On this photo illustration, a McDonald’s Quarter Pounder hamburger meal is seen at a McDonald’s on October 23, 2024 within the Flatbush neighborhood within the Brooklyn borough of Latest York City.Â
Michael M. Santiago | Getty Images
As McDonald’s and health authorities race to contain a deadly E. coli outbreak, the burger chain faces challenges within the months ahead to maintain the trust of diners and investors.
Shares of the fast-food giant have fallen 5% because the Centers for Disease Control and Prevention issued an advisory notice Tuesday, warning that the corporate’s Quarter Pounder burgers have been linked to an E. coli outbreak in 10 states that has led to at least one death.
Health investigators have zeroed in on the slivered onions utilized in the Quarter Pounder because the likely contaminant. McDonald’s confirmed that California-based vegetable producer Taylor Farms is the supplier of onions it faraway from its supply chain. Taylor Farms issued a recall on 4 raw onion products, citing potential E. coli contamination, restaurant supplier U.S. Foods said in a notice to customers Thursday. (U.S. Foods isn’t a supplier for McDonald’s.)
The CDC reported 49 people became sick from the outbreak from Sept. 27 to Oct. 11, as of Tuesday. Health experts say the variety of cases will likely rise because the investigation progresses.
Just two days after the CDC issued its advisory notice, it’s too soon to inform how the outbreak could affect McDonald’s business, especially if the case count grows. But investors are already fearful that it could cause sales to fall at the corporate, which has been attempting to rebound from lagging traffic by offering deals to price-sensitive customers.
Company spokespeople said Wednesday that is it is too early to share if the outbreak was having any effect on its restaurants’ sales. McDonald’s is predicted to report its third-quarter results on Oct. 29 before the markets open.
The damage to the business will depend partly on how effectively McDonald’s has already contained the outbreak — and the way well it may possibly persuade diners it’s fit for human consumption at its restaurants.
Where the investigation could go next
Investigations into multistate foodborne outbreaks can last from a couple of weeks to as much as several months.Â
But Dr. Thomas Jaenisch, an epidemiology professor on the Colorado School of Public Health, believes it can likely take two or three weeks for federal agencies and McDonald’s to find out the precise source of contamination and chain of events resulting in the E. coli outbreak. He said any testing of ingredients and provide sources “really shouldn’t take that long.”
The CDC has said the variety of confirmed cases related to the McDonald’s E. coli outbreak could grow because the investigation continues, as many individuals recuperate from an infection without testing for it or receiving medical care. It also typically takes three to 4 weeks to find out if a sick patient is an element of an outbreak, the agency added.Â
There’s also the likelihood that cases could crop up in recent states or regions that have not reported any illnesses, in response to Xiang Yang, a professor and meat scientist on the University of California, Davis.Â
For instance, an individual traveling to a state impacted by the outbreak, reminiscent of Colorado, could have gotten infected with E. coli and brought it back to where they’re from, in response to Yang. It’s also unclear if the onion supplier ships ingredients to restaurants in other regions of the U.S., which could potentially spread the E.coli strain that caused the McDonald’s outbreak.Â
That strain, called O157:H7, may cause a serious complication that may result in kidney failure. One in every of the patients within the McDonald’s outbreak suffered from that condition, often known as hemolytic uremic syndrome. The federal government essentially bans the sale of any ground beef contaminated with the strain, requiring suppliers to check their products for it.
E. coli can spread through contaminated food or water, or by a person coming into contact with an infected person, environment or animal.Â
The CDC and the ten states impacted have been interviewing each patient case to get detailed details about their exposure to E. coli, reminiscent of what they ate and when, in response to Craig Hedberg, the co-director of the Minnesota Integrated Food Safety Center of Excellence. Hedberg can be a member of the McDonald’s Food Safety Advisory Council, but said he has not worked with the corporate on its response to the outbreak.Â
The CDC and the states have been sharing the data they gather with the Food and Drug Administration to trace onion distribution and discover a particular source of contamination, he said. The data can be shared with the U.S. Department of Agriculture’s Food Safety and Inspection Service, which does the identical with ground beef.Â
The CDC is investigating each the Quarter Pounder’s uncooked slivered onions and its beef patty because the potential offender for the outbreak.Â
Hedberg said contamination of raw onions with E. coli is “highly plausible,” noting several salmonella outbreaks have been linked to onions in recent times.Â
McDonald’s uses a single onion supplier, which washes and slices the vegetable, within the affected area.Â
Meanwhile, McDonald’s uses multiple beef suppliers within the region, and its burgers are imagined to be cooked to an internal temperature that might kill the bacteria. The dimensions of the outbreak “would imply widespread undercooking by many alternative individual McDonald’s restaurants” if beef was the offender, in response to Hedberg.
But he said that seems unlikely since most fast-food chains have designed their cooking systems to forestall E. coli contamination of ground beef, which is a widely known hazard. Still, investigators will likely examine the cooking practices of multiple locations as a part of the investigation, Hedberg noted.Â
Jaenisch said he hopes the investigation can even examine the preparation process for Quarter Pounders to see if there’s any potential for cross contamination between slivered onions and other ingredients.
“While you prepare the burger at McDonald’s, at which point are the slivered onions added? Have they got a bowl of slivered onions, someone puts their hands in it and then touches the tomatoes?” Jaenisch said. “I might look very closely at that time of preparation.”
McDonald’s has already pulled Quarter Pounders from restaurants within the affected areas. Roughly a fifth of McDonald’s U.S. restaurants aren’t selling Quarter Pounder burgers presently. The corporate has also instructed restaurants in the world to remove slivered onions from their supply, and has paused the distribution of that ingredient within the region.
Customers pass within the Drive Thru lane during breakfast hours at a McDonald’s restaurant on October 23, 2024 in Omaha, Nebraska.
Mario Tama | Getty Images
Learning from the past
Based on past foodborne illness outbreaks at other restaurant chains, it is not a on condition that McDonald’s sales and brand image will suffer.
For instance, rival Wendy’s handled its own link to an E. coli outbreak two years ago. Greater than 100 people got sick across six states. Still, the incident did not have a long-term effect on the chain’s sales.
“They got past it, and also you never really heard about it,” KeyBanc analyst Eric Gonzalez told CNBC. “I feel there have been some operators in the world that probably saw a mid-to-high single digit, perhaps 10% decline for a pair days of per week or so, after which it reverted because the news cycle moved on.”
On the opposite side of the spectrum is Jack within the Box, which became the poster child for food questions of safety a long time ago.
An outbreak in 1992 and 1993 linked to the chain resulted within the deaths of 4 children and infected greater than 700 people. Media coverage, coupled with the severity of the outbreak, led to a steep decline in sales that yr, fueled three straight years of losses and tarnished Jack within the Box’s fame for years.
After which there’s Chipotle, a newer example of a series that struggled for years to enhance its food safety and switch around its image after a string of foodborne illnesses.
“It was form 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 administer through the crisis,” Gonzalez said.
After the initial wave of outbreaks in 2015, it took Chipotle several more years and a recent 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 one other Chipotle or Jack within the Box.
“We do not know where that is going to land, so far as McDonald’s is worried, but you’ve got to have somewhat little bit of confidence of their ability to contain the outbreak,” Gonzalez said. “It’s a really sophisticated organization with a complicated supply chain, and I do not doubt their capabilities.”
Reassuring customers
McDonald’s has already been taking steps to reassure customers concerning the safety of its food. Barring a rather more serious crisis, it could have the ability to contain the damage to its brand, experts said.
Shortly after the CDC issued its notice, the corporate released a press release outlining the steps it’s taken to contain the outbreak, together with a video featuring McDonald’s USA President Joe Erlinger.
The next morning, Erlinger appeared on NBC’s “TODAY,” telling viewers — and potential customers — that its food and drinks were protected to devour.
“Any form of product safety recall requires some crisis communication and reassurance on the a part of the corporation that it takes safety seriously, that it takes consumer health seriously and that it can react appropriately,” said Jo-Ellen Pozner, associate professor on the Santa Clara University Leavey School of Business.
She added that she thinks McDonald’s must apologize “very publicly” and aim its messaging at each consumers and its shareholders. Nonetheless, that transparency means more media coverage, which reminds consumers concerning the crisis and risks scaring them away from McDonald’s restaurants.
Yang said McDonald’s appears to be “doing what they will do up to now” while waiting for more information on the precise source of contamination.Â
But other experts hope the chain does more to mitigate the potential spread of the outbreak in the course of the investigation.
Dr. Darin Detwiler, professor of food policy and company social responsibility at Northeastern University, said he believes locations in other unaffected states needs to be “doubling up on their sanitation procedures and protocols and do more testing of their ingredients.”Â
“Don’t wait until the lawyers or inspectors say you’ve got an issue,” Detwiler said.Â
“Why don’t you make the idea that there might be something in your state, and take a look at your product,” he said. “That’s being proactive. That’s corporate social responsibility.”
Bill Marler, an attorney who makes a speciality of cases involving foodborne illnesses, said McDonald’s must also follow within the footsteps of Jack within the Box, which offered to pay medical bills and lost wages for the victims of its E. coli outbreak.
“They simply should be seen as an excellent corporate player, and that is really how they’ll have the ability to bounce back pretty quickly,” Marler said.
One potential plaintiff tied to the crisis has already reached out to Marler, who represented tons of of people that sued Jack within the Box in a class-action lawsuit, resulting in a settlement of greater than $50 million.
McDonald’s is already facing not less than two lawsuits tied to the outbreak.
Each Clarissa DeBock, of Nebraska, and Eric Stelly, a resident of Greeley, Colorado, are suing the corporate for damages in excess of $50,000 after allegedly testing positive for E. coli after eating at McDonald’s, in response to court filings.
“McDonald’s has nowhere to cover. They’re strictly responsible for producing food that was contaminated. They could have the ability to point the finger on the onion supplier or the meat supplier, but ultimately they made the hamburger,” said Marler.
McDonald’s declined to comment on the lawsuits.
While media coverage of related lawsuits could bring more attention to McDonald’s, the suits themselves are unlikely to threaten the chain’s existence, in response to Pozner.
“McDonald’s is as ubiquitous as Coke. It’s one among these very taken-for-granted brands, for its value as a brand to be diminished in a big way, would require a rather more serious end result of the E. coli outbreak,” she said. “The scope of this tragedy continues to be very contained.”
Slumping sales
The outbreak comes as McDonald’s tries to win back diners who balked at years of price increases. For months, McDonald’s has been locked in a war with its rivals over competing value meals.
The restaurant industry broadly has seen traffic fall as inflation-weary consumers cook more at home and visit eateries less regularly. Fast-food chains, including McDonald’s, Burger King and Wendy’s, have turned to discounts and value meals to win back customers.
McDonald’s U.S. restaurants have been offering a $5 value meal since late June. And earlier this month, the chain launched its Chicken Big Mac nationwide, betting that customers can be willing to pay its higher price point due to the novelty. Those moves appeared to be paying off for McDonald’s before the outbreak.
“That is somewhat of a momentum killer for them,” Gonzalez said, adding that the burger category has loads of “capable substitutes” for McDonald’s.
Combined, McDonald’s, Burger King and Wendy’s control roughly 70% of the burger quick-service restaurant segment, in response to Barclays. McDonald’s alone holds 48.8% market share.
“It isn’t a zero-sum game, however the burger category specifically is one among the more concentrated segments,” Gonzalez said. “If McDonald’s loses a degree of sales, that is 3 to 4 points up for grabs for Wendy’s or Burger King to capture.”
