Icelanders like Jon Ogmundsson have endured many hardships in the last year, including soaring inflation, rising unemployment and a banking crisis so serious the country nearly declared bankruptcy.
Now Iceland's battered economy is claiming one more victim - McDonald's.
Mr. Ogmundsson owns the country's three McDonald's restaurants and he plans to close them all this week. He says Iceland's troubled currency, the krona, is to blame. It has lost almost 70 per cent of its value against the euro in the last 18 months, driving up the cost of imports including the beef, cheese and special sauces Mr. Ogmundsson brings in from Germany.
"With the collapse of the Icelandic krona, our food costs have doubled," he said yesterday from Reykjavik. "Business is good, but the bottom line is not sexy."
Mr. Ogmundsson charges about 650 kronur for a Big Mac, roughly $5.50 (U.S.). He said he would have to increase the burger's price by 30 per cent just to cover the added input costs. "We have not been able to increase prices as we would need," he said. "Customers are not willing to pay more."
Most economists don't expect Iceland's economy, or its currency, to recover any time soon. Inflation stands at about 10 per cent, interest rates are 12 per cent and the International Monetary Fund expects the country's economy to shrink by 8.5 per cent this year, the worst among 33 developed nations.
The IMF and other lenders have put together a $10-billion rescue package for Iceland.
No currency has been hammered harder by the financial crisis than the krona, which plunged against all major currencies. While Iceland maintained a floating currency, a handful of other small countries in Latin America and Asia had earlier taken measures to prevent runs on their currencies after crises in the 1980s and 1990s, typically through pegs to the U.S. dollar or euro.
The krona lost 50 per cent of its value against the euro last year, putting it alongside the Zimbabwean dollar and Turkmenistan's manat in terms of poorly-performing currencies. It has fallen more than 15 per cent this year despite the government's adoption of some foreign-exchange controls.
McDonald's, which has more than 30,000 restaurants worldwide, doesn't have much confidence in Iceland's sagging economy either. In a statement, McDonald's said "the very challenging economic climate in the country makes it financially prohibitive to continue the business."
Yesterday's announcement ends 16 years of McDonald's in Iceland. The first restaurant was opened in Reykjavik in 1993 by then-prime minister David Oddsson, who took a big bite out of a Big Mac. That might have been a bad omen. Mr. Oddsson went on to become the head of the country's central bank and he has been widely blamed for the country's financial problems. The public bitterness got so bad this year Mr. Oddsson was forced from office and had to travel with a team of bodyguards.
McDonald's is not the only burger chain to fall victim to Iceland's ailing economy. Burger King has also pulled out. There are other fast food chains in the country, such as Pizza Hut, KFC and Taco Bell, but they rely more on local supplies instead of costly imports.
Mr. Ogmundsson said his customers will be sad to see the end of Ronald McDonald. But he offered some hope to burger-starved patrons. He plans to convert the restaurants into a new chain called Metro. They will have "very similar products like McDonald's," he said.
Not everyone in the country, which has a population of 320,000, is mourning the loss of the golden arches. History teacher and blogger Pall Vilhjalmsson joked that the feeble krona managed to do what seemed impossible, bring down an American icon.
The krona has "taken down the mighty symbol of American imperialism, The McDonald's," Mr. Vilhjalmsson said in an e-mail from Reykjavik.
He added that "the word on the street is that Starbucks is a 21st century edition of American imperialism. Alas, we do not have Starbucks in Iceland."
With a report from Brian Milner
THE BIG MAC INDEX
Working time required to buy one Big Mac in:
Toronto: 12 minutes
Rome: 27 minutes
Mexico City: 129 minutes
Cost of a Big Mac around the world (in U.S. dollars):
Hong Kong: $1.71
Working time required to buy one Big Mac, in minutes
GLOBAL AVERAGE: 37
Mexico City: 129
Sao Paulo: 40
New York: 14
THE GLOBE AND MAIL / SOURCE: UBS