Taco Bell visits plunge 31% amid cyclosporiasis outbreak, worse than initially reported

Topline

A cyclospora parasite outbreak potentially linked to lettuce used by Taco Bell and other chains has dealt a significant blow to the restaurant's customer traffic—far worse than initially reported. Shares of parent company Yum! Brands have fallen sharply from a five-month high reached earlier this month.

Key Facts

• Taco Bell's customer visits on July 17 were approximately 31% below the chain's average Friday traffic level for the year to date, according to Placer.ai, which tracks location activity via mobile devices.
• The impact was initially reported as roughly 19%, but Placer.ai stated that early coverage underreported the damage to the restaurant.
• The broader fast-food category saw only a 1.9% traffic decline on the same day, meaning Taco Bell's drop was about 16 times worse than its peers.
• Shares of Yum! Brands—which also owns KFC—have fallen approximately 10% since July 10, when news reports first linked the chain to an ongoing outbreak of an "explosive diarrhea parasite," erasing roughly $4.3 billion in market value.
• The Centers for Disease Control and Prevention (CDC) has attributed over 1,600 cyclosporiasis cases to Taco Bell restaurants across five states: Indiana, Kentucky, Michigan, Ohio, and West Virginia.
• The stock decline came days after Yum! Brands hit a five-month high of $167.49 per share on July 7.

What to Watch For

Yum! Brands is scheduled to release its earnings on July 30.

Key Background

More than 7,400 people—most of whom reside in Michigan—are confirmed or suspected to have been sickened with cyclosporiasis, an illness caused by the cyclospora parasite, over the past two months. Federal investigators spent weeks searching for the source before identifying Taco Bell's lettuce supplier as a possible origin.

The Food and Drug Administration (FDA) reported that more than 1,600 of those sickened in the outbreak had eaten at Taco Bell restaurants and pointed to Taylor Farms' shredded lettuce as the culprit. Shortly afterward, however, the agency backtracked, stating that a test of the brand's lettuce for the cyclospora parasite had returned a false positive. The FDA did not fully clear Taylor Farms, and supply chain evidence remains, but no produce samples have tested positive for the parasite to date.

Cyclospora outbreaks are notoriously difficult to trace because the parasite is hard to detect—finding it has been compared to "a needle in a haystack." The CDC expects cases to rise through the end of August.

Surprising Fact

Yum! Brands, Sweetgreen, and major McDonald's franchisee Arcos Dorados warned investors about cyclosporiasis in recent Securities and Exchange Commission filings. Each company explicitly named the illness as a material business risk and cautioned that fresh, raw leafy greens handled at its restaurants were vulnerable to the parasite.

Further Reading

• Forbes: Here's Where The Cyclosporiasis Outbreak Stands After Taylor Farms' False Positive — By Mary Whitfill Roeloffs
• Forbes: Taco Bell Warned Investors About Cyclosporiasis Before The Outbreak—And These Other Chains Did Too — By Mary Whitfill Roeloffs
• Forbes: Cyclosporiasis Theories Are Spreading Online. Here's What's True. — By Mary Whitfill Roeloffs