The three branches of the McDonald's fast food chain in Iceland are to close after the franchise holder said the country's financial woes had made them too expensive to operate.

Magnus Ogmundsson, CEO of franchise holder Lyst, said that under a supply agreement with McDonalds whereby the restaurants had to import many of the ingredients they used from Germany - rather than using cheaper, locally sourced produce - meant that costs had practically doubled in 18 months. He also blamed the 'unique operational complexity' of running the outlets in an isolated nation with a population of around 300,000.

However, Lyst is reported to be planning to reopen the sites - all in the capital, Reykjavik - under the brand name Metro, using domestically produced supplies and foodstuffs and employing the original staff. Iceland's first McDonald's restaurant was opened in 1993 by the then prime minister, David Oddsson. The brand's disappearance from the country's streets means it joins Albania, Armenia and Bosnia & Herzegovina as the only European countries without a McDonald's presence.