19 New E. Coli Cases Linked to a Sizzler Restaurant in Wis.

As the number of E. coli victims from a Milwaukee Sizzler restaurant mushroomed to 42 Monday, Sizzler International officials scrambled to head off what could be a serious threat to its reputation and ultimately its economic survival.

Milwaukee health officials on Monday confirmed 19 new cases of E. coli poisoning among people whohad eaten at a Sizzler franchise, just days after a 3-year-old girl died of complications from the food-borne illness.

The illness is spread by eating undercooked or spoiled meats, or food that has been contaminated by those products.

The outbreak comes as struggling Sizzler, which emerged from Chapter 11 bankruptcy in 1998, had just begun to post earnings gains and was embarking on plans to re-engineer the entire chain.

Now, analysts say the company will have to fight not only the huge public stigma associated with a deadly outbreak, it likely will face a barrage of litigation from victims and their families that could cost the company millions. Late Monday the company learned that one hospitalized victim has filed suit in Milwaukee, although it has not seen a copy of the suit.

The company has offered to pay hospital bills for victims, and Sizzler USA Chief Executive Thomas Metzger flew to Milwaukee to meet with the families. Sizzler USA, which operates 65 company owned stores and franchises 200 more, is a unit of Sizzler International.

Metzger downplayed the outbreak’s impact on Sizzler and said he plans to continue with the chain’s remodeling and expansion.

“It’s an isolated impact up here in Milwaukee,” he said. “It has no impact on us moving this organization forward and expanding.”

Not everyone agrees with that assessment. “This dampens their image in the mind of the consumer and also in the mind of any potential franchisees,” says Randall Hiatt, an Irvine restaurant consultant.

Sizzler’s Milwaukee franchisee closed his restaurant Wednesday after the first case was reported.

On Monday, Milwaukee Health Commissioner Seth Foldy said he believes the infection may have been spread by watermelon, which could have been contaminated either in the restaurant or before. There is no evidence the outbreak is related to a recall of ground beef from a packing company in Pennsylvania, he said.

The people who became sick--18 adults and 24 children--ate at the Sizzler restaurant between July 14 and July 21. Seventeen of them have been hospitalized.

Foldy says he expects the number of cases to increase as more laboratory cultures are completed and cases treated elsewhere reported.

E. coli is produced when animals eat grain that doesn’t get digested. There are 73,000 E. coli cases annually in the U.S., resulting in 61 deaths, according to the Centers for Disease Control and Prevention.

The shares of Sizzler were unchanged at $1.88 on the New York Stock Exchange. They have fallen 25% this year.

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Bloomberg News contributed to this report.