Adds details on Taco Bell foot traffic in paragraph 10, context throughout

July 17 (Reuters) - Taylor Farms, a California-based lettuce supplier, told U.S. regulators it was preparing to recall ingredients linked to a parasite outbreak, Bloomberg News reported on Friday, in what could become one of the largest foodborne illness outbreaks in the United States in recent years.

The scope of the recall is unclear, Bloomberg reported, citing a document. Taylor Farms and the Department of Health and Human Services, which oversees the U.S. Food and Drug Administration, did not immediately respond to requests for comment.

The FDA and the Centers for Disease Control and Prevention are investigating a cyclosporiasis outbreak linked to shredded iceberg lettuce served at Taco Bell locations in Indiana, Kentucky, Michigan, Ohio and West Virginia. The parasitic illness can cause diarrhea and other gastrointestinal symptoms.

THOUSANDS OF MICHIGAN CASES

Michigan health officials reported 5,002 cases of cyclosporiasis on Friday, an increase of 690 cases from a day earlier as investigators continued efforts to identify the source of the unusually large outbreak of the intestinal illness.

On Thursday, the FDA said Yum Brands-owned YUM.N Taco Bell would discontinue using lettuce from a supplier identified by the agency in its investigation.

Taco Bell and the FDA did not name the supplier, but the food safety regulator said its traceback investigation identified a common supplier of iceberg lettuce from Mexico used by Taco Bell locations where sick people ate before becoming ill.

The Washington Post reported on Thursday that investigators had identified Taylor Farms as a potential source of contamination.

Taylor Farms supplied the slivered onions identified as the likely source of the 2024 E. coli outbreak linked to McDonald's Quarter Pounder burgers, which led to a recall.

Earlier this week, Taco Bell removed limited items from some restaurants as a precaution. Taco Bell's daily foot traffic on July 11 was down 5.8%, a few days after Taco Bell pulled ingredients from some locations, according to data firm Placer.ai.

Foodborne illness outbreaks can weigh heavily on restaurant stocks. McDonald's faced scrutiny during a cyclospora outbreak linked to salads in 2018, while Chipotle grappled with a series of E. coli and norovirus outbreaks that hurt sales, damaged consumer confidence and pressured its shares.

"The recent outbreak will likely dent (Taco Bell's) near-term same-store sales growth," said Ari Felhandler, an analyst at Morningstar, adding that some consumers would opt to dine at competitors outside the incident’s spotlight to mitigate perceived risk, even when prudent precautions are in place.

On Friday, Wendy's and Chipotle Mexican Grill said their restaurants were not hit by the cyclosporiasis outbreak linked to shredded iceberg lettuce served at some Taco Bell outlets.