Iceland’s only three McDonalds are going out of business. The reason was that they simply could not remain profitable. This was due to the global economic meltdown in which lead to a drop in the value of their currency. And the Iceland McDonald’s owner was bound to an agreement which forced him to source their ingredients from Germany. High tariffs and the drop in the Krona, Iceland’s currency, raise a Iceland Big Mac from an already expensive $5.29 to $6.36, which made it the most expansive Big Mac in the world. The profit was simply not there with the current economics in place.
The interesting part of this story for me, as a fan of local food, is that the owner of the three Mcdonalds plans to reopen the restaurant under a new name, Metro and source his food locally. This means that 90 people get to keep their jobs, local food producers get a cut, and the owner can actually make a profit. Everyone wins except McDonalds. (Read a full article on this story)
I like this story because of the “Out with McDonalds and In with Local Food” theme, but there is more here than a local food victory lap. The idea is that McDonalds bailed on a country rather than trying to source ingredients locally. They also lost economically favorable circumstances, which made their business in Iceland possible. Similar favorable circumstances like cheap oil, a drive thru culture, and subsidies to the corn and soy industries make McDonalds profitable here in the US. If they lost favor and had to compete on a level playing field with locally sourced food, they might lose out like they did in Iceland.
Local has become a buzzword in food marketing in that last couple of years, but I never hear it coming from fast food. The economies of scale of fast food makes it hard for them to source locally, and that trend does not seem to be going away anytime soon. Will we ever see a “Local Big Mac?” Probably not, but who needs it. The burger I make from grass fed beef from the farmers market on an avalon bakery bun with Michigan cheddar cheese is way better than McDonalds will ever be, and its about the same price. The rub is that without all of the subsidies, McDonalds would not even cost mush less. In fact it probably would cost more because of the transportation costs.