McDonald's flees Iceland as Big Mac hits record

27/10/2009 9:30:00 AM

By Stuart Fagg, ninemsn Money and AFP

McDonald's will close its restaurants in Iceland this week after currency fluctuations threatened to make Icelandic Big Macs the world's most expensive.

Magnus Ogmundsson, CEO of Iceland's McDonald’s franchise owner Lyst, told Bloomberg that rising costs would have meant a Big Mac would cost US$6.36, the most expensive in the world, according to the Economist's Big Mac Index.

Norway and Switzerland currently have the world’s most expensive Big Macs, at US$5.75.

Iceland's economy collapsed last year as the global financial crisis gathered pace leaving Icelanders grappling with soaring prices and a national currency – the kronur – that dived 80 percent as the nation’s banks collapsed.

McDonald's imports the majority of its ingredients, Ogmundsson told Bloomberg, meaning the fast-food giant can no longer compete with domestic restaurants who source produce locally.

Lyst owner Jon Gardar Ogmundsson added that the two McDonald's restaurants have "never been this busy before, but at the same time profits have never been lower.

"The decision was not taken lightly," he said.

Iceland's first McDonald's opened in 1993, with the then prime minister, David Oddsson, eating the first burger.

Oddsson later became head of Iceland’s central bank, but was sacked in the wake of the financial crisis.

The collapsing kronur has made the North Atlantic island nation a cheap destination for travellers.

Indeed, a sign at the Keflavik international airport last year greeted travelers with the slogan "Welcome to Halfpriceland. Are you here for the nature or the exchange rate?".