Subway store launch vote of confidence

US-based restaurant chain Subway's opening of its newest store in Shanghai, its 4,000th outlet in the Asia-Pacific region, on Tuesday indicates the brand's confidence in the bright prospects of the China market, according to its top executive.

The company's ambition is to make China its second-largest market with 4,000 new stores in the country over the next two decades, said John Chidsey, global CEO of Subway.

Situated in Shanghai's Hongkou district, it is also the first sports-themed store in the Asia-Pacific region. This is a milestone for Subway's growth globally, solidifying China's status as one of its most important markets worldwide, Chidsey said.

"Over the past year, China has become our fastest-growing market in terms of Subway store openings. We opened more than 250 new stores in 2023 and 2024, nearly half of the number of stores opened in the past 20 years," he said.

"We built more restaurants in China last year than we built anywhere else in the world (one-fifth). It's our number one growth market. It will be our number one growth market for the next five or 10 years."

Subway launched its first store on the mainland in Beijing in 1995. It currently operates more than 700 outlets across more than 90 Chinese cities.

"I think in the next five to six years, China could be the second-largest market. Over time, it should be the largest market," Chidsey said.

The scale of the China market, the size of its fast food industry, and a growing middle-income group that is pursuing healthier lifestyles are the reasons for its strong showing in the country, Chidsey said.

Catering has become an important driver of domestic consumption, and the revenue generated from drinking and dining surged 20.4 percent year-on-year to surpass 5.2 trillion yuan ($730 billion) in 2023, according to data released by the National Bureau of Statistics.

China's limited-service restaurants sector, which includes fast food as well as 100 percent home delivery or take-away outlets, has grown from 948.4 billion yuan in 2018 to 1.01 trillion yuan in 2023, and the market scale is projected to expand from 1.1 trillion yuan in 2024 to 1.47 trillion yuan in 2028, according to data from London-based market research company Euromonitor International.

Subway unveiled a plan in June 2023 to open 4,000 new stores in China over the next 20 years, according to Zhu Fuqiang, China CEO of Subway.

"We are confident not only of achieving the target of opening 4,000 stores in 20 years, but also to exceeding this number," said Zhu.

"Initially, the new stores will be added in first-tier and second-tier cities, and with the stabilization of market in these cities, more new stores would be launched in lower-tier cities," Zhu said.

"I think our brand is perfectly positioned to grow in an extremely large market where we have lots of upside, (including) perfect partner, large market, perfect food … Given where the Chinese consumer is going, I think all three of those things align to make it our best opportunity in the world," Chidsey said.

As the headquarters of Subway China, Shanghai is projected to have more than 200 stores by the end of this year, the largest number of stores among Chinese cities.

The decision to opt for Shanghai as the location for its 4,000th store in the Asia-Pacific region underscores the importance of the city as well as the Chinese market overall.

"I can't think of a better city to, sort of, showcase how important China, not just Shanghai, but China overall is to Subway for our growth," Chidsey said.