The Big Mac Has Left the Country

The era of Big Macs has passed in the small country of Iceland. This is due mostly to the aftereffects of the fiscal crisis that gripped Iceland last year. As a result, the local McDonald’s saw its costs double. In order to make the Big Mac profitable, the local McDonalds franchise owner would have had to charge over $6 for it. Compare that to the price in the United States (about $3.50). The competing Icelandic offerings using locally sourced produce (and other ingredients) now cost noticeably less than the Big Mac.

In other words, the locally sourced products not controlled by the global corporation have become the cheaper option. We usually hear that the “sustainable” or “ecologically friendly” way actually makes the product economically uncompetitive. In this case, the exact opposite happened. Admittedly, the increasing expense of the Big Mac ingredients is the result of a perfect storm of a national financial meltdown and corporate dictates. But the end result is that the Big Mac became economically unsustainable, and the business that it supported did not survive—at least in Iceland.

Put another way, in times of severe economic stress, the Big Mac business in Iceland turned out to not be very secure after all. Meanwhile, the competing businesses based on locally produced foods turned out to be secure enough to survive the economic storm that engulfed Iceland last year. In fact, they are so secure that they have a new entrant—the old McDonald’s franchisee.

The coda to the story is a classic entrepreneurial story. Since the McDonald’s business is no longer viable—the franchisee looked around for one that was. The answer turns out to be one also based on local (Icelandic) produced foods. Even better, he hopes to be able to keep all 90 of his employees in his new venture.

Interesting websites:

http://www.wacotrib.com/money/content/shared-gen/ap/Finance_General/EU_Iceland_McDonalds.html

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