In this photo illustration, a McDonald’s Quarter Pounder hamburger meal is seen at a McDonald’s on October 23, 2024 in the Flatbush neighborhood in the Brooklyn borough of New York City.
Michael M. Santiago | Getty Images
As McDonald’s and health authorities race to contain a deadly E. coli outbreak, the burger chain faces challenges in the months ahead to keep the trust of diners and investors.
Shares of the fast-food giant have fallen 5% since the Centers for Disease Control and Prevention issued an advisory notice Tuesday, warning that the company’s Quarter Pounder burgers have been linked to an E. coli outbreak in 10 states that has led to one death.
Health investigators have zeroed in on the slivered onions used in the Quarter Pounder as the likely contaminant. McDonald’s confirmed that California-based vegetable producer Taylor Farms is the supplier of onions it removed from its supply chain. Taylor Farms issued a recall on four raw onion products, citing potential E. coli contamination, restaurant supplier U.S. Foods said in a notice to customers Thursday. (U.S. Foods is not a supplier for McDonald’s.)
The CDC reported 49 people became ill from the outbreak from Sept. 27 to Oct. 11, as of Tuesday. Health experts say the number of cases will likely rise as the investigation progresses.
Just two days after the CDC issued its advisory notice, it’s too soon to tell how the outbreak could affect McDonald’s business, especially if the case count grows. But investors are already worried that it could cause sales to fall at the company, which has been trying to rebound from lagging traffic by offering deals to price-sensitive customers.
Company spokespeople said Wednesday that’s it’s far too early to share if the outbreak was having any effect on its restaurants’ sales. McDonald’s is expected to report its third-quarter results on Oct. 29 before the markets open.
The damage to the business will depend in part on how effectively McDonald’s has already contained the outbreak — and how well it can convince diners it is safe to eat at its restaurants.
O157:H7, can cause a serious complication that can lead to kidney failure. One of the patients in the McDonald’s outbreak suffered from that condition, known as hemolytic uremic syndrome. The federal government essentially bans the sale of any ground beef contaminated with the strain, requiring suppliers to test their products for it.
E. coli can spread through contaminated food or water, or by an individual coming into contact with an infected person, environment or animal.
The CDC and the 10 states impacted have been interviewing each patient case to get detailed information about their exposure to E. coli, such as what they ate and when, according to Craig Hedberg, the co-director of the Minnesota Integrated Food Safety Center of Excellence. Hedberg is also a member of the McDonald’s Food Safety Advisory Council, but said he has not worked with the company on its response to the outbreak.
The CDC and the states have been sharing the information they gather with the Food and Drug Administration to trace onion distribution and identify a specific source of contamination, he said. The information is also shared with the U.S. Department of Agriculture’s Food Safety and Inspection Service, which does the same with ground beef.
The CDC is investigating both the Quarter Pounder’s uncooked slivered onions and its beef patty as the potential culprit for the outbreak.
Hedberg said contamination of raw onions with E. coli is “highly plausible,” noting several salmonella outbreaks have been linked to onions in recent years.
McDonald’s uses a single onion supplier, which washes and slices the vegetable, in the affected area.
Meanwhile, McDonald’s uses multiple beef suppliers in the region, and its burgers are supposed to be cooked to an internal temperature that would kill the bacteria. The size of the outbreak “would imply widespread undercooking by many different individual McDonald’s restaurants” if beef was the culprit, according to Hedberg.
But he said that seems unlikely since most fast-food chains have designed their cooking systems to prevent E. coli contamination of ground beef, which is a widely recognized hazard. Still, investigators will likely examine the cooking practices of multiple locations as part of the investigation, Hedberg noted.
Jaenisch said he hopes the investigation will also examine the preparation process for Quarter Pounders to see if there is any potential for cross contamination between slivered onions and other ingredients.
“When you prepare the burger at McDonald’s, at which point are the slivered onions added? Do they have a bowl of slivered onions, someone puts their hands in it and then touches the tomatoes?” Jaenisch said. “I would look very closely at that point of preparation.”
McDonald’s has already pulled Quarter Pounders from restaurants in the affected areas. Roughly a fifth of McDonald’s U.S. restaurants are not selling Quarter Pounder burgers at this time. The company has also instructed restaurants in the area to remove slivered onions from their supply, and has paused the distribution of that ingredient in the region.
Wendy’s dealt with its own link to an E. coli outbreak two years ago. More than 100 people got sick across six states. Still, the incident didn’t have a long-term effect on the chain’s sales.
“They got past it, and you never really heard about it,” KeyBanc analyst Eric Gonzalez told CNBC. “I think there were some operators in the area that probably saw a mid-to-high single digit, maybe 10% decline for a couple days of a week or so, and then it reverted as the news cycle moved on.”
On the other side of the spectrum is Jack in the Box, which became the poster child for food safety issues decades ago.
An outbreak in 1992 and 1993 linked to the chain resulted in the deaths of four children and infected more than 700 people. Media coverage, coupled with the severity of the outbreak, led to a steep decline in sales that year, fueled three straight years of losses and tarnished Jack in the Box’s reputation for years.
And then there’s Chipotle, a more recent example of a chain that struggled for years to improve its food safety and turn around its image after a string of foodborne illnesses.
“It was sort of a victim of its own inexperience, in a way, where not only were there multiple illnesses — E. coli, salmonella, norovirus — but you didn’t really have the expertise and experience level to manage through the crisis,” Gonzalez said.
After the initial wave of outbreaks in 2015, it took Chipotle several more years and a new CEO to rebuild trust in its burritos and bowls.
While investors fear the outbreak will hit McDonald’s sales, it’s unlikely that the burger giant turns into another Chipotle or Jack in the Box.
“We don’t know where this is going to land, as far as McDonald’s is concerned, but you have to have a little bit of confidence in their ability to contain the outbreak,” Gonzalez said. “It’s a very sophisticated organization with a sophisticated supply chain, and I don’t doubt their capabilities.”
