Fast-food brand Subway's recently opened store in Shanghai marked its 1,000th outlet in China, with the restaurant chain on track to reach its target of 4,000 stores in the country in the next 20 years.

The development marks a shift for Subway in China, spurring rapid expansion in a market that was previously dominated by global quick-service giants such as McDonald's and KFC.

From its debut in 1995 until mid-2023, Subway's growth in China had been slow, reaching only 500 stores over 28 years. In contrast, competitors like McDonald's and KFC opened thousands of locations, capitalizing on the growing middle-income group and urbanization of tier-1 and tier-2 cities in the country.

However, Subway's fortunes took a sharp turn for the better in June 2023, when the company signed a transformative franchise agreement with Shanghai-based Furuishi Enterprise Development Co Ltd, which accelerated its footprint, leading to an explosion of new store openings. Within just two years, Subway added nearly 500 new locations, a total comparable to its combined growth over the previous three decades.

Subway is expected to open about 300 new stores by the end of this year. Under the new agreement, Subway stores in China have adopted the direct operating model, rather than the previously used franchising model, allowing faster expansion, better brand-building capability and higher profit margins for the brand.

This rapid expansion reflects the broader surge in Western fast-food chains across China. According to the Hongcan Industry Research Institute's 2025 Western Fast-Food Report, the number of Western fast-food outlets in China reached 325,000 by March 2025, growing 6.6 percent year-on-year.

Subway's robust performance mirrors this trend, as Subway China CEO Zhu Fuqiang said that new locations are becoming profitable within their first year, with first-half 2024 sales increasing by more than 30 percent year-on-year. Even excluding the impact of new openings, Subway's existing restaurants posted a healthy 20 percent growth in the second half of 2023.

The rapid pace of Subway's expansion in China is echoed by the performance of other international quick-service chains. Yum China Holdings Inc, the parent company of KFC and Pizza Hut, reported solid results in its latest quarterly earnings release.

Total system sales for the second quarter of 2025 grew 4 percent to $2.8 billion, with 336 net new store openings, pushing the company's total store count to nearly 17,000 by June 30. Operating profit grew 14 percent year-on-year to $304 million, a second-quarter record high.

Yum China CEO Joey Wat attributed much of the company's success to its digital innovations and an expanding footprint.

"We are continuously exploring ways to broaden our addressable market," said Wat. She said KFC's expansion of KCOFFEE cafes to over 1,300 locations and Pizza Hut's upgraded menu have significantly contributed to sustained growth.

Delivery sales grew 22 percent, contributing roughly 45 percent of total company sales, and digital sales hit $2.4 billion, accounting for an impressive 94 percent of total sales.

Furthermore, Yum China's membership program, which has about 560 million members across KFC and Pizza Hut, has proven instrumental in driving repeat business, with member sales accounting for 64 percent of system sales.

McDonald's has also seen marked success in the Chinese market, with executives reporting meaningful improvements in both market share and same-store sales. The company opened a net 407 new restaurants in the first half of 2025, maintaining a pace of at least two new locations per day.

This expansion is part of McDonald's long-term roadmap to reach 10,000 locations by 2028. McDonald's Corp Global CFO Ian Borden said that chicken products have become a key traffic driver for the brand, which continues to gain share not only in chicken, but across the broader fast-food sector.