LONDON (CNNMoney) -- A new food scandal has erupted in China, threatening to tarnish the reputations of McDonald's and Yum Brands.
An American-owned meat factory operating in China has been accused of selling out-of-date and tainted meat to clients including McDonald's and Yum Brands, which owns the KFC, Taco Bell and Pizza Hut chains.
Dragon TV reported that workers at the food plant were processing expired meat and food that had fallen on the floor, illustrating China's continuing struggle to meet international food standards.
McDonald's and Yum Brands say they have stopped buying meat from the processing plant, Shanghai HUSI Food, which is a subsidiary of Illinois-based OSI Group.
Shares in Yum Brands were down by about 1.5% in premarket trading Monday. McDonald's stock was also edging down by about 0.5%.
OSI Group said it was "appalled" by the television report and has begun an investigation.
"We have zero tolerance for any actions that compromise food safety," it said in a statement. "Our company management believes this to be an isolated event, but takes full responsibility for the situation."
Local food regulators have ordered all customers of Shanghai HUSI Food to take its products off their shelves.
McDonald's warned Chinese customers that it may experience some shortages at its restaurants as a result.
Food safety and contamination problems have plagued many companies operating in China.
Yum Brands lost business in China after a food safety scandal that began in late 2012, and over fears of a new strain of bird flu.
Earlier this year Wal-Mart recalled some donkey meat after it was found to be contaminated with fox meat.
And a series of scares damaged confidence in local powdered infant formula, causing a surge in demand for baby milk from Western countries.
While global brands have built up a reputation among many Chinese consumers for safer products, some are still clearly struggling with local supply-chain problems.
™ & © 2014 Cable News Network, Inc., a Time Warner Company. All rights reserved.
Sears not fixing all Kenmore grills with holes
Before you fire up the grill this Fourth of July, we're showing you the hidden problem you need to look for. The Consumer Watchdog…
Drivers complain of paint chipping off their car
Drivers are frustrated as paint chips off cars piece by piece. The Consumer Watchdog shows you how to protect your car.
Roaches close Italian, Sushi, & Mexican kitchens
Three restaurants temporarily closed for roaches.