Taco Bell, one of the biggest drivers of growth for Yum Brands, is facing pressure after a large cyclosporiasis outbreak linked to shredded lettuce served at some of its restaurants. While the outbreak has led to a sharp decline in customer footfall and a fall in Yum Brands’ share price, analysts believe the damage is likely to remain temporary if no new food safety issues emerge, reported Reuters.
The outbreak has become the largest foodborne illness incident in the United States in recent years. Thousands of people across Michigan and four other states have fallen ill. Health officials are still investigating the source of the Cyclospora parasite responsible for the infections.
Initial reports linked the outbreak to shredded lettuce supplied by Taylor Farms from a facility in Mexico. However, Mexican authorities said they have found no evidence so far that lettuce exported from the country caused the illnesses.
As the investigation continues, Taco Bell has removed potentially affected lettuce from restaurants in selected states. The company has also stopped using iceberg lettuce supplied by Taylor Farms across the United States as a precaution.
How has the outbreak affected Taco Bell’s business?
The outbreak has already affected customer traffic. According to location analytics company Placer.ai, foot traffic at Taco Bell restaurants fell 18.9% on Friday, July 17, compared with the average Friday traffic recorded between January 1 and July 6, reported Reuters.
The decline also affected investor confidence. Shares of Yum Brands dropped nearly 10% last week after Taco Bell’s connection to the outbreak became public, according to Reuters report. The company is expected to announce its quarterly financial results next week, and investors will closely watch management’s comments on the issue.
Morningstar analyst Ari Felhandler told Reuters that some customers may temporarily avoid Taco Bell because of concerns about food safety. “Wary consumers may temporarily take their appetites elsewhere to sidestep any perceived health risk,” Felhandler said.
However, analysts believe the decline in customer visits could prove temporary if the company successfully contains the outbreak and avoids further incidents.
Taco Bell has remained one of Yum Brands’ strongest-performing restaurant chains despite weaker demand across much of the fast-food industry. A prolonged slowdown in sales would affect Yum’s overall revenue, but experts do not expect that outcome at this stage.
Why do analysts expect Taco Bell to recover?
Restaurant industry experts spoke about previous food safety incidents involving major fast-food chains to support their view.
McDonald’s returned to sales growth within a few quarters after its 2024 E coli outbreak linked to Quarter Pounder burgers. Analysts say that case showed how large restaurant brands can recover if they respond quickly and communicate clearly with customers, reported Reuters.
Hospitality Works President Izzy Kharasch believes Taco Bell has taken the right steps. “They are already making the right moves,” he told Reuters. “This type of action, in addition to lots of communication to the public, will get them back on track sooner rather than later,” he said.
Brand experts also believe consumers often move on quickly once a food safety issue is resolved. David Mayer, senior partner at brand consultancy Lippincott, said the company’s biggest challenge is preventing another incident.
“People have very short-term memories,” Mayer told Reuters. “The most important thing for Taco Bell is that there is no additional food poisoning incident within the next 12 months,” Mayer added.
The experience of Chipotle Mexican Grill also offers an important comparison. The company needed several years to rebuild customer trust after multiple foodborne illness outbreaks in 2015. Analysts say Taco Bell’s situation appears less severe because the company acted quickly and no deaths have been linked to the current outbreak.
For now, analysts expect Taco Bell to face weaker sales over the coming weeks. However, they believe the brand’s long-term reputation will depend on whether health officials quickly identify the source of the outbreak and whether the company avoids another food safety incident, reported Reuters.
