##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
 Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal
    year ended December 27, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission
    files number
    000-32369
  
  AFC
    Enterprises, Inc.
  Minnesota(State or other jurisdiction
    of
    incorporation or organization)

58-2016606(I.R.S. Employer
    Identification No.)5555 Glenridge Connector, NE, Suite 300
    Atlanta, Georgia(Address of principal
    executive offices)

30342(Zip
    Code)   Registrants telephone number, including area code:
 (404) 459-4450
 Securities registered pursuant to Section 12(b) of the
    Exchange Act:
  Title of each class

Name of each exchange on which registeredCommon stock, $0.01 par value per share

Nasdaq Global Market   Securities registered pursuant to Section 12(g) of the
    Exchange Act: None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K.  Yes þ o
  12b-2
 Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o(Do not check if a smaller
    reporting company)

Smaller reporting
    company o   rule 12b-2).  Yes o þ
      Class

Outstanding at
    February 19, 2010Common stock, $0.01 par value per share

25,455,917 shares   Documents incorporated by reference:




---



##### 





AFC
    ENTERPRISES, INC.
    INDEX TO
    FORM 10-K
   
 PART IItem 1.


Business


1Item 1A.


Risk Factors


7Item 1B.


Unresolved Staff Comments


12Item 2.


Properties


13Item 3.


Legal Proceedings


13Item 4.


Reserved


13Item 4A.


Executive Officers


14PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


15Item 6.


Selected Financial Data


17Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


20Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


36Item 8.


Financial Statements and Supplementary Data


36Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


36Item 9A.


Controls and Procedures


36Item 9B.


Other Information


39PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


40Item 11.


Executive Compensation


40Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


40Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


40Item 14.


Principal Accountant Fees and Services


40PART IVItem 15.


Exhibits and Financial Statement Schedules


41EX-10.56EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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PART I.  Item 1.
    BUSINESS  ® ®
  Popeyes
    Profile
      
    Form 10-K.
  Our
    Business Strategy
   1




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
    Build the Popeyes Brand offering a
    distinctive brand and menu with superior food at affordable
    prices.  
    In 2009, Popeyes promoted its flavorful
    Bonafide®

    chicken and seafood offerings at value price points, supported
    by its successful new Louisiana Fast advertising campaign and
    national media. These marketing initiatives delivered strong
    positive guest counts resulting in positive full year same-store
    sales.
    In 2010, Popeyes will continue to promote its core chicken and
    seafood offerings and periodically introduce new innovative
    products. Popeyes will continue the use of national advertising
    to efficiently expand media reach and build additional brand
    awareness.  
    Run Great Restaurants improving
    restaurant operations and Popeyes guest experience by
    delighting the guest with service as distinctive as our
    food.  
    Popeyes restaurants steadily improved our Guest Experience
    Monitor (GEM) scores, with Overall Delighted and
    Intent to Return scores at the end of 2009 up
    significantly since the beginning of the year.
    With newly required drive-thru equipment substantially in place
    throughout the system, we are rolling out a new speed of service
    training program system-wide in the first half of 2010.
    Longer-term, we believe an increase in speed of service will
    provide a significant benefit to Popeyes customers and
    restaurant sales performance.
    In 2009, we successfully completed our re-franchising strategy
    with the sale of company-operated restaurants in Atlanta and
    Nashville. Going forward, the Company intends to own and operate
    its remaining company-operated restaurants in New Orleans and
    Memphis, which are high volume, profitable stores.  
    Strengthen Unit Economics lowering
    restaurant operating costs and improving profitability while
    maintaining excellent food quality for our guests.  
    In 2009, Popeyes restaurants benefited from a 3 percent
    decrease in commodity costs which translated to approximately a
    100 basis point improvement in restaurant operating
    margins. This overall benefit was partially offset, however, by
    increases in national minimum wage.
    During 2009, we also completed a diagnostic analysis of our
    supply chain system, identifying significant cost-savings
    opportunities in packaging, shipping, and sourcing alternatives
    which will benefit the entire system in 2010 and beyond.  
    Ramp Up New Unit Growth building more
    restaurants across the U.S. and abroad with superior
    profits and investment returns.  
    We are generating a strong pipeline of current and new franchise
    developers to open new restaurants and enter new markets, and
    will be better positioned to accelerate new unit development as
    the economy recovers. 2




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
    Our site modeling software investment is helping to strengthen
    real-estate site selection by identifying higher quality sites
    with higher sales volume potential and more attractive returns
    for our franchise owners.
    Our build-out costs remain competitive. In January of this year,
    QSR Magazine named Popeyes as one of the 10 great franchise
    deals. The magazine stated, Popeyes is a good deal because
    the build-out cost is reasonable for a drive-thru, stand-alone
    building.    Our
    Agreements with Popeyes Franchisees
    Domestic Development Agreements.
  International Development
    Agreements. sub-franchising
  Domestic Franchise Agreements.
    International Franchise Agreements.
   3




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##### Table of Contents



Site
    Selection
      Suppliers
    and Purchasing Cooperative
  Suppliers.
  Purchasing Cooperative. not-for-profit ®
  Supply Agreements.
      Marketing
    and Advertising
      Fiscal
    Year and Seasonality
     4




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Employees
  multi-unit
    Intellectual
    Property and Other Proprietary Rights
    Copeland Formula Agreement.
  King Features Agreements.
  International
    Operations
    Insurance
    Competition
   5




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Government
    Regulation
          Environmental
    Matters
  and/or
  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330 http://www.sec.gov. (404) 459-4450.
 6




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##### Table of Contents



Item 1A.
    RISK
    FACTORS  Certain statements we make in this filing, and other written
    or oral statements made by or on our behalf, may constitute
    forward-looking statements within the meaning of the
    federal securities laws. Words or phrases such as should
    result, are expected to, we
    anticipate, we estimate, we
    project, we believe, or similar expressions
    are intended to identify forward-looking statements. These
    statements are subject to certain risks and uncertainties that
    could cause actual results to differ materially from our
    historical experience and our present expectations or
    projections. We believe that these forward-looking statements
    are reasonable; however, you should not place undue reliance on
    such statements. Such statements speak only as of the date they
    are made, and we undertake no obligation to publicly update or
    revise any forward-looking statement, whether as a result of
    future events, new information or otherwise. The following risk
    factors and others that we may add from time to time, are some
    of the factors that could cause our actual results to differ
    materially from the expected results described in our
    forward-looking statements.
  If we
    are unable to compete successfully against other companies in
    the QSR industry or develop new products that appeal to consumer
    preferences, we could lose customers and our revenues may
    decline.
    Continued
    disruptions in the financial markets may adversely affect the
    availability and cost of credit and the slower economy may
    impact consumer spending patterns.
    and/or
  Because
    our operating results are closely tied to the success of our
    franchisees, the failure or loss of one or more franchisees,
    operating a significant number of restaurants, could adversely
    affect our operating results.
   7




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If our
    franchisees are unable or unwilling to open a sufficient number
    of restaurants, our growth strategy could be at
    risk.
      Changes
    in consumer preferences and demographic trends could result in a
    loss of customers and reduce our revenues.
    Adverse
    publicity related to food safety and quality could result in a
    loss of customers and reduce our revenues.
  multi-unit
  If the
    cost of chicken increases, our cost of sales will increase and
    our operating results could be adversely affected.
   8




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Instances
    of food-borne illness or avian flu could adversely affect the
    price and availability of poultry and other foods and create
    negative publicity which could result in a decline in our
    sales.
    If we
    face labor shortages or increased labor costs, our growth and
    operating results could be adversely affected.
    Currency,
    economic, political and other risks associated with our
    international operations could adversely affect our operating
    results.
    Our
    operating results and same-store sales may fluctuate
    significantly and could fall below the expectations of
    securities analysts and investors, which could cause the market
    price of our common stock to decline.
      
    the opening of new restaurants by us or our franchisees;
    the closing of restaurants by us or our franchisees;
    volatility of gasoline prices; 9




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##### Table of Contents




    increases in labor costs;
    increases in the cost of commodities and paper products;
    the ability of our franchisees to meet their future commitments
    under development agreements;
    consumer concerns about food quality or food safety;
    the level of competition from existing or new competitors in the
    QSR industry;
    inclement weather patterns; and
    economic conditions generally, and in each of the markets in
    which we, or our franchisees, are located.    We are
    subject to government regulation, and our failure to comply with
    existing regulations or increased regulations could adversely
    affect our business and operating results.
    
    the preparation and sale of food;
    franchising;
    building and zoning requirements;
    environmental protection;
    information security and data protection;
    minimum wage, overtime, immigration, unions and other labor
    issues;
    compliance with the Americans with Disabilities Act; and
    working and safety conditions.      Shortages
    or interruptions in the supply or delivery of fresh food
    products could adversely affect our operating
    results.
    If any
    member of our senior management left us, our operating results
    could be adversely affected, and we may not be able to attract
    and retain additional qualified management
    personnel.
   10




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We may
    not be able to adequately protect our intellectual property,
    which could harm the value of our Popeyes brand and branded
    products and adversely affect our business.
          Our
    2005 Credit Facility, as amended and restated, may limit our
    ability to expand our business, and our ability to comply with
    the repayment requirements, covenants, tests and restrictions
    contained in the 2005 Credit Facility may be affected by events
    that are beyond our control.
   11




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Because
    certain of our current or former properties were used as retail
    gas stations in the past, we may incur substantial liabilities
    for remediation of environmental contamination at our
    properties.
  and/or
  Item 1B.
    UNRESOLVED
    STAFF COMMENTS   12




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##### Table of Contents



Item 2.
    PROPERTIES      Land and


Land and/orBuildings Owned


Buildings Leased


TotalLouisiana


3



21



24Tennessee


2



7



9Mississippi


0



3



3Arkansas


0



1



1Total


5



32



37               Item 3.
    LEGAL
    PROCEEDINGS    Item 4.
    RESERVED 13




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##### Table of Contents



Item 4A.
    EXECUTIVE
    OFFICERS    Name

Age

PositionCheryl A. Bachelder


53


President and Chief Executive OfficerH. Melville Hope, III


48


Senior Vice President and Chief Financial OfficerRichard H. Lynch


55


Chief Marketing OfficerHarold M. Cohen


46


Senior Vice President, General Counsel, Chief
    Administrative Officer and Corporate SecretaryRalph W. Bower


47


Chief Operating Officer   Cheryl A. Bachelder,
  H. Melville Hope, III,
  Richard H. Lynch,
  Harold M. Cohen,
  Ralph W. Bower
 14




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##### Table of Contents



PART II.  Item 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES     2009

2008(Dollars per share)

High

Low

High

LowFirst Quarter

$
7.09


$
3.72


$
11.35


$
7.07Second Quarter

$
7.37


$
4.96


$
10.68


$
7.79Third Quarter

$
9.10


$
6.26


$
9.56


$
6.43Fourth Quarter

$
9.13


$
7.58


$
6.45


$
2.85   Share
    Repurchases
        Shareholders
    of Record
    Dividend
    Policy
   15




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##### Table of Contents



Stock
    Performance Graph
    Comparison
    of Cumulative Five Year Total Return
  
  Company Name / Index


12/26/2004


12/25/2005


12/31/2006


12/30/2007


12/28/2008


12/27/2009AFC Enterprises, Inc.


$
100



$
123



$
142



$
84



$
35



$
67S&P 500 Index


$
100



$
107



$
122



$
129



$
78



$
103Peer Group Index


$
100



$
114



$
143



$
161



$
129



$
151   9/29/08,
 16




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Item 6.
    SELECTED
    FINANCIAL DATA    (Dollars in millions, except per
    share data)

2009


2008


2007


2006


2005Summary of continuing operations:Revenues:(1)Sales by company-operated restaurants

$
57.4


$
78.3


$
80.0


$
65.2


$
60.3Franchise revenues(2)


86.0



84.6



82.8



82.6



77.5Rent and other revenues


4.6



3.9



4.5



5.2



5.6Total revenues


148.0



166.8



167.3



153.0



143.4Expenses:Restaurant employee, occupancy and other expenses


29.5



41.4



40.7



33.7



30.5Restaurant food, beverages and packaging


18.9



27.1



27.3



21.3



20.6Rent and other occupancy expenses


2.6



2.4



2.3



2.7



3.2General and administrative expenses(3)


56.0



53.9



47.2



45.4



65.5Depreciation and amortization


4.4



6.3



6.9



6.4



7.3Other expenses (income), net(4)


(2.1
)


(4.6
)


(2.7
)


(1.8
)


23.2Total expenses


109.3



126.5



121.7



107.7



150.3Operating profit (loss)


38.7



40.3



45.6



45.3



(6.9
)Interest expense, net(5)


8.4



8.1



8.7



11.1



6.8Income (loss) before income taxes


30.3



32.2



36.9



34.2



(13.7
)Income tax expense


11.5



12.8



13.8



12.0



(5.3
)Net income (loss)

$
18.8


$
19.4


$
23.1


$
22.2


$
(8.4
)Earnings per common share, basic

$
0.74


$
0.76


$
0.81


$
0.75


$
(0.29
)Earnings per common share, diluted

$
0.74


$
0.76


$
0.80


$
0.74


$
(0.29
)Weighted average shares outstanding:Basic


25.3



25.6



28.6



29.5



29.1Diluted


25.4



25.7



28.8



29.8



29.1Summary of cash flow data:Special cash dividend

$



$
0.5


$
0.7


$
0.7


$
352.9Share repurchases






19.0



39.4



20.3



19.5Year-end balance sheet data:Total assets

$
116.6


$
132.0


$
155.0


$
163.1


$
212.7Total debt(6)


82.6



119.2



132.8



134.0



191.4      (a)
    The effects of restaurant openings, closings, unit conversions,
    franchisee sales and same-store sales (see Summary of
    System-Wide Data later in this Item 6).  (b)
    On January 26, 2009, the Company completed the
    re-franchising of 3 company-operated restaurants in its
    Nashville, Tennessee market resulting in a decrease in 2009
    revenues of $3.1 million (net of franchise royalties
    earned) as compared to 2008.  (c)
    On June 8, 2009, the Company completed the re-franchising
    of 13 company-operated restaurants in its Atlanta, Georgia
    market resulting in a decrease in 2009 revenues of
    $6.8 million (net of franchise royalties earned) as
    compared to 2008. 17




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(d)
    On September 8, 2008, the Company completed the
    re-franchising and sale of 11 company-operated restaurants
    in its Atlanta, Georgia market resulting in a decrease in 2008
    revenues of approximately $4.0 million (net of franchise
    royalties earned) as compared to 2007; and a decrease in 2009
    revenue of $9.2 million (net of franchise royalties earned)
    compared to 2008.  (e)
    During the third quarter of 2005, the company-operated
    restaurants in the City of New Orleans were adversely affected
    by Hurricane Katrina. The timing of restaurant closures and
    re-openings resulted in: a decrease in company-operated
    restaurant sales of approximately $9.9 million in 2006 as
    compared to 2005; and an increase in company-operated restaurant
    sales of approximately $13.1 million in 2007 as compared to
    2006.  (f)
    The Companys fiscal year ends on the last Sunday in
    December. The 2006 fiscal year consisted of 53 weeks. All
    other fiscal years presented consisted of 52 weeks each.
    The 53rd week in 2006 increased sales by company-operated
    restaurants by approximately $1.2 million and increased
    franchise revenues by approximately $1.3 million.  (g)
    On May 1, 2006, the Company completed an acquisition of 13
    franchised restaurants from a Popeyes franchisee in the Memphis
    and Nashville, Tennessee markets. The results of operations of
    the acquired restaurants are included in the consolidated
    financial statements since that date. The acquired units
    increased 2006 revenues by approximately $10.0 million (net
    of lost franchise revenues attributable to these restaurants)
    and increased 2007 revenues by approximately $5.3 million
    as compared to 2006 (net of lost franchise revenues attributable
    to these restaurants).(h)
    The consolidated financial results include the accounts of the
    Company and the accounts of any franchisee entity deemed a
    variable interest entity (VIE) where we are the
    primary beneficiary. During 2006 and 2005, the consolidation of
    a VIE increased sales by company-operated restaurants by
    approximately $1.2 million and $2.7 million,
    respectively.  (2)
    
    Franchise revenues are principally composed of royalty payments
    from franchisees that are determined based on franchise net
    restaurant sales and are generally 5% of franchise net
    restaurant sales. While franchise sales are not recorded as
    revenue by the Company, management believes they are important
    in understanding the Companys financial performance
    because these sales are indicative of the Companys health,
    given the Companys strategic focus on growing its overall
    business through franchising. Total franchisee sales were
    $1.716 billion in 2009, $1.663 billion in 2008,
    $1.651 billion in 2007, $1.661 billion in 2006, and
    $1.552 billion in 2005. Fiscal year 2006 included a
    53rd week

    which increased franchisee sales by approximately
    $27.9 million. All other fiscal years presented consisted
    of 52 weeks.(3)
    
    During 2005, general and administrative expenses included
    approximately $8.3 million relating to corporate
    restructuring charges as well as stay bonuses and severance
    costs paid to the Companys former Chief Executive Officer,
    former Chief Financial Officer and former General Counsel.(4)
    
    Factors that impact the comparability of other expenses (income)
    for the years presented include:  (a)
    During 2009 there were no significant expenses (income)
    associated with shareholder litigation. During 2008, 2007, 2006,
    and 2005, our expenses (income) associated with litigation
    related costs (proceeds) were approximately
    $(12.9) million, $(0.9) million, $(0.3) million,
    and $21.8 million, respectively. The substantially higher
    costs in 2005 relate to the settlement of certain shareholder
    litigation. The substantially higher income in 2008 relates to
    recoveries from claims against certain director and officers
    liability insurance policies.  (b)
    During 2009 the Company sold ten real estate properties for a
    gain of approximately $3.6 million.  (c)
    During 2009, 2008, 2007, 2006, and 2005, impairments and
    disposals of fixed assets were approximately $0.6 million,
    $9.5 million, $1.9 million, $0.1 million, and
    $5.8 million, respectively. Of the 2008 impairments,
    $9.2 million was associated with the re-franchising of
    company-operated restaurants in Atlanta, Georgia and Nashville,
    Tennessee. Of the 2005 impairments, $4.1 million was due to
    the adverse effects of Hurricane Katrina, $0.6 million of
    which were subsequently reversed due to adjustments to damage
    estimates in 2006. 18




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(d)
    During 2006 and 2005, our expenses (income), net associated with
    hurricane related costs (other than impairments of long-lived
    assets) associated with Hurricane Katrina were approximately
    $0.7 million and $(2.5) million, respectively. During
    2007, the Company also recognized approximately
    $4.8 million of income from insurance proceeds related to
    property damage and business interruption claims.  (5)
    
    During 2009, we expensed $1.9 million as a component of
    Interest expense, net in connection with the third amendment and
    restatement of the 2005 Credit Facility. See Note 10 for a
    description of the amendment and restatement transaction.(6)
    
    Total debt includes the long-term and current portions of our
    debt facilities, capital lease obligations, outstanding lines of
    credit, and other borrowings.  Summary
    of System-Wide Data
    2009


2008


2007


2006


2005Global system-wide sales increase(1)


1.8
%


0.6
%


0.3
%


7.0
%


4.8
%Total domestic same-store sales increase (decrease)


0.6
%


(2.2
)%


(2.3
)%


1.6
%


3.3
%International same-store sales increase (decrease)


1.9
%


4.1
%


1.1
%


(3.2
)%


(4.2
)%Total global same-store sales increase (decrease)(2)


0.7
%


(1.7
)%


(2.0
)%


1.1
%


2.6
%Company-operated restaurants (all domestic)Restaurants at beginning of year


55



65



56



32



56New restaurant openings


0



1



5



3



1Restaurant conversions, net(3)


(16
)


(11
)


1



12



2Permanent closings


(2
)


(3
)


(3
)


(3
)


(7
)Temporary (closings)/re-openings, net(4)


0



3



6



12



(20
)Restaurants at end of year


37



55



65



56



32Franchised restaurants (domestic and international)Restaurants at beginning of year


1,867



1,840



1,822



1,796



1,769New restaurant openings


95



139



119



139



122Restaurant conversions, net(3)


16



11



(1
)


(12
)


(2
)Permanent closings


(79
)


(117
)


(106
)


(93
)


(95
)Temporary (closings)/re-openings, net(4)


7



(6
)


6



(8
)


2Restaurants at end of year


1,906



1,867



1,840



1,822



1,796Total system restaurants


1,943



1,922



1,905



1,878



1,828New franchised restaurant openingsDomestic


39



72



77



97



71International


56



67



42



42



51Total new franchised restaurant openings


95



139



119



139



122Franchised restaurantsDomestic


1,539



1,527



1,518



1,503



1,451International


367



340



322



319



345Restaurants at end of year


1,906



1,867



1,840



1,822



1,796   (1)
    
    Fiscal year 2006 consisted of 53 weeks. All other fiscal
    years presented consisted of 52 weeks each. The 53rd week
    in 2006 contributed approximately 1.8% to global system-wide
    sales growth. Excluding the impact of the 53rd week in 2006,
    global system-wide sales growth in 2007 was approximately 2.1%.(2)
    
    New restaurants are included in the computation of same-store
    sales after they have been open 15 months. Unit conversions
    are included immediately upon conversion.(3)
    
    Unit conversions include the sale or purchase of
    company-operated restaurants to/from a franchisee.(4)
    
    Temporary closings are presented net of re-openings. Most
    temporary closings arise due to the re-imaging or the rebuilding
    of older restaurants. In 2005, there were significant temporary
    closings related to Hurricane Katrina. 19




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##### Table of Contents



Item 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following discussion and analysis should be read in
    conjunction with our Selected Financial Data, our Consolidated
    Financial Statements and our Risk Factors that are included
    elsewhere in this filing.
  Our discussion contains forward-looking statements based upon
    current expectations that involve risks and uncertainties, such
    as our plans, objectives, expectations and intentions. Actual
    results and the timing of events could differ materially from
    those anticipated in these forward-looking statements, as a
    result of a number of factors including those factors set forth
    in Item 1A. of this Annual Report and other factors
    presented throughout this filing.
  Nature of
    Business
  ® ®
  Management
    Overview of 2009 Results:
    
    Reported net income was $18.8 million, or $0.74 per diluted
    share, compared to $19.4 million, or $0.76 per diluted
    share, last year. Adjusted earnings per diluted share were $0.74
    in 2009, compared to $0.65 in 2008, an increase of
    14 percent. Adjusted earnings per diluted share is a
    supplemental non-GAAP measure of performance. Please see
    Non-GAAP Financial Measures in this Item 7
    for a definition of adjusted earnings per diluted share and a
    reconciliation to the most comparable GAAP measure.
    Total system-wide sales increased 1.8 percent compared to a
    0.6 percent increase last year.
    Global same-store sales increased 0.7 percent compared to a
    1.7 percent decrease last year. Total domestic same-store
    sales increased 0.6 percent, compared to a 2.2 percent
    decrease last year, outpacing both the QSR and chicken QSR
    categories. International same-store sales increased
    1.9 percent, compared to a 4.1 percent increase last
    year, the third consecutive year of positive same-store sales.
    The Popeyes system opened 95 restaurants globally and entered
    two new countries, Malaysia and Egypt. 81 restaurants were
    permanently closed, resulting in net openings of 14 restaurants,
    which exceeded our previous guidance of 0-10 net openings.
    We successfully completed our re-franchising strategy with the
    sale of our 27 company-operated restaurants in Atlanta and
    Nashville. The year over year impact of re-franchising was
    favorable to operating profit by approximately
    $1.7 million, including franchise fees and royalties,
    general and administrative savings, and lower depreciation and
    amortization.
    Outstanding debt was reduced by $36.6 million to
    $82.6 million.
    On August 14, 2009, we entered into a third amendment and
    restatement to the 2005 Credit Facility to, among other things,
    extend the maturity dates of our revolving credit facility and
    term loan by two years to May 2012 and May 2013, respectively.
    For a discussion of the terms see Long Term Debt
    within this Item 7.  2009
    Same-Store Sales
  ®
 20




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##### Table of Contents



Form 10-K.
      2009 Unit
    Growth
      Factors
    Affecting Comparability of Consolidated Results of Operations:
    2009, 2008, and 2007
    
    During 2009 we re-franchised 13 company-operated
    restaurants in Atlanta, Georgia, and during 2008 we
    re-franchised 11 company-operated restaurants in Atlanta,
    Georgia. In 2009 we also re-franchised 3 company-operated
    restaurants in Nashville, Tennessee. The re-franchising resulted
    in a decrease in 2009 revenues of $19.1 million (net of
    franchise royalties earned) as compared to 2008 and a decrease
    in 2008 revenues of $4.0 million (net of franchise
    royalties earned) as compared to 2007.
    During 2009 we sold 10 real estate properties for a gain of
    approximately $3.6 million.
    During 2008 and 2007, our income associated with litigation
    related proceeds was $12.9 million and $0.9 million,
    respectively.
    During 2009, 2008 and 2007, impairments and disposals of fixed
    assets were $0.6 million, $9.5 million and
    $1.9 million, respectively.
    During 2007, we recognized approximately $4.8 million of
    income from insurance proceeds related to property damage and
    business interruption claims associated with Hurricane Katrina.  Comparisons
    of Fiscal Years 2009 and 2008
  Sales by
    Company-Operated Restaurants
    The successful re-franchising and sales of
    11 company-operated restaurants in the Atlanta, Georgia
    market in the third quarter of 2008, 3 company-operated
    restaurants in the Nashville, Tennessee market in the first
    quarter of 2009, and 13 company-operated restaurants in the
    Atlanta, Georgia market in the second quarter of 2009.   21




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##### Table of Contents



Franchise
    Revenues
      Rent and
    Other Revenues
    Restaurant
    Employee, Occupancy and Other Expenses
    Restaurant
    Food, Beverages and Packaging
    Rent and
    Other Occupancy Expenses
    General
    and Administrative Expenses
    
    a $2.0 million increase in bad debt expense,
    a $0.8 million increase in personnel expense, primarily
    related to employee incentive accruals, and
    a $0.4 million increase due to $1.4 million net of
    national media advertising expenses, partially offset by
    non-recurring marketing expenses incurred during 2008,    
    a $0.8 million decrease in business conference and travel
    expenses, and
    a $0.3 million decrease in professional fees and other net
    general and administrative costs.   22




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##### Table of Contents



Depreciation
    and Amortization
    Other
    Expenses (Income), Net
          Operating
    Profit
      As a(Dollars in millions)

2009


2008


Fluctuation


PercentFranchise operations

$
36.8


$
38.9


$
(2.1
)


(5.4
)%Company-operated restaurants


4.2



3.1



1.1



35.5
%Operating profit before unallocated expenses


41.0



42.0



(1.0
)


(2.4
)%Less unallocated expenses:Depreciation and amortization


4.4



6.3



1.9



30.2
%Other expenses (income), net


(2.1
)


(4.6
)


(2.5
)


(54.3
)%Total

$
38.7


$
40.3


$
(1.6
)


(4.0
)%         Interest
    Expense, Net
   23




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##### Table of Contents



Income
    Tax Expense
    Comparisons
    of Fiscal Years 2008 and 2007
  Sales by
    Company-Operated Restaurants
    
    a $4.2 million decrease due to the re-franchising and sale
    on September 8, 2008 of 11 company-operated
    restaurants in our Atlanta, Georgia market, and
    a $4.0 million decrease due to a 5.6% decrease in
    same-store sales in fiscal 2008 as compared to fiscal 2007,    
    a $3.5 million increase due to the opening of new
    company-operated restaurants and the acquisition of one
    restaurant during the second quarter of 2007 which was
    previously owned by a franchisee, and
    a net $3.0 million increase due primarily to the timing and
    duration of temporary restaurant closures during both 2008 and
    2007.  Franchise
    Revenues
    Rent and
    Other Revenues
    Restaurant
    Employee, Occupancy and Other Expenses
    Restaurant
    Food, Beverages and Packaging
   24




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##### Table of Contents



Rent and
    Other Occupancy Expenses
    General
    and Administrative Expenses
    
    a $2.4 million increase due to marketing and menu
    initiatives including national media advertising, new menu board
    development, product research and other marketing related costs,
    a $1.5 million increase in international expenses including
    salary and personnel related costs, travel and other net general
    and administrative costs,
    a $1.0 million increase due to higher domestic salary,
    employee relocation and other personnel related costs,
    a $0.8 million increase in stock-based compensation
    expense, and
    a $1.0 million increase in travel, business conference
    expenses and other net general and administrative costs.    Depreciation
    and Amortization
    Other
    Expenses (Income), Net
         25




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##### Table of Contents



Operating
    Profit
      As a(Dollars in millions)

2008


2007


Fluctuation


PercentFranchise operations

$
38.9


$
45.1


$
(6.2
)


(13.7
)%Company-operated restaurants


3.1



4.7



(1.6
)


(34.0
)%Operating profit before unallocated expenses


42.0



49.8



(7.8
)


(15.7
)%Less unallocated expenses:Depreciation and amortization


6.3



6.9



0.6



8.7
%Other expenses (income), net


(4.6
)


(2.7
)


1.9



70.4
%Total

$
40.3


$
45.6


$
(5.3
)


(11.6
)%         Interest
    Expense, Net
    Income
    Tax Expense
    Liquidity
    and Capital Resources
    
    Cash flows generated from our operating activities, and 26




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##### Table of Contents




    Borrowings under our 2005 Credit Facility, as amended and
    restated.        
    The term loan and revolving credit facility maturity dates were
    extended by two years to May 2013 and May 2012,
    respectively.
    The Company must maintain a Total Leverage Ratio of 3.00 to 1 or
    less through the end of the first quarter of 2012 and 2.75 to 1
    or less thereafter.          
    reinvestment in core business activities that promote the
    Companys strategic initiatives,
    reduction of long-term debt, and
    repurchase of shares of our common stock (subject to the
    restrictions under our 2005 Credit Facility, as amended and
    restated).        Total Leverage Ratio

Prepayment> 2.00 to 1.0

50% of the Consolidated Excess Cash Flow£
    2.00 to 1.0

25% of the Consolidated Excess Cash Flow  27




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##### Table of Contents



£ £ £
  rd
      Operating
    and Financial Outlook for 2010
    110-130
  3.1-3.2
    Long-Term
    Guidance
   28




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##### Table of Contents



Contractual
    Obligations
    There-(In millions)

2010


2011


2012


2013


2014


after


TotalLong-term debt, excluding capital leases(1)

$
1.3


$
1.0


$
19.7


$
57.1


$
0.3


$
1.6


$
81.0Interest on long-term debt, excluding capital leases(1)


5.7



5.6



5.5



2.1



0.2



0.5



19.6Leases(2)


6.0



6.0



4.8



4.5



4.3



55.5



81.1Copeland formula agreement(3)


3.1



3.1



3.1



3.1



3.1



43.1



58.6King Features agreements(3)


0.5























0.5Information technology outsourcing(3)


1.3



1.4



1.4















4.1Business process services(3)


1.0



0.3



















1.3Total(4)

$
18.9


$
17.4


$
34.5


$
66.8


$
7.9


$
100.7


$
246.2   (1)
    
    For variable rate debt, the Company estimated average
    outstanding balances for the respective periods and applied
    interest rates in effect at December 27, 2009. See
    Note 10 to our Consolidated Financial Statements for
    information concerning the terms of our 2005 Credit Facility, as
    amended and restated, and the 2005 interest rate swap agreements.(2)
    
    Of the $81.1 million of minimum lease payments,
    $76.7 million of those payments relate to operating leases
    and the remaining $4.4 million of payments relate to
    capital leases. See Note 11 to our Consolidated Financial
    Statements.(3)
    
    See Note 16 to our Consolidated Financial Statements.(4)
    
    We have not included in the contractual obligations table
    approximately $4.9 million for unrecognized tax benefits
    for various tax positions we have taken. These liabilities may
    increase or decrease over time as a result of tax examinations,
    and given the status of the examinations, we cannot reliably
    estimate the amount or period of cash settlement, if any, with
    the respective taxing authorities. These liabilities also
    include amounts that are temporary in nature and for which we
    anticipate that over time there will be no net cash outflow.  Share
    Repurchase Program
      Capital
    Expenditures
     29




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##### Table of Contents



Off-Balance
    Sheet Arrangements
    Long Term
    Debt
  2005 Credit Facility.
    
    The term loan and revolving credit facility maturity dates were
    extended by two years to May 2013 and May 2012,
    respectively.
    The revolving credit facility commitment was reduced from
    $60.0 million to $48.0 million.
    The applicable interest rate for the term loan and revolving
    credit facility was set at LIBOR plus 4.50%, with a minimum
    LIBOR of 2.50%.
    The Company must maintain a Total Leverage Ratio of 3.00 to 1 or
    less through the end of first quarter of 2012 and 2.75 to 1 or
    less thereafter.
    The Company must prepay (i) 50% of Consolidated Excess Cash
    Flow (as defined in the 2005 Credit Facility) for such fiscal
    year if the Total Leverage Ratio is greater than 2.00 to 1 on
    the last day of such fiscal year or (ii) 25% of
    Consolidated Excess Cash Flow for such year if the Total
    Leverage Ratio is equal to or less than 2.00 to 1.
    The Company is permitted to resume its common stock repurchase
    program once the Total Leverage Ratio is less than 1.75 to 1. As
    of December 27, 2009, the Companys Total Leverage
    Ratio was 1.95 to 1.
    To reduce interest rate risk, derivative instruments are
    required to be maintained on no less than 30% of the outstanding
    debt (see discussion below under the heading Interest Rate
    Swap Agreements).   30




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##### Table of Contents



Interest Rate Swap Agreements.
      Impact of
    Inflation
   31




---



##### Table of Contents



Tax
    Matters
    Market
    Risk
    Commodity Market Risk.
  not-for-profit
  Foreign Currency Exchange Rate Risk.
    Interest Rate Risk.
   32




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
  and/or
  Impairment of Long-Lived Assets.
    Impairment of Goodwill and
    Trademarks.
    Allowances for Accounts and Notes Receivable and
    Contingent Liabilities. note-by-note
 33




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##### Table of Contents



Leases.
  Deferred Tax Assets and Tax
    Reserves.
        Stock-Based Employee Compensation.
  Derivative Financial Instruments
 34




---



##### Table of Contents



Recent
    Accounting Standards
      Non-GAAP Financial
    Measures
  Adjusted
    earnings per diluted share: Calculation and Definition
  (dollars in millions)


2009



2008Net income


$
18.8



$
19.4Other income, net


$
(2.1
)


$
(4.6
)Interest expense associated with credit facility amendment


$
1.9




Tax effect


$
0.1



$
2.0Adjusted net income


$
18.7



$
16.8Adjusted earnings per diluted share


$
0.74



$
0.65Weighted-average diluted shares outstanding



25.4




25.7   Adjusted
    earnings per diluted share: Calculation and Definition
   35




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##### Table of Contents



Forward-Looking
    Statements
  Form 10-K Form 10-K Form 10-K
  Item 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Item 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Page F-1
 36




---



##### Table of Contents



Item 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    Item 9A.
    CONTROLS
    AND PROCEDURES  (a)
    Disclosure
    Controls and Procedures    (b)
    Our
    Evaluation of AFCs Disclosure Controls and
    Procedures  Rule 13a-15(b) 15d-15(b)
    (c)
    Managements
    Report on Internal Control Over Financial
    Reporting      Internal Control-Integrated Framework
   37




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##### Table of Contents



(d)
    Changes
    in Internal Control Over Financial Reporting    (e)
    Report
    of Independent Registered Public Accounting Firm on Internal
    Control over Financial Reporting  
  Internal Control  Integrated Framework
        Internal Control 
    Integrated Framework
    
  
 38




---



##### Table of Contents



Item 9B.
    OTHER
    INFORMATION  Amended
    and Restated Employment Agreement with Henry Hope,
    III
     39




---



##### Table of Contents



PART III.  Item 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Form 10-K
  Form 8-K
  Item 11.
    EXECUTIVE
    COMPENSATION    Item 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    Item 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    Item 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   40




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##### Table of Contents



PART IV.  Item 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  (a)
    Financial
    Statements  Page F-1
  PagesReport of Independent Registered Public
    Accounting Firm


F-1Consolidated Balance Sheets as of
    December 27, 2009 and December 28, 2008


F-2Consolidated Statements of Operations for Fiscal
    Years 2009, 2008 and 2007


F-3Consolidated Statements of Changes in
    Shareholders Deficit for Fiscal Years 2009, 2008 and
    2007


F-4Consolidated Statements of Cash Flows for Fiscal
    Years 2009, 2008 and 2007


F-5Notes to the Consolidated Financial Statements


F-6     (b)
    Exhibits  ExhibitNumber

Description3
.1(c)

Articles of Incorporation of AFC Enterprises, Inc., as amended,
    dated June 24, 2002.3
.2(y)

Amended and Restated Bylaws of AFC Enterprises, Inc.4
.1(o)

Form of registrants common stock certificate.10
.1(e)

Form of Popeyes Development Agreement, as amended.10
.2(e)

Form of Popeyes Franchise Agreement.10
.3(a)

Formula Agreement dated July 2, 1979 among Alvin C.
    Copeland, Gilbert E. Copeland, Mary L. Copeland, Catherine
    Copeland, Russell J. Jones, A. Copeland Enterprises, Inc. and
    Popeyes Famous Fried Chicken, Inc., as amended to date.10
.4(a)

Supply Agreement dated March 21, 1989 between New Orleans
    Spice Company, Inc. and Biscuit Investments, Inc.10
.5(a)

Recipe Royalty Agreement dated March 21, 1989 by and among
    Alvin C. Copeland, New Orleans Spice Company, Inc. and Biscuit
    Investments, Inc.10
.6(a)

Licensing Agreement dated March 11, 1976 between King
    Features Syndicate Division of The Hearst Corporation and A.
    Copeland Enterprises, Inc.10
.7(a)

Assignment and Amendment dated January 1, 1981 between A.
    Copeland Enterprises, Inc., Popeyes Famous Fried Chicken, Inc.
    and King Features Syndicate Division of The Hearst Corporation.10
.8(a)

Letter Agreement dated September 17, 1981 between King
    Features Syndicate Division of The Hearst Corporation, A.
    Copeland Enterprises, Inc. and Popeyes Famous Fried Chicken, Inc.10
.9(a)

License Agreement dated December 19, 1985 by and between
    King Features Syndicate, Inc., The Hearst Corporation, Popeyes,
    Inc. and A. Copeland Enterprises, Inc.10
.10(a)

Letter Agreement dated July 20, 1987 by and between King
    Features Syndicate, Division of The Hearst Corporation, Popeyes,
    Inc. and A. Copeland Enterprises, Inc.10
.11(n)

Amendment dated January 1, 2002 by and between Hearst
    Holdings, Inc., King Features Syndicate Division and AFC
    Enterprises, Inc.10
.12(a)

1992 Stock Option Plan of AFC, effective as of November 5,
    1992, as amended to date.*10
.13(a)

1996 Nonqualified Performance Stock Option Plan 
    Executive of AFC, effective as of April 11, 1996.*10
.14(a)

1996 Nonqualified Performance Stock Option Plan 
    General of AFC, effective as of April 11, 1996.* 41




---



##### Table of Contents



ExhibitNumber

Description10
.15(a)

1996 Nonqualified Stock Option Plan of AFC, effective as of
    April 11, 1996.*10
.16(a)

Form of Nonqualified Stock Option Agreement  General
    between AFC and stock option participants.*10
.17(a)

Form of Nonqualified Stock Option Agreement 
    Executive between AFC and certain key executives.*10
.18(a)

1996 Employee Stock Bonus Plan  Executive of AFC
    effective as of April 11, 1996.*10
.19(a)

1996 Employee Stock Bonus Plan  General of AFC
    effective as of April 11, 1996.*10
.20(a)

Form of Stock Bonus Agreement  Executive between AFC
    and certain executive officers.*10
.21(a)

Form of Stock Bonus Agreement  General between AFC
    and certain executive officers.*10
.22(a)

Form of Secured Promissory Note issued by certain members of
    management.*10
.23(a)

Form of Stock Pledge Agreement between AFC and certain members
    of management.*10
.24(a)

Settlement Agreement between Alvin C. Copeland, Diversified
    Foods and Seasonings, Inc., Flavorite Laboratories, Inc. and AFC
    dated May 29, 1997.10
.25(a)

Indemnification Agreement dated April 11, 1996 by and
    between AFC and John M. Roth.*10
.26(a)

Indemnification Agreement dated May 1, 1996 by and between
    AFC and Kelvin J. Pennington.*10
.27(a)

Indemnification Agreement dated April 11, 1996 by and
    between AFC and Frank J. Belatti.*10
.28(e)

Substitute Nonqualified Stock Option Plan, effective
    March 17, 1998.*10
.29(f)

Indemnification Agreement dated May 16, 2001 by and between
    AFC and Victor Arias Jr.*10
.30(f)

Indemnification Agreement dated May 16, 2001 by and between
    AFC and Carolyn Hogan Byrd.*10
.31(f)

Indemnification Agreement dated August 9, 2001 by and
    between AFC and R. William Ide, III.*10
.32(g)

AFC Enterprises, Inc. Employee Stock Purchase Plan.*10
.33(g)

AFC Enterprises, Inc. 2002 Incentive Stock Plan.*10
.34(g)

AFC Enterprises, Inc. Annual Executive Bonus Program.*10
.36(p)

Indemnity Agreement dated October 14, 2004 by and between
    AFC Enterprises, Inc. and Supply Management Services, Inc.10
.37(p)

Indemnity Agreement dated February 5, 2004 by and between
    AFC Enterprises, Inc., Cajun Operating Company and Supply
    Management Services, Inc.10
.38(z)

Third Amended and Restated Credit Agreement dated as of
    August 14, 2009 among AFC Enterprises, Inc., the Lenders
    party thereto, JPMorgan Chase Bank, NA, JP Morgan Securities
    Inc. and Bank of America, N.A.10
.39(i)

Fourth Amendment to the 1992 Stock Option Plan of Americas
    Favorite Chicken Company.10
.40(i)

Fifth Amendment to the Americas Favorite Chicken Company
    1996 Nonqualified Performance Stock Option Plan 
    General.*10
.41(i)

Amendment No. 1 to the Americas Favorite Chicken
    Company 1996 Nonqualified Stock Option Plan.*10
.42(i)

Second Amendment to the Americas Favorite Chicken Company
    1996 Nonqualified Performance Stock Option Plan 
    Executive.*10
.43(i)

Second Amendment to the AFC Enterprises, Inc. 2002 Incentive
    Stock Plan.*10
.44(i)

Indemnification Agreement between AFC and Peter Starrett dated
    December 1, 2000.10
.45(s)

Indemnification Agreement dated November 28, 2006 by and
    between AFC and John M. Cranor, III.*10
.46(s)

Indemnification Agreement dated November 28, 2006 by and
    between AFC and Cheryl A. Bachelder.*10
.47(t)

Popeyes Chicken and Biscuits 2006 Bonus Plan.*10
.48(t)

Employment Agreement dated as of March 14, 2007 between AFC
    Enterprises, Inc. and James W. Lyons.*10
.49(t)

Employment Agreement dated as of March 14, 2007 between AFC
    Enterprises, Inc. and Robert Calderin.* 42




---



##### Table of Contents



ExhibitNumber

Description10
.50(u)

Second Amendment to Second Amended and Restated Credit Agreement
    dated as of April 25, 2007.10
.51(v)

Non-Qualified Stock Option Certificate for Cheryl Bachelder
    (time-based vesting).*10
.52(v)

Non-Qualified Stock Option Certificate for Cheryl Bachelder
    (performance-based vesting).*10
.53(w)

Employment Agreement dated as of October 9, 2007 between
    AFC Enterprises, Inc. and Cheryl A. Bachelder.*10
.54(m)

Accelerated Stock Repurchase Agreement by and between AFC
    Enterprises, Inc. and J.P. Morgan Securities Inc., as agent
    for JPMorgan Chase Bank, National Association, London Branch
    dated March 12, 2008.10
.55(x)

Amended and Restated Employment Agreement dated as of
    November 12, 2008 between the Company and Harold M. Cohen.*10
.56

Amended and Restated Employment Agreement dated as of
    November 12, 2008 between the Company and Henry
    Hope, III.*10
.57(bb)

Employment Agreement effective as of February 4, 2008
    between the Company and Richard Lynch.*10
.58(aa)

Employment Agreement effective as of April 20, 2009 between
    the Company and Ralph Bower.*11
.1**

Statement regarding computation of per share earnings.23
.1

Consent of Grant Thornton LLP31
.1

Certification Pursuant to
    Rule 13a-14(a),
    as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.31
.2

Certification Pursuant to
    Rule 13a-14(a),
    as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.32
.1

Certification of Chief Executive Officer, pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2

Certification of Chief Financial Officer, pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     
    
    Certain portions of this exhibit have been granted confidential
    treatment.*
    
    Management contract, compensatory plan or arrangement required
    to be filed as an exhibit.**
    
    Data required by FASB authoritative guidance for Earnings per
    Share, is provided in Note 20 to our Consolidated Financial
    Statements in this Annual Report.(a)
    
    Filed as an exhibit to the Registration Statement of AFC on
    Form S-4/A
    (Registration
    No. 333-29731)
    on July 2, 1997 and incorporated by reference herein.(c)
    
    Filed as an exhibit to the
    Form 10-Q
    of AFC for the quarter ended July 14, 2002, on
    August 14, 2002 and incorporated by reference herein.(d)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed May 16, 2005 and incorporated by reference
    herein.(e)
    
    Filed as an exhibit to the Registration Statement of AFC on
    Form S-1/A
    (Registration
    No. 333-52608)
    on January 22, 2001 and incorporated by reference herein.(f)
    
    Filed as an exhibit to the Registration Statement of AFC on
    Form S-1
    (Registration
    No. 333-73182)
    on November 13, 2001 and incorporated by reference herein.(g)
    
    Filed as an exhibit to the Proxy Statement and Notice of 2002
    Annual Shareholders Meeting of AFC on April 12, 2002 and
    incorporated by reference herein.(h)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed April 16, 2003 and incorporated by reference
    herein.(i)
    
    Filed as an exhibit to the
    Form 10-Q
    of AFC for the quarter ended April 17, 2005, on
    May 27, 2005, and incorporated by reference herein.(j)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed November 5, 2004 and incorporated herein by
    reference.(k)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed November 2, 2004 and incorporated herein by
    reference.(l)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed January 5, 2005 and incorporated herein by
    reference. 43




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##### Table of Contents



(m)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed on August 13, 2008 and incorporated herein by
    reference(o)
    
    Filed as an exhibit to the Registration Statement of AFC on
    Form S-1/A
    (Registration
    No. 333-52608)
    on February 28, 2001 and incorporated by reference herein.(p)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed on August 21, 2007 and incorporated herein by
    reference.(s)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed November 29, 2006 and incorporated herein by
    reference.(t)
    
    Filed as an exhibit to the
    Form 10-K
    of AFC for the fiscal year ended December 31, 2006 and
    incorporated herein by reference.(u)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed April 30, 2007 and incorporated herein by
    reference.(v)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed November 7, 2007 and incorporated herein by
    reference.(w)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed October 12, 2007 and incorporated herein by
    reference.(x)
    
    Filed as an exhibit to the
    Form 10-Q
    of AFC for the quarter ended October 5, 2008 on
    November 12, 2008 and incorporated herein by reference.(y)
    
    Filed an exhibit to the
    Form 8-K
    of AFC filed on April 16, 2008 and incorporated herein by
    reference.(z)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed on August 20, 2009 and incorporated herein by
    reference.  (aa)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed on April 21, 2009 and incorporated herein by
    reference.(bb)
    
    Filed as an exhibit to the
    Form 10-K
    of AFC for the fiscal year ended December 28, 2008 and
    incorporated herein by reference. 44




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Cheryl
    A. Bachelder   Chief Executive Officer
    Signature

Title(s)

Date/s/  Cheryl
    A. BachelderCheryl
    A. Bachelder

Chief Executive Officer (Principal Executive Officer)

March 10, 2010/s/  H.
    Melville HopeH.
    Melville Hope

Chief Financial Officer (Principal Financial and Accounting
    Officer)

March 10, 2010/s/  John
    M. Cranor, IIIJohn
    M. Cranor, III

Director, Chairman of the Board

March 10, 2010/s/  Victor
    Arias, Jr.Victor
    Arias, Jr.

Director

March 10, 2010/s/  Carolyn
    H. ByrdCarolyn
    H. Byrd

Director

March 10, 2010/s/  R.
    William Ide, IIIR.
    William Ide, III

Director

March 10, 2010/s/  Kelvin
    J. PenningtonKelvin
    J. Pennington

Director

March 10, 2010/s/  John
    F. HoffnerJohn
    F. Hoffner

Director

March 10, 2010  45




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Internal Control 
    Integrated Framework
      F-1




---



##### Table of Contents



AFC
    Enterprises, Inc.
 Consolidated
    Balance SheetsAs of December 27, 2009 and December 28, 2008
    (In millions, except share data) 2009


2008ASSETSCurrent assets:Cash and cash equivalents

$
4.1


$
2.1Accounts and current notes receivable, net


9.1



9.4Assets held for sale






4.5Other current assets


3.9



5.2Advertising cooperative assets, restricted


16.0



12.8Total current assets


33.1



34.0Long-term assets:Property and equipment, net


21.5



25.3Goodwill


11.1



11.1Trademarks and other intangible assets, net


47.6



48.2Other long-term assets, net


3.3



13.4Total long-term assets


83.5



98.0Total assets

$
116.6


$
132.0LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Accounts payable

$
4.8


$
6.5Other current liabilities


13.7



13.6Current debt maturities


1.3



4.7Advertising cooperative liabilities


16.0



12.8Total current liabilities


35.8



37.6Long-term liabilities:Long-term debt


81.3



114.5Deferred credits and other long-term liabilities


17.7



19.2Total long-term liabilities


99.0



133.7Commitments and contingenciesShareholders deficit:Preferred stock ($.01 par value; 2,500,000 shares
    authorized; 0 issued and outstanding)






Common stock ($.01 par value; 150,000,000 shares
    authorized; 25,455,917 and 25,294,973 shares issued and
    outstanding at the end of fiscal years 2009 and 2008,
    respectively)


0.3



0.3Capital in excess of par value


112.3



110.5Accumulated deficit


(130.3
)


(149.1
)Accumulated other comprehensive loss


(0.5
)


(1.0
)Total shareholders deficit


(18.2
)


(39.3
)Total liabilities and shareholders deficit

$
116.6


$
132.0    F-2




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##### Table of Contents



AFC
    Enterprises, Inc.
 Consolidated
    Statements of OperationsFor Fiscal Years 2009, 2008 and 2007
    (In millions, except per share data) 2009


2008


2007Revenues:Sales by company-operated restaurants

$
57.4


$
78.3


$
80.0Franchise revenues


86.0



84.6



82.8Rent and other revenues


4.6



3.9



4.5Total revenues


148.0



166.8



167.3Expenses:Restaurant employee, occupancy and other expenses


29.5



41.4



40.7Restaurant food, beverages and packaging


18.9



27.1



27.3Rent and other occupancy expenses


2.6



2.4



2.3General and administrative expenses


56.0



53.9



47.2Depreciation and amortization


4.4



6.3



6.9Other expenses (income), net


(2.1
)


(4.6
)


(2.7
)Total expenses


109.3



126.5



121.7Operating profit


38.7



40.3



45.6Interest expense, net


8.4



8.1



8.7Income before income taxes


30.3



32.2



36.9Income tax expense


11.5



12.8



13.8Net income

$
18.8


$
19.4


$
23.1Earnings per common share, basic:

$
0.74


$
0.76


$
0.81Earnings per common share, diluted:

$
0.74


$
0.76


$
0.80Weighted-average shares outstanding:Basic


25.3



25.6



28.6Diluted


25.4



25.7



28.8    F-3




---



##### Table of Contents



AFC
    Enterprises, Inc.
 Consolidated
    Statements of Changes in Shareholders DeficitFor Fiscal Years 2009, 2008 and 2007
    (In millions, except share data) Capital in





AccumulatedCommon Stock


Excess of





OtherNumber of





Par


Accumulated


ComprehensiveShares


Amount


Value


Deficit


Income (Loss)


TotalBalance at December 31, 2006


29,487,648


$
0.3


$
161.7


$
(194.4
)

$
1.2


$
(31.2
)Cumulative effect of liability for uncertain tax positions
    (Note 2)














2.6







2.6Net income














23.1







23.1Other comprehensive income:Net change in fair value of cash flow hedge (net of tax impact
    of $0.5 million)


















(0.9
)


(0.9
)Derivative loss realized in earnings during the period (net of
    tax impact of $0.1 million)


















(0.1
)


(0.1
)Total comprehensive income






















22.1Issuance of common stock under stock option plans


333,933







3.3











3.3Repurchases and retirement of shares


(2,496,030
)






(39.4
)










(39.4
)Excess tax benefits from stock-based compensation










0.9











0.9Special cash dividend forfeited














0.2







0.2Cancellation of shares


(33,916
)






(0.5
)










(0.5
)Issuance of restricted stock awards, net of forfeitures


64,470



















Stock-based compensation expense










1.7











1.7Balance at December 30, 2007


27,356,105



0.3



127.7



(168.5
)


0.2



(40.3
)Net income














19.4







19.4Other comprehensive income:Net change in fair value of cash flow hedge, (net of tax impact
    of $0.7 million)


















(1.3
)


(1.3
)Derivative loss realized in earnings during the period, net of
    tax


















0.1



0.1Total comprehensive income






















18.2Repurchases and retirement of shares


(2,120,401
)






(19.0
)










(19.0
)Excess tax liabilities from stock-based compensation










(0.5
)










(0.5
)Cancellation of shares


(31,031
)






(0.2
)










(0.2
)Issuance of restricted stock awards, net of forfeitures


90,300



















Stock-based compensation expense










2.5











2.5Balance at December 28, 2008


25,294,973



0.3



110.5



(149.1
)


(1.0
)


(39.3
)Net income














18.8







18.8Other comprehensive income:Net change in fair value of cash flow hedge (net of tax impact
    of $0.1 million)


















(0.2
)


(0.2
)Derivative loss realized in earnings during the period (net of
    tax impact of $0.4 million)


















0.7



0.7Total comprehensive income






















19.3Cancellation of shares


(32,914
)






(0.1
)










(0.1
)Issuance of restricted stock awards, net of forfeitures


193,858



















Stock-based compensation expense










1.9











1.9Balance at December 27, 2009


25,455,917


$
0.3


$
112.3


$
(130.3
)

$
(0.5
)

$
(18.2
)    F-4




---



##### Table of Contents



AFC
    Enterprises, Inc.
 Consolidated
    Statements of Cash FlowsFor Fiscal Years 2009, 2008 and 2007
    (In millions) 2009


2008


2007Cash flows provided by (used in) operating activities:Net income

$
18.8


$
19.4


$
23.1Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:Depreciation and amortization


4.4



6.3



6.9Asset write-downs


0.6



9.5



1.9Net gain on sale of assets


(3.3
)


(0.9
)


(0.3
)(Gain) loss on insurance recoveries related to asset damages, net


0.4



(0.5
)


(3.2
)Deferred income taxes


1.0







(0.5
)Non-cash interest, net


1.9



(0.1
)


(0.3
)Provision for credit losses


2.1



0.1



0.4Excess tax benefits from stock-based compensation










(0.9
)Stock-based compensation expense


1.9



2.5



1.7Change in operating assets and liabilities:Accounts receivable


(1.5
)






(0.5
)Prepaid income taxes


0.9



(0.4
)


7.8Other operating assets


0.4



0.8



0.3Accounts payable and other operating liabilities


(4.4
)


(7.0
)


5.1Net cash provided by operating activities


23.2



29.7



41.5Cash flows provided by (used in) investing activities:Capital expenditures


(1.4
)


(2.7
)


(10.0
)Proceeds from dispositions of property and equipment


7.9



3.8



0.3Property insurance proceeds


0.2







4.5Acquisition of franchised restaurants










(0.4
)Proceeds from notes receivable


11.0



0.8



0.8Net cash provided by (used in) investing activities


17.7



1.9



(4.8
)Cash flows provided by (used in) financing activities:Principal payments  2005 credit facility (term loan)


(35.9
)


(8.9
)


(6.9
)Borrowings under 2005 revolving credit facility






20.0



9.5Principal payments  2005 revolving credit facility


(0.5
)


(24.5
)


(4.5
)Principal payments  other notes


(0.2
)


(0.2
)


(0.1
)Special cash dividend






(0.5
)


(0.7
)Share repurchases






(19.0
)


(39.4
)Proceeds from exercise of employee stock options










3.3Excess tax benefits from stock-based compensation










0.9Debt issuance costs


(1.8
)






(0.2
)Other, net


(0.5
)


(1.4
)


(0.3
)Net cash used in financing activities


(38.9
)


(34.5
)


(38.4
)Net increase (decrease) in cash and cash equivalents


2.0



(2.9
)


(1.7
)Cash and cash equivalents at beginning of year


2.1



5.0



6.7Cash and cash equivalents at end of year

$
4.1


$
2.1


$
5.0    F-5




---



##### Table of Contents



AFC
    ENTERPRISES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Fiscal Years 2009, 2008 and 2007
  Note 1 
    Description
    of Business  ® ®
  Note 2 
    Summary
    of Significant Accounting Policies  Principles of Consolidation.
  Use of Estimates.
  Reclassifications.
      Fiscal Year.
  Codification.
  Cash and Cash Equivalents.
  Supplemental
    Cash Flow Information.
  (in millions)

2009


2008


2007Interest paid

$
6.6


$
8.9


$
7.1Income taxes paid, net


8.9



13.2



5.8Property acquired under capital lease obligations










0.9  F-6




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
  Accounts Receivable, Net.
  (in millions)

2009


2008


2007Balance, beginning of year

$
0.5


$
0.4


$
0.1Provisions for loss


1.9



0.1



0.4Write-offs


(0.3
)






(0.1
)Balance, end of year

$
2.1


$
0.5


$
0.4   Notes Receivable, Net.
    note-by-note
    Inventories. (first-in,
  Assets Held for Sale.
  Property and Equipment.
 F-7




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
      Goodwill, Trademarks, and Other Intangible
    Assets.
         F-8




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
  Debt Issuance Costs.
  Advertising Cooperative.
      Leases.
    Accumulated Other Comprehensive Income
    (Loss).
    (In millions)

2009


2008Net unrealized loss on an interest rate swap agreement

$
(0.1
)

$
(0.3
)Unrealized loss on interest rate swaps settled in cash


(0.4
)


(0.7
)Total accumulated other comprehensive loss

$
(0.5
)

$
(1.0
)    F-9




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
  Revenue Recognition  Sales by Company-Operated
    Restaurants.
  Revenue Recognition  Franchise Operations
  Rent and Other Revenues.
  Cash Consideration from Vendors.
  Gains and Losses Associated With
    Re-franchising.
      Research and Development.
  Foreign Currency
    Transactions.
  Income Taxes.
 F-10




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
        Stock-Based Compensation Expense.
    Subsequent Events.
  Derivative Financial Instruments.
 F-11




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
   Note 3 
    Recent
    Accounting Pronouncements That the Company Has Not Yet
    Adopted      Note 4 
    Other
    Current Assets  (in millions)

2009


2008Deferred tax assets

$
1.7


$
1.6Prepaid expenses and other current assets


2.2



3.6$
3.9


$
5.2   Note 5 
    Property
    and Equipment, Net  (in millions)

2009


2008Land

$
3.2


$
4.0Buildings and improvements


23.6



23.2Equipment


22.6



22.6Properties held for sale and other


0.1



0.149.5



49.9Less accumulated depreciation and amortization


(28.0
)


(24.6
)$
21.5


$
25.3    F-12




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
   Note 6 
    Trademarks
    and Other Intangible Assets, Net  (in millions)

2009


2008Non-amortizable
    intangible assets:Trademarks

$
42.0


$
42.0Other


0.6



0.642.6



42.6Amortizable intangible assets:Re-acquired franchise rights


7.1



7.1Accumulated amortization


(2.1
)


(1.5
)5.0



5.6$
47.6


$
48.2     Note 7 
    Other
    Long-Term Assets, Net  (in millions)

2009


2008Noncurrent notes receivable, net

$
0.5


$
11.6Debt issuance costs, net


1.7



1.1Other


1.1



0.7$
3.3


$
13.4   Note 8 
    Other
    Current Liabilities  (in millions)

2009


2008Accrued wages, bonuses and severances

$
4.2


$
3.1Accrued income taxes payable and income tax reserves


6.0



5.8Accrued interest


0.7



1.7Other


2.8



3.0$
13.7


$
13.6  F-13




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
   Note 9 
    Fair
    Value Measurements    Quoted Prices inActive Markets for





SignificantIdentical Asset or


Significant Other


UnobservableLiability


Observable Inputs


Inputs


Carrying(in millions)

(Level 1)


(Level 2)


(Level 3)


ValueDecember 27, 2009Financial AssetsCash equivalents

$
3.3


$



$



$
3.3Advertising cooperative assets, restricted


3.6











3.6Total assets at fair value

$
6.9


$



$



$
6.9Financial LiabilitiesInterest rate swap agreement (Note 10)

$



$
0.1


$



$
0.1Total liabilities at fair value

$



$
0.1


$



$
0.1December 28, 2008Financial AssetsCash equivalents

$
2.1


$



$



$
2.1Advertising cooperative assets, restricted


5.4











5.4Total assets at fair value

$
7.5


$



$



$
7.5Financial LiabilitiesInterest rate swap agreement (Note 10)

$



$
0.5


$



$
0.5Total liabilities at fair value

$



$
0.5


$



$
0.5    F-14




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
   Note 10 
    Long-Term
    Debt and Other Borrowings  (in millions)

2009


20082005 Credit Facility:Revolving credit facility

$



$
0.5Term B loan


78.3



114.2Capital lease obligations


1.6



1.6Other notes


2.7



2.982.6



119.2Less current portion


(1.3
)


(4.7
)$
81.3


$
114.5   2005 Credit Facility.
    
    The term loan and revolving credit facility maturity dates were
    extended by two years to May 2013 and May 2012, respectively.
    The revolving credit facility commitment was reduced from
    $60.0 million to $48.0 million.
    The applicable interest rate for the term loan and revolving
    credit facility was set at LIBOR plus 4.50%, with a minimum
    LIBOR of 2.50%.
    The Company must maintain a Total Leverage Ratio of 3.00 to 1 or
    less through the end of the first quarter of 2012 and 2.75 to 1
    or less thereafter.
    The Company must prepay (i) 50% of Consolidated Excess Cash
    Flow (as defined in the 2005 Credit Facility) for such fiscal
    year if the Total Leverage Ratio is greater than 2.00 to 1 on
    the last day of such fiscal year or (ii) 25% of
    Consolidated Excess Cash Flow for such year if the Total
    Leverage Ratio is equal to or less than 2.00 to 1.
    The Company is permitted to resume its common stock repurchase
    program once the Total Leverage Ratio is less than 1.75 to 1. As
    of December 27, 2009, the Companys Total Leverage
    Ratio was 1.95 to 1.
    To reduce interest rate risk, derivative instruments are
    required to be maintained on no less than 30% of the outstanding
    debt (see discussion below under the heading entitled
    Interest Rate Swap Agreements).     F-15




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
          Interest Rate Swap Agreements.
     F-16




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
  Fair
    Values of Derivative Instruments
  Derivative Liabilities(in millions)

Balance Sheet Location


12/27/09


12/28/08Interest rate swap agreements


Deferred credits and other long-term liabilities


$
0.1


$
0.5   The
    Effect of Derivative Instruments on the Statement of
    Operations
  Amount of Gain (Loss)





Amount of Gain (Loss)Recognized into AOCI





Reclassified from AOCI to IncomeLocation of Gain(Loss) Reclassified(in millions)

2009


2008


2007


from AOCI to Income


2009


2008


2007Interest rate swap agreements, net of tax

$
(0.2
)

$
(1.3
)

$
(0.9
)


Interest expense, net


$
(1.1
)

$
(0.1
)

$
0.2$
(0.2
)

$
(1.3
)

$
(0.9
)





$
(1.1
)

$
(0.1
)

$
0.2     Future Debt Maturities.
  (in millions)2010

$
1.32011


1.02012


19.72013


57.12014


0.3Thereafter


1.6$
81.0   Note 11 
    Leases   F-17




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
    Capital


Operating(in millions)

Leases


Leases2010

$
0.2


$
5.82011


0.2



5.82012


0.2



4.62013


0.2



4.32014


0.2



4.1Thereafter


3.4



52.1Future minimum lease payments


4.4



76.7Less amounts representing interest


(2.8
)


$
1.6


$
76.7       Note 12 
    Deferred
    Credits and Other Long-Term Liabilities  (in millions)

2009


2008Deferred franchise revenues

$
3.4


$
3.9Deferred gains on unit conversions


2.4



2.7Deferred rentals


4.0



4.7Above-market rent obligations


2.8



2.9Deferred income taxes


3.3



1.9Other


1.8



3.1$
17.7


$
19.2   Note 13 
    Common
    Stock  Share Repurchase Program.
   F-18




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
    Dividends.
  Note 14 
    Stock
    Option Plans  The 1996 Nonqualified Stock Option
    Plan.
  The 2002 Incentive Stock Plan.
  The 2006 Incentive Stock Plan.
        A Summary of Stock Option Plan
    Activity.
  F-19




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##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
  WeightedAverageRemaining


AggregateWeighted


Contractual


IntrinsicAverage


Term


Value(shares in thousands)

Shares


Exercise Price


(years)


(millions)Stock options:Outstanding at beginning of year


823


$
12.16Granted options


155



8.30Exercised options






Cancelled and expired options


(114
)


14.03Outstanding at end of year


864


$
11.22



4.4


$
0.1Exercisable at end of year


330


$
11.79



2.6


$
Shares available for future grants under the plans at end of year


2,175           2009


2008


2007


2007Black-


Black-


Monte


Black-Scholes


Scholes


Carlo


ScholesRisk-free interest rate


2.6
%


2.9
%


4.2
%


4.2
%Expected dividend yield


0.0
%


0.0
%


0.0
%


0.0
%Expected term (in years)


4.50



6.25



6.25



7.00Expected volatility


60.6
%


41.9
%


42.0
%


41.9
%    F-20




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##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
    WeightedAverageGrant Date(shares in thousands)

Shares


ValueUnvested stock options outstanding at beginning of period


405


$
5.41Granted


155



4.23Vested


(15
)


3.84Forfeited


(11
)


3.89Unvested stock options outstanding at end of period


534


$
5.15   Restricted
    Share Awards
      WeightedAverageGrantDate Fair(share awards in thousands)

Shares


ValueUnvested restricted share awards:Outstanding beginning of year


90


$
8.76Granted


194



8.29Vested


(86
)


8.80Cancelled


(8
)


7.85Outstanding end of year


190


$
8.31       Restricted
    Share Units
   F-21




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##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
      WeightedAverageGrantDate Fair(share awards in thousands)

Units


ValueUnvested restricted stock units:Outstanding beginning of year


74


$
12.70Granted


51



5.86Vested






Outstanding end of year


125


$
9.90     Note 15 
    401(k)
    Savings Plan    Note 16 
    Commitments
    and Contingencies  Supply Contracts. not-for-profit ®
     F-22




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##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
    Formula and Supply Agreements with Former
    Owner.
  King Features Agreements.
    Business Process Services.
  Information Technology
    Outsourcing.
  Employment Agreements.
 F-23




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##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
    Litigation.
  Insurance Programs.
  and/or
  Environmental Matters. and/or
  Foreign Operations.
  Significant Franchisee.
  Geographic Concentrations.
 F-24




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##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
   Note 17 
    Other
    Expenses (Income), Net  (in millions)

2009


2008


2007Net recoveries of directors and officers liability insurance
    claims and shareholder litigation

$



$
(12.9
)

$
(0.9
)Impairments and disposals of fixed assets


0.6



9.5



1.9(Gain) loss on insurance recoveries related to asset damages, net


0.4



(0.5
)


(3.2
)Income from business interruption insurance recoveries










(1.6
)Costs related to restaurant closures


0.2







0.8Net gain on sale of assets


(3.3
)


(0.9
)


(0.3
)Other






0.2



0.6$
(2.1
)

$
(4.6
)

$
(2.7
)               Note 18 
    Interest
    Expense, Net  (in millions)

2009


2008


2007Interest on debt, less capitalized amounts

$
7.5


$
8.1


$
9.0Amortization and write-offs of debt issuance costs


1.3



0.6



0.6Other debt related charges


0.5



0.6



0.4Interest income


(0.9
)


(1.2
)


(1.3
)$
8.4


$
8.1


$
8.7  F-25




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##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
   Note 19 
    Income
    Taxes    (in millions)

2009


2008


2007Income taxes in the statements of operations, net

$
11.5


$
12.8


$
13.8Income taxes charged (credited) to statements of
    shareholders deficit:Compensation expense for tax purposes less than (in excess of)
    amounts recognized for financial reporting purposes






0.5



(0.9
)Other comprehensive income


0.3



(0.7
)


(0.6
)Total

$
11.8


$
12.6


$
12.3     (in millions)

2009


2008


2007United States

$
24.6


$
26.6


$
31.8Foreign


5.7



5.6



5.1Total

$
30.3


$
32.2


$
36.9     (in millions)

2009


2008


2007Current income tax expense:Federal

$
8.7


$
10.5


$
11.9Foreign


0.9



0.9



0.8State


0.9



1.4



1.610.5



12.8



14.3Deferred income tax expense (benefit):Federal


1.0







(0.5
)State










1.0







(0.5
)$
11.5


$
12.8


$
13.8       2009


2008


2007Federal income tax rate


35.0
%


35.0
%


35.0
%State taxes, net of federal benefit


0.1



1.5



1.7Valuation allowance


2.1



0.8



0.9Provision to return adjustments


(0.1
)


0.2



(0.1
)Adjustments to estimated tax reserves


0.6



1.4



(0.5
)Non-deductible goodwill impairment






0.7



Other items, net


0.3



0.2



0.4Effective income tax benefit rate


38.0
%


39.8
%


37.4
%  F-26




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##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
      (in millions)

2009


2008Deferred tax assets:Deferred franchise fee revenue

$
2.3


$
2.6State net operating loss carry forwards


4.7



4.0Deferred rentals


2.9



3.1Deferred compensation


1.8



1.4Property, plant and equipment


1.1



1.5Allowance for doubtful accounts


1.0



0.5Insurance accruals


0.5



0.4Other accruals


1.0



1.7Reorganization costs


4.0



4.0Total gross deferred tax assets


19.3



19.2Deferred tax liabilities:Franchise value and trademarks


(16.2
)


(15.5
)Total gross deferred liabilities


(16.2
)


(15.5
)Valuation allowance


(4.7
)


(4.0
)Net deferred tax liability

$
(1.6
)

$
(0.3
)           (in millions)Balance as of December 28, 2008

$
4.7Gross additions related to current year


0.2Expirations of statutes of limitation


Balance as of December 27, 2009

$
4.9  F-27




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##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
      Note 20 
    Components
    of Earnings Per Share Computation  (in millions)

2009


2008


2007Net income

$
18.8


$
19.4


$
23.1Denominator for basic earnings per share  weighted
    average shares


25.3



25.6



28.6Dilutive employee stock options


0.1



0.1



0.2Denominator for diluted earnings per share


25.4



25.7



28.8  F-28




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##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
   Note 21 
    Segment
    Information  ® ®
  (in millions)

2009


2008


2007RevenuesFranchise operations(a)

$
90.6


$
88.5


$
87.3Company-operated restaurants


57.4



78.3



80.0$
148.0


$
166.8


$
167.3Operating profit before unallocated expensesFranchise operations

$
36.8


$
38.9


$
45.1Company-operated restaurants


4.2



3.1



4.741.0



42.0



49.8Less unallocated expensesDepreciation and amortization


4.4



6.3



6.9Other expenses (income), net


(2.1
)


(4.6
)


(2.7
)Operating profit

$
38.7


$
40.3


$
45.6Capital expendituresFranchise operations

$
0.4


$
0.2


$
0.6Company-operated restaurants


1.0



2.5



9.4$
1.4


$
2.7


$
10.0Goodwill  year endFranchise operations

$
8.9


$
8.9


$
8.9Company-operated restaurants


2.2



2.2



2.8$
11.1


$
11.1


$
11.7Total assets  year endFranchise operations

$
90.3


$
98.6


$
106.6Company-operated restaurants


26.3



33.4



48.4$
116.6


$
132.0


$
155.0   (a)
    
    Franchise operations revenues excludes 5% inter-segment royalties F-29




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##### Table of Contents



AFC
    ENTERPRISES, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    For Fiscal Years 2009, 2008 and
    2007  (Continued)
   Note 22 
    Quarterly
    Financial Data (Unaudited)  2009First(a)


Second


Third


Fourth(in millions, except per share data)

Quarter


Quarter


Quarter


QuarterResults of OperationsTotal revenues

$
47.9


$
35.7


$
31.9


$
32.5Operating profit


9.9



11.4



8.9



8.5Net income


5.0



6.4



3.4



4.0Basic earnings per common share


0.20



0.25



0.13



0.16Diluted earnings per common share


0.20



0.25



0.13



0.16   2008First(a)


Second


Third


Fourth(b)Quarter


Quarter


Quarter


QuarterResults of OperationsTotal revenues

$
53.3


$
39.3


$
38.3


$
35.9Operating profit


13.3



12.9



8.1



6.0Net income


6.4



6.6



4.0



2.4Basic earnings per common share


0.24



0.26



0.16



0.10Diluted earnings per common share


0.24



0.26



0.16



0.10   (a)
    
    The Companys first quarters for 2009 and 2008 contained
    sixteen weeks. The remaining quarters of 2009 and 2008 contained
    twelve weeks each.(b)
    
    Significant fourth quarter adjustments and unusual or
    infrequently incurred items recognized in 2008 include:
    $1.1 million in asset impairments of company-operated
    restaurants and $0.8 million of income recognized from
    insurance proceeds related to property damage and business
    interruption claims. F-30