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McDonald’s moves off the grill and into the fryer


McDonald’s worked Wednesday to reassure customers that its U.S. restaurants are safe as federal investigators tried to pinpoint the cause of a deadly E. coli outbreak linked to the fast-food giant’s Quarter Pounder hamburgers.

McDonald’s pulled Quarter Pounders from one-fifth of its U.S. stores Tuesday as a result of the outbreak, which the U.S. Centers for Disease Control and Prevention said had sickened at least 49 people in 10 states. One person died and 10 were hospitalized, according to the CDC.

A preliminary investigation by the U.S. Food and Drug Administration suggested fresh slivered onions that are served raw on Quarter Pounder hamburgers were a likely source of the contamination. McDonald’s also serves raw, slivered onions on one of its breakfast sandwiches, but that sandwich isn’t available at the impacted stores. Other burgers, like the Big Mac, use diced, cooked onions.

McDonald’s said it was searching for a new regional supplier for fresh onions. In the meantime, Quarter Pounders were removed from menus in Colorado, Kansas, Utah, Wyoming, and portions of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico, and Oklahoma.

Adriean Madden pulled up outside a McDonald’s outside Denver on Wednesday for his usual afternoon snack but then decided against it. He said he was unsure how E. coli spreads or contaminates other foods, and he thinks McDonald’s should be more forthcoming.

“This affects my decision to come to McDonald’s in the future,” Madden said. “I feel like the information isn’t as widely spread. I didn’t see any notices on the door, and then I saw vehicles going through the drive-through just as if nothing was going on.”

Colorado has had the most reported cases of any state so far, and it’s where the one death involving an older adult occurred.

McDonald’s said it has worked closely with federal food safety regulators since late last week when it was alerted to the potential outbreak. The company said the scope of the problem and the popularity of its products have complicated efforts to identify the contamination source.

McDonald’s has more than 14,000 U.S. stores and serves 1 million Quarter Pounders every two weeks in the affected 12-state area.

McDonald’s is known for its stringent food safety guidelines and protocols, said Chris Gaulke, a professor of food and beverage management at Cornell University’s Nolan School of Hotel Administration. The company said Wednesday that the supplier regularly tested its onions for E. coli, for example.

“Given the volume of food that they go through, how infrequently this happens to McDonald’s is a testament to the effort that they take,” Gaulke said.

But some experts questioned why McDonald’s simply stopped selling one sandwich and didn’t close restaurants for further investigation.

“Good practice would have been to close all the restaurants,” said Bill Marler, a Seattle lawyer who has sued companies over food poisoning outbreaks. “Until we know definitively what the product was that made people sick, consumers should be aware.”

Marler said cross-contamination remains a potential possibility at the affected restaurants until they are thoroughly cleaned.

Asked why it didn’t close any restaurants, McDonald’s said nothing in the government’s investigation indicated there were issues with its food preparation practices. In an interview on the “Today” show Wednesday, McDonald’s U.S. President Joe Erlinger also said it’s likely that whatever product was contaminated has already passed through the company’s supply chain.

The Centers for Disease Control and Prevention reported the outbreak late Tuesday. It said infections were reported between Sept. 27 and Oct. 11 in Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, Oregon, Utah, Wisconsin and Wyoming.

State and local public health officials were interviewing people about the foods they ate in the week before they got sick. Of the 18 people interviewed as of Tuesday, all reported eating at McDonald’s, and 16 people reported eating a beef hamburger. Twelve reported eating a Quarter Pounder.

McDonald’s said it’s unlikely the beef in the Quarter Pounder was the source since it comes from multiple suppliers and is cooked at a high enough temperature to kill E. coli.

McDonald’s said its initial findings suggest that some of the reported illnesses were linked to onions from a single supplier, which the company didn’t name. McDonald’s said the onions are cleaned and sliced by the supplier and then packaged for use on individual Quarter Pounders.

The incubation period for E. coli is only a couple of days, so illness would be quickly apparent to anyone affected, said Donald Schaffner, a food safety expert at Rutgers University. “If you ate these burgers in September and now it’s the middle of October and you didn’t get sick, you’re probably OK,” he said.

E. coli bacteria are harbored in the guts of animals and found in the environment. Infections can cause severe illness, including fever, stomach cramps, and bloody diarrhea. People who develop symptoms of E. coli poisoning should seek health care immediately and tell the provider what they ate.

The type of bacteria implicated in the McDonald’s case causes about 74,000 infections in the U.S. annually, leading to more than 2,000 hospitalizations and 61 deaths each year, according to the CDC. In general, E. coli infections were lower in 2023 than in recent years and cases of severe kidney injury caused by the bacteria remained stable, according to latest federal data.

Outbreaks at restaurant chains are rare, but they do happen.

In 2020, Chipotle agreed to pay a record $25 million fine to resolve criminal charges that it served tainted food that sickened more than 1,100 people with E. coli between 2015 and 2018. In that case, poor safety practices, such as not keeping food at proper temperatures to prevent pathogen growth, were to blame.

In 2006, Taco Bell ordered the removal of green onions from its restaurants nationwide after samples taken by investigators appeared to contain a harsh strain of E. coli. The outbreak sickened at least 71 people.

“The worst thing you can have at a restaurant is a food safety problem. It’s the equivalent of an airline losing the plane,” said Aaron Allen, a restaurant consultant and founder of Aaron Allen and Associates.

But Allen said McDonald’s has enough experience and safety protocols in place that it won’t suffer long-term damage from the outbreak.

“No one would be better equipped to mitigate and respond to this than McDonald’s,” he said.

McDonald’s shares fell 5% Wednesday.

 Foodborne illness is the last thing McDonald’s (MCD.N)

, opens a new tab on the menu. The fast-food restaurant chain has pulled, opens new tab Quarter Pounders from some U.S. locations following an E. coli outbreak. Its quick response suggests it should be able to weather the crisis, but it can ill afford to scare off more customers.
The U.S. Centers for Disease Control and Prevention said on Tuesday, opens a new tab that one person died and 49 others in 10 states were sickened from eating at McDonald’s. Early indications suggest slivered onions are the cause.
McDonald’s mobilized swiftly to try and contain the problem, learning from missteps by restaurant rivals. Chipotle Mexican Grill (CMG.N), opens a new tab, for example, failed to prevent its own 2015 E. coli incident from spiraling, and it took years, opens new tab before the burrito chain’s stock price recovered. Fellow burger flipper Jack in the Box (JACK.O), opens new tab, which suffered from the same bacterial outbreak in the early 1990s, denied it was the culprit only to become a U.S. Defense Department case study, opens new tab on how not to respond.
Although McDonald’s may be able to pin the problem on a supplier rather than its own kitchens, the nuance may be lost on diners. The company led by Chris Kempczinski is already dealing with other challenges, including its high prices, the appetite-suppressing threat from weight-loss drugs, and a slow-moving desire for healthier foods.
McDonald's same-store sales
McDonald's same-store sales
Last quarter, McDonald’s reported that worldwide sales at sites open for at least 13 months fell 1% from a year earlier, partly because it has been charging more. The average price of its menu items is up 40% over, opens new tab the past five years, nearly double broader national inflation of 23%. A temporary $5 meal promotion introduced in the spring has been extended, and is helping lure customers back. Headlines about E. coli might give them fresh pause.
McDonald’s shares tumbled 5% early on Wednesday. This implies initially, based on the enterprise’s valuation of nearly 19 times EBITDA next year and its 54% margin, that investors anticipate a 4% hit to sales, according to Breakingviews calculations using estimates gathered by Visible Alpha.
If the maker of the Happy Meal can limit the fallout, the damage may be less severe. At the same time, sales were already projected to tumble 9% in 2024, per LSEG data. The danger is that McDonald’s already has moved off the grill and into the fryer.
Follow @jennifersaba, opens new tab on X
CONTEXT NEWS
McDonald’s said on Oct. 22 it removed its Quarter Pounder hamburger from menus in several states including Colorado, Utah and Wyoming following an E. coli outbreak. The fast-food chain said early indications suggest the illness may be linked to onions from one of its suppliers.
The U.S. Centers for Disease Control and Prevention said one person died and 49 people from 10 states have gotten sick.
McDonald’s shares were down about 5% at 1030 EDT on Oct. 23.
 Tesla (TSLA.O), opens new tab has been short on results and long on promises lately. Boss Elon Musk has yet to produce a cheap car for the masses. Market share and profitability have shrunk. Even its supposed bet-the-company project, the Cybercab, opens new tab robotic taxi, left investors cold. That makes Wednesday’s expectations-beating third-quarter results, opens new tab a refreshing, if slight, change, and offers a reed of hope for the Tesla faithful.
Most of the juice that turbo-boosted operating profit by 54% from the same period last year came from cutting expenses, with revenue up just 8% by comparison. Trimming costs pushed the automotive business’s gross margin, adjusted for sales of regulatory credits, to 17.1% from last quarter’s nadir of 14.6%. That metric hit new highs at the company’s energy storage and services businesses, too, at 31% and 9%, respectively.
This is a key gauge for Tesla. Its share of the U.S. electric vehicle market fell to 48% this quarter, according, opens new tab to Cox Automotive, from 63% two years ago. Rising competition has ground down prices industry-wide. That’s still happening: stripping out leased vehicles, Tesla’s revenue per car fell again. But vehicle costs are now falling faster, to an all-time low of $35,106 each.
A chart showing year-over-year changes in revenue and costs per car sold by Tesla
A chart showing year-over-year changes in revenue and costs per car sold by Tesla
That’s crucial to Musk’s premise that Tesla can crush costs and scale up better than rivals, which just about remains the case for now. Second-place General Motors (GM.N), opens new tabhas, opens new tab 9% of the U.S. market, and legacy automakers do not yet profit from battery-powered sales. If Tesla can mint more income in this environment, it might hold its lead.
The thing is, Tesla’s roughly $700 billion valuation is premised on big promises, not incremental improvements. Musk is trotting the former out as usual, saying on Wednesday that deliveries could rise 20% to 30% next year and that a sub-$30,000 vehicle should arrive then, too. Even the "slight" growth expected for 2024 is an aggressive projection, too, requiring the current quarter’s sales to be Tesla’s best ever.
The Cybercab is supposed to be the real growth engine, though, as well as the way to truly upend the market. But it looks a baffling oddity, and Tesla’s self-driving approach is struggling. Robot Optimus, which may be a little more human than implied, seems far-fetched. And there’s a long way back to the old target of outselling Toyota Motor (7203.T), opens new tab. One quarter’s improved results may refresh shareholders’ faith, but they seem to be getting too charged up.
Follow @JMAGuilford, opens new tab on X
CONTEXT NEWS
Tesla said on Oct. 23 that it generated $25.2 billion in revenue in the third quarter, up 8% year-over-year. The electric car maker’s operating income of $2.7 billion rose 54% from the same period in 2023.
The gross margin at Tesla’s core automotive business, adjusting for sales of regulatory credits, came in at 17.1%, a turnaround from the prior quarter and above the 14.9% anticipated by analysts, according to Visible Alpha data. The company said that it expects to deliver slightly more cars in 2024 than last year.

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