health card and say this is something very possitive, and blah, blah, but thats just the exuse of the looser, like the kid that doesnt know how to loose:
-Hey, you are an idiot!!
-well, yes…but…but at least…mmmhh… I’m something!!!
-what???
Let me guess… Knowing Icelandic practices, Metro prices won’t be cheaper than McDonald’s.
Once again it will be an excuse to increase profit margins. Icelandic customers are just “milking cows”.
McDonalds offers absolutely no positives. It’s unhealthy to consume and undermines local industry/ agriculture. If anything the abscence of a McDonalds should be a positive indicator for your country. 10 year olds whining over the internet about how lame Iceland is without McDonalds will simply have to deal with it.
[…] This post was Twitted by martin_uetz […]
…and there is even a McDonald’s in Cuba!
Well, Iceland joins a short list of 6 other countries (out of 48) in Europe without McDonald’s: Albania, Armenia, Bosnia and Herzegovina, Greenland, Northern Cyprus, and Vatican City.
That’s a tempting conclusion, Jim. But a wrong one.
You see, McDonald’s had to fight to get a place in the likes of France and China.
But if Icelanders hadn’t gone to them and asked for permission to open McD in Iceland then McD never would have come here. That’s the difference – they don’t care either way.
What we end up with in reality is the exact same restaurants with a different name servingnearly the same food made from local produce instead of being forced to import Argentinian beef burgers and American bread.
Viva the third world if that’s it’s most serious consequence….
Does this mean that Iceland is now officially a third-world country?
Finally something good is coming out of the kreppa!