Subway riding sandwich wave in China

US fast food giant Subway said it aims to expand its business on the Chinese mainland by opening another 4,000 restaurants over the next 20 years in the world's second-largest economy to satisfy an ever-increasing appetite for submarine sandwiches by Chinese consumers.

In June, Subway announced that it had signed a new franchise agreement with Shanghai Fu-Rui-Shi Corporate Development Co Ltd, the largest deal in the restaurant chain's history, and one of the largest in the quick service restaurant sector, to expand its business on the Chinese mainland.

Subway said the partnership will help expand its scale on the Chinese mainland by over sevenfold, and will give FRS exclusive rights to manage and develop the Subway shops in the country.

By the end of May, Subway operated some 670 stores nationwide. Among the total, more than 40 percent were located in top-tier cities such as Beijing, Shanghai and Guangzhou, Guangdong province, according to Canyan Data, a third-party platform on the Chinese mainland that provides catering sector data.

"China is a key market with significant long-term growth opportunity, and the agreement has been a significant milestone in Subway's international growth strategy," said John Chidsey, CEO of Subway.

Subway started its business on the Chinese mainland in 1995, with a few stores targeting areas with a higher concentration of expats. The brand began to grow more quickly from 2004, and most Subway stores in Beijing are located near office buildings.

In comparison, McDonald's entered the Chinese mainland market in 1990. By the end of June, it operated more than 5,400 stores nationwide.

FRS said that with Subway's business in the country entering a new stage, it will rapidly expand its direct-store business in the country with the support of capital. Subway will reshape its brand positioning and store image, optimize and innovate menus, and upgrade digital experiences.

In addition, the US-based franchise brand aims to expand its restaurant presence in the Asia-Pacific region to more than 6,000 over the next five years from the current 3,500, Subway said.

Subway shops, which make sandwiches to order, have attracted many people who like to see their meal prepared in front of them, choosing from a variety of ingredients, with the option to dine on the premises or take it away. For those not insisting on viewing the sandwich-making process, deliveries are naturally available and broadly utilized.

On the Chinese mainland, the cost of a six-inch sandwich at Subway with several fillings is about 30 yuan ($4.1) each, and 15 yuan for a daily special chosen from the regular menu.

Meanwhile, fast-food giant Burger King is ramping up its plans to open more stores on the Chinese mainland. From 2023 onward, Burger King plans to open 200 restaurants in the country annually. Between 2019 and 2022, the number of new stores opened by the famous "Home of the Whopper" brand on the Chinese mainland was less than 100 annually, the company said.

Entering the Chinese mainland market in 2005, Burger King now operates more than 1,500 outlets in 188 cities across the country. Compared to its competitors, Burger King's presence on the Chinese mainland has been significantly smaller.

In 2021, Burger King ranked fifth on the Chinese mainland with a 1.2 percent market share in terms of total retail sales of fast food services. The top two companies, KFC and McDonald's, accounted for shares of 12 percent and 6.7 percent, respectively, according to data from global market research provider Euromonitor International.

Last year, sales of Western-style food on the Chinese mainland reached 267.3 billion yuan, with the growth rate significantly faster than other fast food options in the country, said market research provider LeadLeo Research Institute.

Between 2020 and 2022, the compound annual growth rate of Western-style food in the country reached 6.2 percent. Last year, sales of the Chinese mainland's catering market reached 4.39 trillion yuan, ranking only behind the United States, the consultancy found.

Western food, which heavily relies on cheese, has also driven the business growth of dairy products on the Chinese mainland. Last year, the country's use of domestic-origin cheese products reached 63.2 percent, and more domestic cheese manufacturers have emerged, according to LeadLeo.