Why McDonald’s Failed In Iceland

Why McDonald’s Failed In Iceland

When you think of global fast food,
Titans you probably think of McDonald’s. The chain has restaurants in more than a
hundred countries and has been a household name in America since the
1950s. But there is one European state where
McDonald’s failed to capture national attention: Iceland.
McDonald’s tried for over 15 years to make it in Iceland but in 2009 the local
franchise closed its three remaining stores with no plans in return. So what
went so long for McDonald’s in Iceland? To answer that, let’s go back to the
McDonald’s first entered the market in 1993. At a time when the isolated island
nation was shifting toward a free market economy and becoming more globalized,
then Prime Minister David Adson took the first bite of an Icelandic McDonald’s
hamburger at his grand opening. It was seen as a sign of the country finally
entering into the modern globalized world. When McDonalds opened up [in]
1993, I have never ever in
my life seen such an opening in one restaurant. There were lines for days
outside the restaurant and they were selling thousands and thousands of
burgers every day. But then you know after honeymoon is over, the people it
was just a usual thing. And locals, was welcomed the American fast food chain
because it symbolized the country pulling away from isolation and
nationalism. The opening of the franchise kind of symbolized in Iceland and a hard
time entering into a global community. As some scholars have pointed out that in
relation to marginal countries or countries that feel themselves a little
bit marginal, getting international franchise can be important as a as kind
of affirming that you are part of a global community or a community of
nations. But in 2008, the global economic collapse hit the small country of
roughly 300,000 people. The stock market and its three biggest banks collapsed in
almost every business in the country nearly went bankrupt. Thousands of people lost their savings and Iceland erupted in protests. The Krona lost roughly half
its value and higher tariffs translated in some much higher import prices. That
made it difficult for foreign brands that were dependent on imports to
maintain its profit margins without drastically raising its prices. According
to the owner of the McDonald’s Iceland franchise, the chain imported its raw
ingredients from Germany. The franchise owner told the media that prices
spiraled so out of control that for kilo of onion in Germany he was paying the equivalent of a bottle of good whiskey. In contrast with McDonald’s and also Burger King which closed at a similar time as McDonald’s closed. Those were sourcing materials from outside Iceland and the two restaurants in question closed in 2008/2009 following the economic crisis. So it simply wasn’t cost effective to have such large share of materials for the fast food. McDonald’s Icelandic franchise owners said that in order to remain business and make a profit
McDonald’s would have had to hike up it’s a Big Mac price by 20% to $6.36 that would have made it the most expensive Big Mac in the world at the time. Switzerland currently holds that title
with its $6.82 Big Mac. In 2009, the franchise announced that it
would be closing its three outlets with only a weeks notice. Blaming high operational cost. McDonald’s local franchise partner in Iceland was a firm called “Lyst.” The managing director of the McDonald’s franchise to mediate
that business had actually never been better at the time it pulled out of the
country. He told media that the restaurants had never been this busy
before. But at the same time profits had never been lower. Icelandic media
reported that tens of 15,000 people patronized McDonald’s daily in its final
days of operation. 2008 marked a time when several businesses decided to exit Iceland, including McDonald’s rival Burger King and Pizza Hut, which closed all but
one outlet. Just like McDonald’s, Burger
King’s source their products from abroad. The fast food giant’s that did exit
Iceland had trouble competing with restaurants that sourced their
ingredients locally. But other analysts say high import costs affected everyone. Even the businesses that used homegrown ingredients. And the difference between the chains that succeeded in Iceland after the crisis and the ones that failed all boils down to management. Companies that survived were companies
that had usually either finance themselves in a more conservative manner and/or maybe simply got better assistance from the banks and other
companies. So in the case of, for example, McDonald’s that company was highly
indebted with foreign currencies when they went bankrupt. Iceland has long been.known for its overpriced food and its high cost of living. In 2018, Iceland was
ranked the second most expensive country in the world. A typical sit-down meal
will cost you around $20 to $40. Local fast-food owners say
keeping prices consistent is the key to surviving in Iceland. Keep your reasonable and if you keep quality good. If you have consistency… This is the key consistency. consistency, consistency, then you can survive in almost any business. After closing, McDonald’s Iceland franchise lost the McDonald’s signage and renamed the
stores Metro. This new chain uses locally sourced food to keep costs low and is still operating today. And not all American fast-food chains left Iceland during the financial crisis. We’ve seen places like KFC. They did not close. They survived the economic crisis and I mean main difference is that they had
most of the raw materials for their foods is grown in Iceland. So I guess they were back draws because of that. And things are getting better in Iceland. Its economy is bouncing back
and it’s proving to be an inviting place to do business. According to the Economic Freedom Index, which looks at a country’s business and investment freedom, Iceland ranks fifth among European countries and Icelanders are opting to eat out. Young
Icelanders eat fast food on average every other day spending an average of
$220 US a month Iceland. Has also become a hot destination for tourism. As
of 2017 the number of foreign visitors to Iceland has more than quadrupled
since 2010. With excellent economy looking bright, tourism climbing and
residents enjoying the most school fast food options, there might be hope for
McDonald’s to make a come back in the Nordic region.

100 thoughts on “Why McDonald’s Failed In Iceland

  1. My wife and I went there last year for our honeymoon. Food was incredibly expensive, but there are some grocery stores like Bónus that have some very friendly prices for those who are on a budget

  2. Iceland is just below the arctic circle, so trees can barely grow there, let alone other plants. All of the ingredients for Maccas in Iceland, except for some meat and fish, had to be imported. When the GFC hit, imports became prohibitively expensive and Maccas in Iceland started its decline.

  3. It didn't work because they don't allow blacks there. McDonald's is a black corporation. The CEO is black. They have Black 365. McDonald's is black and Icelanders are racists—PERIOD!

  4. McDonald's failed to be the top fastfood chain here in the Philippines after competing to a local fastfood chain; Jollibee.

  5. Not true in Switzerland I paid 19 euros for a Big Mac Meal. Also, add that driving through Switzerland was horrible experience compare to Italy, France, Spain, Austria, and Slovakia even.

  6. To me, sounds like the real cause was the corporate (franchise) structure that maybe didn’t allow them to adapt since the franchisee continued but in a different name, and not being able to source materials locally.

  7. Howard Stern, "you can always tell that a black person is speaking even over the phone or you can't directly see them"

  8. 1:25 Pulling away from nationalism? God forbid a nation have pride and self identity. Let's all buy burgers and pass down diabetes to children instead of education.

  9. It failed in northern Sweden as well, several times. Reason: Local competition. Max has more tasty food than McDonald's.

  10. Failed in Jamaica too. They wanted the country to use the unhealthy American imported beef and not the local and organic Jamaican beef. Goodbye! Burger King was there before and still there now. Local beef, organic, less salt, taste better and overall less impact on one's health.

  11. I'm glad that McDonald could not even compete with local restaurants who support local suppliers. That's good news for me.

  12. Funny how economic troubles driving away American fast food probably saved many Icelandic people's health.

    Double patty hormone – fueled – cholesterol burger with those fries?

  13. Iceland is such a tiny market it actually doesn't matter at all… unlike this video that tried to make a big deal out of it.

  14. In the 1970s before McDonalds, KFC, opened in New Zealand, New Zealand had the leanest fittest population in the OECD. Now 40 years later it is one of the fattest population and one of the highest concentrations of fast food outlets.

  15. That guy is right,,it’s about consistency. I just dumped a young sugar baby because of lack of consistency.

  16. Iceland you are SMART they sell fake food human flesh burger's and silly putty in the nuggets DONT EAT FAST FOOD!!!! COOK YOUR OWN FOOD!!!

  17. The question should be why MacDonald's succeeded in USA

    Ans- they prefer taste over health and don't wanna learn cooking

  18. Every burguer should cost 10£ each to force people to eat healthier. That's American garbage that is poisoning the world.

  19. Here is your answer why McDonald's failed in Iceland, Too expensive. Do you understand. Good. Keep the prices down and customers will spend money. Greedy businesses fail.

  20. Conservative financing.
    Conservative financing.
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    One of the foundations Islamic financing is based on: 0% interest rates, 100% equity + project financing in profit sharing)

  21. Fast food in general isn’t really much of a deal. I can get a real burger and fries for a couple dollars more, but I get way more food and better quality too.

  22. I don't eat at Mcdump's, garbage food, greasy fake ingredients. You want a good Burger, A&W hand's down.

  23. Annoyed because CNBC added subtitles when the Indians were speaking in the video "Why Big Dairy Companies Struggle in India" but they didn't add subtitles when the Icelanders were speaking in this video. Personally I found it harder to understand the Icelanders.

  24. It is a pity that McDonalds doesn't go broke in all countries
    They service overpriced processed food which is high in sugar , lacking in fibre and high in saturated fat , the food is marked up about 500% to 1000% and a leading cause of obesity world-wide .
    As a tourist , I find in poorer countries , their prices are very overpriced for example in Asia you can buy a three course meal for the price of one McDonalds burger .

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  26. The true question is,,Why McDonalds, awful resturans haven't failed all around the World?".Expensive, garbage food ,full of chemicals,sugars and unhealthy fat..Disgusting

  27. McDonald's wasn't even in the first place there
    McDonald's was just a franchise in Iceland
    And what do we know about owning a franchise
    Meaning you can't choose how to gain profit out of the business, now here's the funny part about owning a franchise
    Owning a franchise mean you are there to make the company money and the company doesn't care about you lmao
    You got that lol
    For those of you who want to be part of this global scam called franchise
    Sure you work hard and get some money or of it, by the way, the money is the small commission they give you lol
    Yes they give you a small commission lmao
    Basically your a slave to them hahaha
    So a easy way, would be to do your own research, maybe gain some experience, by working there as a employee and see the magic behind the burger you eating it lmao
    Copy there meniu, design and whatever lmao
    That's not a crime is fair marketing competition hahaha

  28. "…and has been a house-hote name…" "…blaming high aboriginal cost…"

    Oh, my goodness. Apparently, good diction is no longer a requirement for a person who gets paid to speak.

  29. Iceland has a small population of about three hundred thousand citizens; can’t see greedy American companies making a serious profit in such a small country!

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