McDonald’s withdraws its restaurants from Iceland as rising costs make the chain unsustainable.

McDonald’s Europe has announced plans to close its three restaurants in Reykjavik, Iceland, citing the country’s ongoing economic troubles and high importing costs as the cause.

The restaurant franchises, operated by Jon Ogmundsson, will close on 31 October 2009 – 15 years after Iceland opened its first McDonald’s restaurant.

Mr Ogmundsson said the decision had not been taken lightly, but because of the unreasonable operating costs which they abide by. The restaurants import ingredients from Germany, and with the falling krona, imports have been made prohibitively expensive.

He said: “It makes no sense. For a kilo of onion, imported from Germany, I’m paying the equivalent of a bottle of good whiskey.”

According to reports, meal prices would have to rise by 20% in order to make the restaurants financially viable.

The fast-food chain reported strong Q3 results last week, and CEO Jim Skinner commented: “The consistent strength of McDonald’s business is the result of our commitment to the customer. We are keeping the McDonald’s brand in demand and growing market share around the world by serving great tasting food at an outstanding value in a way that’s convenient to today’s consumers.”

The news from Iceland comes despite McDonald’s reporting a 5.8% growth in global comparable sales in Europe, and a 10% increase in operating income for the third quarter.

Mr Ogmundsson plans to reopen the restaurants under another name using purely Icelandic goods.