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McDonald’s provides an update on the E. coli outbreak as shares fall following scandal
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McDonald’s provides an update on the E. coli outbreak as shares fall following scandal

McDonald’s (MCD) is doing damage control as news of an E. coli outbreak sent its shares down as much as 7% on Tuesday.

About a fifth of US McDonald’s restaurants are not offering Quarter Pounders or onions as a result of the outbreak, Yahoo Finance has learned. That’s about 2,700 restaurants, based on a total of 13,484 U.S. locations as of the second quarter.

While the CDC posted a food safety alert on Tuesday, McDonald’s learned of the outbreak late last week, company spokespeople said. The company quickly removed two ingredients from affected restaurants at the time when the number of reported cases was lower. There are currently 49 cases, including one death.

That number is probably much higher. It takes three to four weeks for the CDC to determine whether a sick person is part of an outbreak. From September 27 to October 11, the timeline the CDC reported, McDonald’s is expected to have sold approximately 1 million Quarter Pounders in the affected region.

McDonald’s has not yet determined the cause of the outbreak, but it could be the onions.

Spokespeople said the beef patties came from multiple suppliers, so an outbreak would mean cross-contamination across the board. Additionally, E. coli is usually killed at 160 degrees, and McDonald’s safety protocols call for burgers to be cooked at 175 degrees. However, all affected locations source their onions from one facility.

This may be the first time onions have been linked to E. coli, a CDC spokesperson confirmed to Yahoo Finance. The agency is still investigating the ingredient linked to illness, so we don’t have enough information yet to say it’s onions or beef.

EFFINGHAM, IL - MARCH 30: A Quarter Pounder hamburger is served at a McDonald's restaurant on March 30, 2017 in Effingham, Illinois. McDonald's announced today that it will make the burger with fresh beef patties instead of the frozen beef it currently uses. (Photo illustration by Scott Olson/Getty Images)
A Quarter Pounder hamburger is served at a McDonald’s restaurant on March 30, 2017 in Effingham, Illinois. (Illustration by Scott Olson/Getty Images) · Scott Olson via Getty Images

Some are quick to recall Chipotle’s (CMG) E. coli outbreak, which affected several ingredients between 2015 and 2018 and resulted in a $25 million FDA fine for the company.

McDonald’s is trying to close the equation. Given the lower number of reported cases, the company believes the problem has occurred further up the supply chain and is likely due to two factors. The CDC pointed out that it did not affect other ingredients.

In a note to clients, TD Cowen analyst Andrew Charles said it is “probably premature to compare the two.” The burrito chain faced two unrelated food safety issues in the fourth quarter of 2015, E. coli and norovirus. At the time, Chipotle was unable to quickly identify the source, and it took the company several years to recover in terms of same-store sales. .

Charles called it a “low conviction estimate” and said the headwinds in McDonald’s sales are likely to continue for about a month.