McDonald's is racing to contain fallout from E. coli outbreak

McDonald's Corp. is trying to contain the fallout from a severe E. coli outbreak that appears to be linked to the slivered onions in its popular Quarter Pounder sandwiches.

The US Centers for Disease Control and Prevention on Tuesday announced an investigation into a raft of illnesses across 10 states from Sept. 27 through Oct. 11. The illnesses impacted dozens of people and led to one death and 10 hospitalisations.

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The investigation sent shares in the burger chain down 5 per cent as investors try to determine how widespread of an impact the crisis will have on the business. The company on Wednesday said it yanked the burgers from one-fifth of its more than 13,000 US restaurants and that it could take weeks to restore the items to menus. It sells a million Quarter Pounders in the US during a typical two-week period, making it one of the chain's biggest sellers.

McDonald's said it was too early to determine the outbreak's impact on sales and that it was actively working with the CDC and other government agencies to root out the source of the illnesses and assure customers that it's safe to eat at its restaurants. McDonald's believes the contamination stems from a supplier, not from food preparation issues at its restaurants.

The CDC has warned that the true number of people infected could grow in the coming weeks as an investigation unfolds into the source of the E. coli. The bacteria causes infections in the body and can be spread through contaminated foods, like raw or undercooked meat or fruits and vegetables. The case count may also continue to rise because it takes three to four weeks to determine if a sick person is part of an outbreak, the agency said.

"This is absolutely a very active investigation, meaning that we do expect additional cases to be identified," said Rachel Herlihy, the state epidemiologist for the Colorado Department of Public Health and Environment.

"Part of the problem with catching an outbreak is you're only looking at the tip of the iceberg when you're counting bodies," said Bill Marler, a food safety lawyer based in Seattle who said the number of infections could climb from 50 to at least 500. "We probably haven't seen the end of illnesses yet."

McDonald's said it was originally notified of the issue by government agencies late last week. After Tuesday's CDC advisory made the issue public, McDonald's pledged to take "swift and decisive action."

It was unclear when it decided to remove the burgers from restaurants or when the chain communicated the issue to its franchisees.

One Colorado restaurant reached by Bloomberg said it was alerted on Sunday to stop serving products that included slivered onions, while others said they were told about the issue on Tuesday. The burgers had disappeared from some delivery apps on Wednesday in several states.

"We are very confident that you can go to McDonald's and enjoy our classics," McDonald's US President Joe Erlinger said Wednesday on the Today show. "I want to say to our consumers that you can confidently go to McDonald's today."

It's likely that any contaminated products already worked their way through the company's supply chain, Erlinger said.

McDonald's said the onions are likely the culprit, but the company hasn't ruled out beef as a potential source of contamination. Whereas the suspected onions came from a single supplier, beef patties originate from multiple suppliers and are cooked in the restaurants, the company said Wednesday.

Longer-term impact

The raw onions come from a farm and are then cleaned, washed and sliced"-and then cleaned again before being packaged into individual bags and, while refrigerated, sent to McDonald's locations. The raw onions stay refrigerated until they're dropped atop the burgers. McDonald's said the illnesses have been linked to stores in Colorado, Nebraska and other states that get their slivered onions from one supplier.

McDonald's, which is due to report quarterly results on Tuesday, is already grappling with a pullback in spending from low-income consumers, which account for a substantial portion of its customers. Rising menu prices have led to a slowdown in dining out and McDonald's has been trying to lure customers back with new menu items and discounted meal deals. The stock drop on Wednesday completely erased the company's 6 per cent year-to-date gain.

Major outbreaks can haunt restaurant chains for years. In 2015, an E. coli and norovirus outbreak across Chipotle Mexican Grill Inc. locations in multiple states led to a drastic drop in sales, as well as fines. In 1993, E. coli at Jack in the Box led to the deaths of four children.

In both cases, sales fell precipitously and were slow to recover, said Gregory Francfort, an analyst at Guggenheim Partners. A McDonald's spokesperson on Wednesday said this issue differed from the outbreak at Chipotle because it is so far likely contained to a single supplier, not to in-store food preparation.

When outbreaks are contained quickly, chains can move past the issues faster. During Wendy's 2022 episode of contaminated lettuce, the incident was limited and "the media attention did not spiral," Francfort said.

At least two analysts downgraded their McDonald's ratings on Wednesday, including Baird analyst David Tarantino who said the outbreak poses "elevated risk" to the company. "With uncertainty now creeping in across all segments, we find difficulty calling for near-term upside for the shares," he said.

At a McDonald's in New York City, multiple customers expressed concerns over the recent outbreak and have veered away from ordering burgers, opting for chicken products or fries instead.

Geraldo Velez, a 37-year-old who frequents the fast-food restaurant about twice a week, said he normally orders a double cheeseburger. But before entering the restaurant he had heard about the outbreak and decided to forgo his regular for a chicken sandwich.

At another kiosk, newlyweds Denise and Steven Fitzpatrick, who were visiting New York from Scotland for their honeymoon, changed their order from a classic Big Mac after they were informed of the outbreak by Bloomberg News. They opted for a chicken Big Mac instead.

The longer-term impact will depend on how McDonald's handles communication around the outbreak and what systems the company has in place to protect their customers and their brand, said David Maloni, president at Datum FS, a food service supply chain consultant.

Companies have ramped up their food-safety controls since the massive Chipotle outbreak to prepare for new traceability regulations by the Food and Drug Administration that come into effect in 2026, Maloni said.

On Wednesday, McDonald's was sued by a Colorado resident who says he began experiencing E. Coli symptoms two days after he purchased food from his local McDonald's on October 4. He is accusing the chain of product liability, negligence, and breach of implied warranties. McDonald's did not immediately respond to questions about the lawsuit.