Subway makes a huge deal to expand in China

The sandwich giant signed a 4,000-unit, master franchise agreement with Shanghai Fu-Rui-Shi Corporate Development, its largest such agreement in the brand’s history.
Subway deal
Subway plans to build 4,000 restaurants in China over the next 20 years. / Photo courtesy of Subway.

Subway is going to sell a lot of footlongs in China.

The Miami-based sandwich giant on Tuesday announced the largest master franchise deal in its history, a 4,000-unit, 20-year agreement with Shanghai Fu-Rui-Shi Corporate Development, or FRS. The deal will be funded by a consortium of private investors, including Asia Investment Capital.

FRS will open the locations over the next 20 years, increasing Subway’s presence in the market by seven times. The group will also acquire the exclusive rights to manage and develop all the chain’s locations in the country. The master franchisee expects to name a CEO with “significant QSR experience in the Chinese market.”

The deal comes as brands continue to push development in the fast-growing market. Popeyes and Papa Johns, among others, have recently announced major expansion deals in the country and existing chains like KFC, McDonald’s and Starbucks continue to develop aggressively in China.

For Subway, the announcement is coming at a particularly opportune time, given that the company is nearing the finalization of a sale, reportedly for $9 billion. The company has signed several international development agreements recently as it pushes growth outside the U.S. This is Subway’s 13th master franchise and development agreement signed in the past two years, representing commitments for more than 9,000 restaurants.

Subway’s system sales outside the U.S. grew 9.5% last year, according to data from Technomic, and the company increased international unit count by 0.4% to 16,100—the first time in five years that the company has been able to increase international restaurant count.

“This agreement is a significant milestone in Subway’s international growth strategy as we continue to focus on strategically expanding our footprint and maintaining our position as one of the world’s largest restaurant brands,” John Chidsey, Subway’s CEO, said in a statement. He called China a “key market with significant long-term growth opportunity.”

Subway said its sales have increased in China coming out of the pandemic, largely driven by digital sales and the introduction of new menu items. The company is expecting a much bigger presence in the Asia Pacific region, expecting its unit count there to grow to 6,000 restaurants from 3,500 over the next five years.

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