Wednesday, October 28, 2009

Uniformity, not profit, may be key to McD's pull-out from Iceland

The big fast-food news yesterday was that McDonald's is pulling out of Iceland. As several news reports noted, the franchisee who owns the three McD's outlets in Iceland decided that importing all of the ingredients necessary for Big Macs and the like was simply too expensive - he couldn't make enough profit to justify keeping them up and running.

There appears to be more to the story, though, which many media reports seem to have missed. As the Globe and Mail story pointed out, Jon Ogmundsson, the franchisee in question, is planning to convert the three restaurants into his own burger chain that will serve "very similar products like McDonald's." Burger King also pulled out of Iceland late last year for the same reasons, yet its franchisee also converted restaurants into a localized version.

What's probably at play here is the big chains' insistence on maintaining product uniformity. McDonald's famously revolutionized Russia's agricultural system when it set up shop in the country in the early 1990s. The chain imported the special potato seeds it needed from the Netherlands in order to get the fries to taste just right.

It's pretty clear that burger chains can exist in Iceland, but the country's difficult climate and terrain probably make it impossible to locally grow the sort of ingredients the chains need in order to make the food taste just like it does in the U.S. of A. In the end, it looks like they'd rather pull out than make food with locally produced ingredients that tastes different from what people are accustomed to.

Interestingly, Subway's fortunes in Iceland would seem to lend credence to this theory. The chain, which is set to soon eclipse McDonald's as the largest purveyor of fast-food in the world - at least by total restaurant numbers - has 18 outlets in the country. Subway, with its generally fresher ingredients, is far less dependent on the sort of technologically produced and preserved goods made by McDonald's and Burger King.

By the way, songstress Bjork has nothing to do with this story. But, as with using a picture of the Sydney Opera House to illustrate any story about Australia, her inclusion in any post or article about Iceland is also a semi-official media rule.

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