Louisville, KY-based Yum! operates just over 1,900 restaurants in China, a majority of them KFCs. Sales in that country have increased from $246 million in 1998 to nearly $1.1 billion last year, according to the report. Yum! executives plan 15% to 20% unit growth annually over the next few years.

Meanwhile, McDonald's, based in Oak Brook, IL, has just about 640 restaurants in China, and 1,000 units are planned by 2008. McDonald's does not break out its sales figures for units in China, but the Lehman report says that they have not fared as well as other international markets because it has only been in the country since 1990.

China is attractive to expanding retailers because of "a rising middle class in cities," "positive wealth effects from the property market," "negative real deposit rates," and other factors, the report says. Other US fast-food chains making a push into China include Dairy Queen, Domino's Pizza, Hard Rock Café, Planet Hollywood, Popeyes Chicken & Biscuits, Rainforest Café, Sholtzky's, Starbucks, Subway and TGI Friday's.