RESOLVING THE LEDGER
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Yum Brands is expected to report its second-quarter earnings before the bell on Thursday, but executives will likely face more questions about how the cyclosporiasis outbreak tied to Taco Bell is hitting its business during the current reporting period.
Since the Food and Drug Administration first linked the parasitic outbreak to lettuce served by Taco Bell, daily traffic to the chain's locations has plunged by double digits, according to Placer.ai data. Shares of Yum have fallen 5% over the same period, dragging the company's market value down to about $42 billion.
The outbreak has sickened at least 1,947 people, with 98 hospitalizations and no deaths reported as of Friday, according to the Centers for Disease Control and Prevention . Federal health agencies have named iceberg lettuce supplied by Taylor Farms as the likely culprit.
For Yum, Taco Bell's plummeting traffic is a bigger deal than just a brand struggling.
The restaurant giant counts Taco Bell as one of its "twin growth engines," counting on it to power its earnings and revenue along with KFC's international business. The Mexican-inspired chain has long been the gem of Yum's portfolio, with a passionate fan base and strong same-store sales growth every quarter, even as diners have become more value conscious.
Besides Taco Bell and KFC, Yum owns Habit Burger & Grill. While KFC's international business is booming, its domestic sales have slipped so much that the company no longer breaks out the fried chicken chain's U.S. sales. Habit Burger & Grill, a more recent acquisition, is much smaller with fewer than 400 locations, and is rarely spoken about on the company's earnings calls.
Yum also recently divested Pizza Hut , a key piece of its portfolio that had also been struggling for more than a decade.
The divestiture means even more attention is on Taco Bell, at the exact wrong moment.
For the second quarter, Wall Street is projecting that Yum will report earnings of $1.58 per share on revenue of $2.2 billion, based on a survey of analysts by LSEG. Taco Bell is expected to report same-store sales growth of 7% for the quarter, which ended more than a month before the FDA linked the chain to the outbreak.
But Wall Street now expects that Taco Bell and its parent company will see a tougher stretch in the back half of the year.
"We think the recent outbreak likely has minimal impact on Taco Bell's Q2 results, though debate around impact on Q3 and beyond is the key driver of the stock recently," RBC Capital Markets analyst Logan Reich wrote in a note to clients on July 21. "We lower our Q3 and Q4 [Taco Bell] estimates as a result, however given the recent selloff in shares, this may create an opportunity to the degree that consumer confidence in TB's food safety is not materially impaired beyond this outbreak."
Between June 30 and Tuesday, seven industry analysts revised their expectations for Yum's full-year earnings per share downward, according to a Factset survey of consensus estimates.
The chain is already trying to win customers back. Taco Bell had pulled affected iceberg lettuce from its restaurants by July 17. Taco Bell CEO Sean Tresvant wrote an open letter to diners five days later trying to assuage their concerns.
"We aren't entitled to your loyalty. We earn it one meal at a time," he said, adding a pledge that Taco Bell will put safety first and act with transparency.
Social media responses show that some consumers have stayed loyal, despite the crisis. Commenters overwhelmingly responded positively to an Instagram post from Taco Bell addressing the situation.
"I still luv u Taco Bell," former reality TV personality Lo Bosworth wrote in a comment on the post.
Moreover, Taco Bell is leaning into its reputation for value to win back customers. The same day that Tresvant shared his letter, the chain sold Enchiritos and nacho fries for $1; on Tuesday, it sold its cult-favorite Mexican Pizza for $1.
Still, the outbreak rages on. Daily cases in Michigan , which appears to be the epicenter of the initial outbreak, keep rising. While Health and Human Services Secretary Robert F. Kennedy Jr. told reporters that the outbreak is "under control, " the CDC has not declared it over.
At their worst, such outbreaks can weigh on a restaurant chain's sales for years.
Chipotle Mexican Grill was once the poster child, after being implicated in at least five separate foodborne illness outbreaks between 2015 and 2018. For a year, from the fourth quarter of 2015 to the fourth quarter of 2016, the burrito chain reported double-digit same-store sales declines. But a new chief executive, sick days and more training for employees and an enhanced food safety program helped Chipotle turn the corner and put the crisis in the rearview mirror.
Industry analysts largely believe that Taco Bell will be spared that reaction, provided that it does not experience any other safety hiccups in the near term. Many instead see McDonald's recent brush with a foodborne illness outbreak as the more likely precedent for Taco Bell.
In late 2024, health authorities linked a deadly E. coli outbreak to McDonald's Quarter Pounder burgers. The burger chain saw traffic to its U.S. restaurants fall steeply in response, particularly in the affected states. Sales began recovering within several weeks after the CDC declared the outbreak over and it disappeared from headlines. Weaker traffic continued into the first quarter of 2025, although that trend coincided with severe winter weather and a broader pullback in consumer spending.
McDonald's domestic sales fully rebounded by the second quarter, thanks to the launch of its Minecraft Movie Meal, according to research note from M Science.
Like Taco Bell and Chipotle, McDonald's also took steps to address the outbreak and restore diners' trust. For example, it severed its relationship with the supplier of the slivered onions likely responsible for the E. coli outbreak — Taylor Farms.
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