##### 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 26, 2010ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission
    file 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
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 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 18, 2011Common stock, $0.01 par value per share

25,711,678 shares   Documents incorporated by reference:




---



##### 





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


Business


1Item 1A.


Risk Factors


8Item 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


37Item 8.


Financial Statements and Supplementary Data


37Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


37Item 9A.


Controls and Procedures


37Item 9B.


Other Information


38PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


39Item 11.


Executive Compensation


39Item 12.


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


39Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


39Item 14.


Principal Accountant Fees and Services


39PART IVItem 15.


Exhibits and Financial Statement Schedules


40EX-23.1EX-23.2EX-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 a Distinct, Relevant Brand offering a distinctive brand and menu with
    superior food at affordable prices.  
    During 2010, Popeyes ran national media advertising to promote
    its famous
    Bonafide®

    chicken and seafood offerings at compelling price points and to
    introduce two new innovative products, Popeyes Wicked Chicken
    and Cane Sweeeet Iced Tea. In addition, the Company announced
    that Popeyes Spicy and Mild
    Bonafide®

    bone-in fried chicken beat
    KFC®s

    Original
    Recipe®

    bone-in fried chicken in a national taste test. These marketing
    initiatives delivered strong guest counts and positive
    same-store sales for the second consecutive year.
    In 2011, Popeyes expects to continue promotion of its core
    chicken and seafood offerings and periodically introduce new,
    innovative menu offerings, while continuing to use national
    media advertising with Annie as its spokesperson.
    In 2010, Popeyes announced multi-year agreements with two new
    marketing partners, The
    Coca-Cola
    Company and Dr Pepper Snapple Group. As a result of the new
    agreements, in 2011 Popeyes will be implementing a unified
    strategy for fountain beverages that is designed to be more
    exciting for its guests and more profitable for its restaurants.
    Similar to its U.S. initiatives, in 2011 the Company is
    working with its international franchisees to implement
    distinctive new product offerings and core menu value promotions
    to drive traffic gains.  
    Run Great Restaurants improving
    restaurant operations and Popeyes guest experience by
    delighting the guest with service as distinctive as our
    food.  
    Popeyes restaurants continue to improve their Guest Experience
    Monitor (GEM) scores. Since the implementation of Popeyes new
    Speed Of Service (SOS) program 18 months ago, GEM scores
    for % Delighted have increased more than
    8 percentage points and Speed of Service scores
    have increased more than 12 percentage points.
    Additionally, by year end 2010, Popeyes had approximately 1,000
    restaurants reporting drive-thru times on a weekly basis, with
    approximately 60% of those restaurants reporting drive-thru
    times at the Companys SOS target of 180 seconds or less.
    In 2011, Popeyes is implementing the same core operating systems
    to measure guest service and restaurant operations across the
    Companys international markets.  
    Strengthen Unit Economics reducing
    restaurant operating costs and increasing restaurant
    profitability while maintaining excellent food quality for our
    guests.  
    Popeyes continues to partner with its franchisees and purchasing
    cooperative to increase restaurant profitability while
    maintaining a high quality food advantage. In 2010, Popeyes
    restaurants achieved approximately $16 million in food cost
    savings related to the successful renegotiation of vendor
    contracts, introduction of alternate suppliers, product
    specification enhancements, logistics/distribution optimization,
    and declines in commodity costs. These initiatives helped
    deliver one full percentage point of restaurant operating profit
    margin improvement compared to 2009. 2




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##### Table of Contents




    Like many in the restaurant industry, in 2011 management expects
    the Popeyes system to experience a
    2-3%
    increase in commodity costs. Management plans to offset these
    increases with additional supply chain cost savings, selective
    menu pricing, and better in-restaurant controls.
    In 2011, the Company will also be applying the same focus on
    profit margin to its international markets, where food costs are
    typically higher. Initiatives are already underway to reduce
    cost by region to make Popeyes restaurant cost structure
    more competitive around the globe.  
    Ramp Up Unit Growth building more
    restaurants across the U.S. and abroad with superior
    profits and investment returns.  
    The Companys global development pipeline for new unit
    openings continues to strengthen, and in 2010 the Popeyes system
    opened 106 new restaurants and closed 67 underperforming units,
    yielding 39 net restaurants, as compared to 95 openings and
    81 closings in 2009.
    Since the implementation of the Companys domestic site
    selection modeling tool in 2008, Popeyes new domestic
    restaurants are opening at significantly stronger sales volumes
    than the system average. Additionally, those restaurants which
    have been open more than two years are sustaining those sales
    volumes in their second year of operation. Management believes
    this demonstrates the quality of the Popeyes unit economic model
    and upgraded development processes, and these improvements will
    allow the Company to begin accelerating new unit growth in the
    U.S.
    As the Company builds similar development capabilities
    internationally, in 2011 management expects to maintain its
    international new unit openings at approximately 60 restaurants,
    comparable to the opening pace it delivered in 2010.  Our
    Agreements with Popeyes Franchisees
    Domestic Development Agreements.
  International Development
    Agreements. sub-franchising
  Domestic Franchise Agreements.
    International Franchise Agreements.
 3




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




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




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Competition
    Government
    Regulation
          Enterprise
    Risk Management
    Environmental
    Matters
  and/or
 6




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Available
    Information
  Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330 http://www.sec.gov. (404) 459-4450.
 7




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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.
    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.
  sub-franchises
 8




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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.
      If the
    cost of chicken increases, our cost of sales will increase and
    our operating results could be adversely affected.
    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.
    Adverse
    publicity related to food safety and quality could result in a
    loss of customers and reduce our revenues.
   9




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##### Table of Contents



multi-unit
  Changes
    in consumer preferences and demographic trends could result in a
    loss of customers and reduce our revenues.
    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;
    increases in labor costs;
    increases in the cost of commodities and paper products;
    inclement weather patterns; and
    economic conditions generally, and in each of the markets in
    which we, or our franchisees, are located.   10




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##### Table of Contents



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;
    mandated
    health-care
    coverage;
    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.
    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.
   11




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Our
    2010 Credit Facility may limit our ability to expand our
    business, and our ability to comply with the repayment
    requirements, covenants, tests and restrictions contained in the
    2010 Credit Facility may be affected by events that are beyond
    our control.
    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


4



21



25Tennessee


2



7



9Mississippi


0



3



3Arkansas


0



1



1Total


6



32



38               Item 3.
    LEGAL
    PROCEEDINGS    Item 4.
    RESERVED 13




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##### Table of Contents



Item 4A.
    EXECUTIVE
    OFFICERS    Name

Age

PositionCheryl A. Bachelder


54


President and Chief Executive OfficerH. Melville Hope, III


49


Senior Vice President and Chief Financial OfficerRichard H. Lynch


56


Chief Marketing OfficerHarold M. Cohen


47


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


48


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     2010

2009(Dollars per share)

High

Low

High

LowFirst Quarter

$
11.27


$
7.75


$
7.09


$
3.72Second Quarter

$
11.58


$
8.56


$
7.37


$
4.96Third Quarter

$
12.80


$
8.62


$
9.10


$
6.26Fourth Quarter

$
15.34


$
12.12


$
9.13


$
7.58   Share
    Repurchases
        Shareholders
    of Record
    Dividend
    Policy
   15




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


12/25/2005


12/31/2006


12/30/2007


12/28/2008


12/27/2009


12/26/2010AFC Enterprises, Inc.


$
100



$
116



$
69



$
29



$
55



$
97S&P 500 Index


$
100



$
114



$
121



$
73



$
97



$
110Peer Group Index


$
100



$
124



$
140



$
112



$
131



$
181   9/29/08,
 16




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##### Table of Contents



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

2010


2009


2008


2007


2006Summary of continuing operations:Revenues:(1)Sales by company-operated restaurants

$
52.7


$
57.4


$
78.3


$
80.0


$
65.2Franchise revenues(2)


89.4



86.0



84.6



82.8



82.6Rent and other revenues


4.3



4.6



3.9



4.5



5.2Total revenues


146.4



148.0



166.8



167.3



153.0Expenses:Restaurant employee, occupancy and other expenses


25.8



29.5



41.4



40.7



33.7Restaurant food, beverages and packaging


16.8



18.9



27.1



27.3



21.3Rent and other occupancy expenses


2.1



2.6



2.4



2.3



2.7General and administrative expenses


56.4



56.0



53.9



47.2



45.4Depreciation and amortization


3.9



4.4



6.3



6.9



6.4Other expenses (income), net(3)


0.2



(2.1
)


(4.6
)


(2.7
)


(1.8
)Total expenses


105.2



109.3



126.5



121.7



107.7Operating profit


41.2



38.7



40.3



45.6



45.3Interest expense, net(4)


8.0



8.4



8.1



8.7



11.1Income before income taxes


33.2



30.3



32.2



36.9



34.2Income tax expense


10.3



11.5



12.8



13.8



12.0Net income

$
22.9


$
18.8


$
19.4


$
23.1


$
22.2Earnings per common share, basic

$
0.91


$
0.74


$
0.76


$
0.81


$
0.75Earnings per common share, diluted

$
0.90


$
0.74


$
0.76


$
0.80


$
0.74Weighted average shares outstanding:Basic


25.3



25.3



25.6



28.6



29.5Diluted


25.5



25.4



25.7



28.8



29.8Summary of cash flow data:Special cash dividend

$



$



$
0.5


$
0.7


$
0.7Share repurchases










19.0



39.4



20.3Year-end balance sheet data:Total assets

$
123.9


$
116.6


$
132.0


$
155.0


$
163.1Total debt(5)


66.0



82.6



119.2



132.8



134.0      (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 2010
    revenues of $0.3 million as compared to 2009 (net of
    franchise royalties earned), and 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 2010 revenues of
    $6.2 million (net of franchise 17




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##### Table of Contents



royalties earned) as compared to 2009 and a decrease in 2009
    revenues of $6.8 million (net of franchise royalties
    earned) as compared to 2008.  (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 2009
    revenue of $9.2 million (net of franchise royalties earned)
    compared to 2008 decrease in 2008 revenues of approximately
    $4.0 million (net of franchise royalties earned) as
    compared to 2007.  (e)
    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.  (f)
    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 2007 revenues by approximately $5.3 million as
    compared to 2006 (net of lost franchise revenues attributable to
    these restaurants).  (g)
    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, the consolidation of a VIE
    increased sales by company-operated restaurants by approximately
    $1.2 million.  (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
    $1.811 billion in 2010, $1.716 billion in 2009,
    $1.663 billion in 2008, $1.651 billion in 2007, and
    $1.661 billion in 2006. 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)
    
    Factors that impact the comparability of Other expenses
    (income), net for the years presented include:  (a)
    During 2010 and 2009, there were no significant expenses
    (income) associated with shareholder litigation. During 2008,
    2007, and 2006, our expenses (income) associated with litigation
    related costs (proceeds) were approximately
    $(12.9) million, $(0.9) million, and
    $(0.3) 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 2010, 2009, 2008, 2007, and 2006, impairments and
    disposals of fixed assets were approximately $0.7 million,
    $0.6 million, $9.5 million, $1.9 million, and
    $0.1 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.  (d)
    During 2006, 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. During 2007, the Company also recognized
    approximately $4.8 million of income from insurance
    proceeds related to property damage and business interruption
    claims.  (4)
    
    During 2010 we expensed $0.6 million as a component of
    Interest expense, net in connection with the re-financing of our
    new credit facility. During 2009 we expensed $1.9 million
    as a component of Interest expense, 18




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net in connection with the third amendment and restatement of
    the 2005 Credit Facility. See Note 9 for a description of
    the amendment and restatement transaction.(5)
    
    Total debt includes the long-term and current portions of our
    debt facilities, capital lease obligations, outstanding lines of
    credit.  Summary
    of System-Wide Data
    2010


2009


2008


2007


2006Global system-wide sales increase(1)


5.1
%


1.8
%


0.6
%


0.3
%


7.0
%Total domestic same-store sales increase (decrease)


2.5
%


0.6
%


(2.2
)%


(2.3
)%


1.6
%International same-store sales increase (decrease)


3.1
%


1.9
%


4.1
%


1.1
%


(3.2
)%Total global same-store sales increase (decrease)(2)


2.6
%


0.7
%


(1.7
)%


(2.0
)%


1.1
%Company-operated restaurants (all domestic)Restaurants at beginning of year


37



55



65



56



32New restaurant openings


1



0



1



5



3Restaurant conversions, net(3)


0



(16
)


(11
)


1



12Permanent closings


0



(2
)


(3
)


(3
)


(3
)Temporary (closings)/re-openings, net(4)


0



0



3



6



12Restaurants at end of year


38



37



55



65



56Franchised restaurants (domestic and international)Restaurants at beginning of year


1,906



1,867



1,840



1,822



1,796New restaurant openings


105



95



139



119



139Restaurant conversions, net(3)


0



16



11



(1
)


(12
)Permanent closings


(67
)


(79
)


(117
)


(106
)


(93
)Temporary (closings)/re-openings, net(4)


(5
)


7



(6
)


6



(8
)Restaurants at end of year


1,939



1,906



1,867



1,840



1,822Total system restaurants


1,977



1,943



1,922



1,905



1,878New franchised restaurant openingsDomestic


44



39



72



77



97International


61



56



67



42



42Total new franchised restaurant openings


105



95



139



119



139Franchised restaurantsDomestic


1,542



1,539



1,527



1,518



1,503International


397



367



340



322



319Restaurants at end of year


1,939



1,906



1,867



1,840



1,822   (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. 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 2010 Results
    
    Reported net income was $22.9 million, or $0.90 per diluted
    share, compared to $0.74 per diluted share last year. Adjusted
    earnings per diluted share were $0.86, consistent with previous
    guidance, compared to $0.74 last year, an increase of 16%.
    Adjusted earnings per diluted share is a supplemental non-GAAP
    measure of performance. See the heading entitled
    Managements Use of Non-GAAP Financial
    Measures.
    Total system-wide sales increased 5.1%, compared to a 1.8%
    increase in 2009.
    Global same-store sales increased 2.6%, compared to a 0.7%
    increase last year. Total domestic same-store sales increased
    2.5% compared to a 0.6% increase in 2009. According to
    independent data, Popeyes domestic same-store sales outpaced
    both the QSR and chicken QSR categories for the second
    consecutive year. International same-store sales were positive
    for the fourth year in a row, with an increase of 3.1% in 2010
    compared to a 1.9% increase in 2009.
    The Popeyes system opened 106 restaurants and permanently closed
    67 restaurants, resulting in 39 net openings, compared to
    14 net openings in 2009.
    Company-operated restaurant operating profit margin was 19.2% of
    sales, an increase of 350 basis points over last year. This
    improvement was primarily a result of supply chain savings,
    declines in commodity costs, higher same-store sales, and the
    re-franchising of lower performing company-operated restaurants
    in 2009. Company-operated restaurant operating profit margin is
    a supplemental non-GAAP measure of performance. See the heading
    entitled Managements Use of Non-GAAP Financial
    Measures.
    Operating EBITDA of $45.3 million was 30.9% of total
    revenues, compared to Operating EBITDA last year of
    $41.0 million, at 27.7% of total revenues. The
    Companys Operating EBITDA as a percentage of total
    revenues remains among the highest in the restaurant industry.
    Operating EBITDA is a supplemental non-GAAP measure of
    performance. See the heading entitled Managements
    Use of Non-GAAP Financial Measures.
    As previously announced, on December 23, 2010, the Company
    completed a new five-year $100 million re-financing,
    comprised of a $40 million term loan and a $60 million
    revolver. At closing, $22 million was drawn on the
    revolver. The Company expects to benefit from significantly
    lower interest expense over the term of the new facility  2010
    Same-Store Sales
  ®
 20




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##### Table of Contents



Form 10-K.
      2010 Unit
    Growth
      Factors
    Affecting Comparability of Consolidated Results of Operations:
    2010, 2009 and 2008
    
    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 2010 revenues of $6.5 million (net of
    franchise royalties earned) as compared to 2009, a decrease in
    2009 revenues of $19.1 million (net of franchise royalties
    earned) as compared to 2008.
    During 2009 we sold 10 real estate properties for a gain of
    approximately $3.6 million.
    During 2008, our income associated with litigation related
    proceeds was $12.9 million.
    During 2010, 2009, and 2008, impairments and disposals of fixed
    assets were $0.7 million, $0.6 million, and
    $9.5 million, respectively.
    During 2010 we expensed $0.6 million as a component of
    Interest expense, net in connection with the re-financing of our
    new credit facility. 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 9 for a description of the amendment and restatement
    transaction.
    During 2010, we recorded a tax benefit of $1.4 million,
    related to the completion of a federal income tax audit for
    years 2004 and 2005.  Comparisons
    of Fiscal Years 2010 and 2009
  Sales by
    Company-Operated Restaurants
   21




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##### Table of Contents



Franchise
    Revenues
      Rent and
    Other Revenues
    Company-operated
    Restaurant Expenses
    Rent and
    Other Occupancy Expenses
    General
    and Administrative Expenses
      
    a $2.7 million increase in personnel expenses primarily due
    to stock-based compensation expense, franchisee support and
    other personnel related expenses,
    $1.0 million in attorney fees associated with litigation
    initiated by the company which resulted in settlement and the
    renegotiation of an important supply agreement with a key
    supplier of proprietary ingredients and products,
    $1.0 million increase in international expenses including
    salary and personnel related costs, travel, and professional
    fees, and
    a $2.0 million increase in travel, business conference
    expenses and other general and administrative costs,    
    $3.5 million decrease in national media advertising
    expenses, and
    $2.8 million lower provision for credit losses.   22




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##### Table of Contents



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

2010


2009


Fluctuation


PercentFranchise operations

$
39.7


$
36.8


$
2.9



7.9
%Company-operated restaurants


5.6



4.2



1.4



33.0
%Operating profit before unallocated expenses


45.3



41.0



4.3



10.5
%Less unallocated expenses:Depreciation and amortization


3.9



4.4



0.5



11.4
%Other expenses (income), net


0.2



(2.1
)


(2.3
)


(109.5
)%Total

$
41.2


$
38.7


$
2.5



6.5
%       Interest
    Expense, Net
    Income
    Tax Expense
   23




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##### Table of Contents



Comparisons
    of Fiscal Years 2009 and 2008
  Sales by
    Company-Operated Restaurants
      Franchise
    Revenues
    Rent and
    Other Revenues
    Company-operated
    Restaurant Expenses
    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. 24




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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
)%        25




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##### Table of Contents



Interest
    Expense, Net
    Income
    Tax Expense
    Liquidity
    and Capital Resources
    
    Cash flows generated from our operating activities, and
    Borrowings under our 2010 Credit Facility.              
    reinvestment in core business activities that promote the
    Companys strategic initiatives,
    repurchase of shares of our common stock (subject to the
    restrictions under our 2010 Credit Facility) and
    reduction of long-term debt.     26




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##### Table of Contents



Operating
    and Financial Outlook for 2011
    120-140
  60-80 40-80 net
  $1-$2 million
     27




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##### Table of Contents



3-year 12-13%.
  Long Term
    Guidance
    Contractual
    Obligations
    There-(In millions)

2011


2012


2013


2014


2015


after


TotalLong-term debt, excluding capital leases(1)

$
4.0


$
5.2


$
6.0


$
6.3


$
41.8


$
1.3


$
64.6Interest on long-term debt, excluding capital leases(1)


1.5



1.8



1.6



1.5



1.2



0.5



8.1Leases(2)


6.0



4.7



4.5



4.2



3.9



51.5



74.8Copeland formula agreement(3)


3.1



3.1



3.1



3.1



3.1



40.0



55.5King Features agreements(3)


1.1



1.1



















2.2Information technology outsourcing(3)


1.6



1.7



















3.3Business process services(3)


1.5



0.5



















2.0Total(4)

$
18.8


$
18.1


$
15.2


$
15.1


$
50.0


$
93.3


$
210.5   (1)
    
    For variable rate debt, the Company estimated average
    outstanding balances for the respective periods and applied
    interest rates in effect at December 29, 2010. See
    Note 9 to our Consolidated Financial Statements for
    information concerning the terms of our 2010 Credit Facility, as
    amended and restated, and the 2005 interest rate swap agreements.(2)
    
    Of the $74.8 million of minimum lease payments,
    $70.7 million of those payments relate to operating leases
    and the remaining $4.1 million of payments relate to
    capital leases. See Note 10 to our Consolidated Financial
    Statements.(3)
    
    See Note 15 to our Consolidated Financial Statements.(4)
    
    We have not included in the contractual obligations table
    approximately $2.1 million for uncertain tax positions we
    have taken or expect to be taken on a tax return. 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. 28




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##### Table of Contents



Share
    Repurchase Program
      Capital
    Expenditures
              Off-Balance
    Sheet Arrangements
    Long Term
    Debt
  2010 Credit Facility.
    
    The term loan and revolving credit facility maturity date is
    December 23, 2015
    The Company must maintain a Total Leverage Ratio of
    £
    2.75 to 1.
    The initial interest rate is LIBOR plus 250 basis points. 29




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##### Table of Contents




    The Company must maintain a Minimum Fixed Charge Coverage Ratio
    of
    3
    1.25 to 1.
    The Company may repurchase and retire its common shares at any
    time the Total Leverage Ratio is less than 2.00 to 1.
    The Company may make Permitted Acquisitions at any time the
    Total Leverage Ratio is less than 2.50 to 1.            2005 Credit Facility.
     30




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##### Table of Contents



Interest Rate Swap Agreements
        Impact of
    Inflation
    Tax
    Matters
    Market
    Risk
    Commodity Market Risk.
  not-for-profit
 31




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##### Table of Contents



Foreign Currency Exchange Rate Risk.
    Interest Rate Risk.
  Critical
    Accounting Policies and Estimates
  and/or
  Impairment of Long-Lived Assets.
    Impairment of Goodwill and
    Trademarks.
 32




---



##### Table of Contents



Fair Value Measurements.
  Level 1
    Inputs based upon quoted prices in active markets for identical
    assets.Level 2
    Inputs other than quoted prices included within Level 1
    that are observable for the asset, either directly or indirectly.Level 3
    Inputs that are unobservable for the asset.  Allowances for Accounts and Notes Receivable and
    Contingent Liabilities. note-by-note
    Leases.
  Deferred Tax Assets and Tax
    Reserves.
   33




---



##### Table of Contents



Stock-Based Employee Compensation.
  Derivative Financial Instruments.
    Recent
    Accounting Standards
   34




---



##### Table of Contents



Managements
    Use of Non-GAAP Financial Measures
    Adjusted
    earnings per diluted share: Calculation and Definition
    (in millions, except per share data)


Fiscal 2010



Fiscal 2009Net income


$
22.9



$
18.8Other expense (income), net


$
0.2



$
(2.1
)Interest expense associated with credit facility


$
0.6



$
1.9Tax effect


$
(0.3
)


$
0.1Tax audit benefit


$
(1.4
)



Adjusted net income


$
22.0



$
18.7Adjusted earnings per diluted share


$
0.86



$
0.74Weighted-average diluted shares outstanding



25.5




25.4   Operating
    EBITDA: Calculation and Definition
   35




---



##### Table of Contents



(dollars in millions)


Fiscal 2010



Fiscal 2009Net income


$
22.9



$
18.8Interest expense, net


$
8.0



$
8.4Income tax expense


$
10.3



$
11.5Depreciation and amortization


$
3.9



$
4.4Other expenses (income), net


$
0.2



$
(2.1
)Operating EBITDA


$
45.3



$
41.0Total Revenues


$
146.4



$
148.0Operating EBITDA as a percentage of Total Revenues



30.9
%



27.7
%   Company-Operated
    Restaurant Operating Profit Margins: Calculation and
    Definition
    (dollars in millions)


Fiscal 2010



Fiscal 2009Sales by company-operated restaurants


$
52.7



$
57.4Restaurant employee, occupancy and other expenses


$
(25.8
)


$
(29.5
)Restaurant food, beverages and packaging


$
(16.8
)


$
(18.9
)Company-operated restaurant operating profit


$
10.1



$
9.0Company-operated restaurant operating profit margins as a
    percentage of sales by company-operated restaurants



19.2
%



15.7
%   Forward-Looking
    Statements
  Form 10-K Form 10-K
 36




---



##### Table of Contents



Form 10-K
  Item 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Item 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Page F-1
  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  Rule 13a-15(f) 15d-15(f)
 37




---



##### Table of Contents



Internal Control-Integrated Framework
  Page F-1
  (d)
    Changes
    in Internal Control Over Financial Reporting    Item 9B.
    OTHER
    INFORMATION   38




---



##### 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   39




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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-1Report of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of
    December 26, 2010 and December 27, 2009


F-3Consolidated Statements of Operations for Fiscal
    Years 2010, 2009, and 2008


F-4Consolidated Statements of Changes in
    Shareholders Deficit for Fiscal Years 2010, 2009, and
    2008


F-5Consolidated Statements of Cash Flows for Fiscal
    Years 2010, 2009, and 2008


F-6Notes to the Consolidated Financial Statements


F-7     (b)
    Exhibits  ExhibitNumber

Description3
.1(c)

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

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

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(d)

Licensing Agreement dated March 11, 1976 between King Features
    Syndicate Division of The Hearst Corporation and A.
    Copeland Enterprises, Inc. as amended through November 29, 2009.10
.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.* 40




---



##### Table of Contents



ExhibitNumber

Description10
.14(a)

1996 Nonqualified Performance Stock Option Plan 
    General of AFC, effective as of April 11, 1996.*10
.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(d)

AFC Enterprises, Inc. Annual Executive Bonus Program.*10
.35(h)

Royalty and Supply Agreement dated July 15, 2010 between the
    Company and Diversified Foods and Seasoning, Inc.10
.36(o)

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

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

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(p)

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

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

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

Employment Agreement dated as of March 14, 2007 between AFC
    Enterprises, Inc. and James W. Lyons.* 41




---



##### Table of Contents



ExhibitNumber

Description10
.49(q)

Employment Agreement dated as of March 14, 2007 between AFC
    Enterprises, Inc. and Robert Calderin.*10
.50(j)

Credit Agreement dated as of December 23, 2010.10
.51(r)

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

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

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

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(t)

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

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

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

Employment Agreement effective as of April 20, 2009 between the
    Company and Ralph Bower.*10
.59(k)

Indemnification Agreement by and between the Company and
    Krishnan Anand dated November 2, 2010.*11
.1**

Statement regarding computation of per share earnings.23
.1

Consent of PricewaterhouseCoopers LLP23
.2

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 19 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.(b)
    
    Filed as an exhibit to the
    Form 10-K
    of AFC for the fiscal year ended December 28, 2008 on
    March 11, 2009 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 10-Q
    of AFC for the quarter ended April 18, 2010 on May 26,
    2010 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. 42




---



##### Table of Contents



(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 10-Q
    of AFC for the quarter ended July 11, 2010 on
    August 18, 2010 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 on December 29, 2010 and incorporated by
    reference herein.(k)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed on November 3, 2010 and incorporated by
    reference herein.(l)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed on March 13, 2008 and incorporated by
    reference herein(m)
    
    Filed as an exhibit to the
    Form 10-K
    of AFC for the fiscal year ended December 28, 2003, on
    March 29, 2004 and incorporated by reference herein.(n)
    
    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.(o)
    
    Filed as an exhibit to the
    Form 10-K
    of AFC for the fiscal year ended December 26, 2004 on
    March 28, 2005 and incorporated by reference herein.(p)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed November 29, 2006 and incorporated by
    reference herein.(q)
    
    Filed as an exhibit to the
    Form 10-K
    of AFC for the fiscal year ended December 31, 2006 and
    incorporated by reference herein.(r)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed November 7, 2007 and incorporated by reference
    herein.(s)
    
    Filed as an exhibit to the
    Form 8-K
    of AFC filed October 12, 2007 and incorporated by reference
    herein.(t)
    
    Filed as an exhibit to the
    Form 10-Q
    of AFC for the quarter ended October 5, 2008 on
    November 12, 2008 and incorporated by reference herein.(u)
    
    Filed an exhibit to the
    Form 8-K
    of AFC filed on April 16, 2008 and incorporated by
    reference herein.(v)
    
    Filed as an Exhibit to the
    Form 8-K
    of AFC filed on August 20, 2009 and incorporated by
    reference herein.(w)
    
    Filed as an Exhibit to the
    form 8-K
    of AFC filed on April 21, 2009 and incorporated by
    reference herein. 43




---



##### 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 9, 2011/s/  H.
    Melville HopeH.
    Melville Hope

Chief Financial Officer (Principal Financial and Accounting
    Officer)

March 9, 2011/s/  John
    M. Cranor, IIIJohn
    M. Cranor, III

Director, Chairman of the Board

March 9, 2011/s/  Krishnan
    AnandKrishnan
    Anand

Director

March 9, 2011/s/  Victor
    Arias, Jr.Victor
    Arias, Jr.

Director

March 9, 2011/s/  Carolyn
    H. ByrdCarolyn
    H. Byrd

Director

March 9, 2011/s/  John
    F. HoffnerJohn
    F. Hoffner

Director

March 9, 2011/s/  R.
    William Ide, IIIR.
    William Ide, III

Director

March 9, 2011/s/  Kelvin
    J. PenningtonKelvin
    J. Pennington

Director

March 9, 2011  44




---



##### Table of Contents



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




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM               F-2




---



##### Table of Contents



AFC
    Enterprises, Inc.Consolidated Balance Sheets As of December 26, 2010, and
    December 27, 2009
    (In millions, except share data)
  2010


2009Current assets:Cash and cash equivalents

$
15.9


$
4.1Accounts and current notes receivable, net


5.6



9.1Other current assets


4.3



3.9Advertising cooperative assets, restricted


16.1



16.0Total current assets


41.9



33.1Long-term assets:Property and equipment, net


21.2



21.5Goodwill


11.1



11.1Trademarks and other intangible assets, net


47.0



47.6Other long-term assets, net


2.7



3.3Total long-term assets


82.0



83.5Total assets

$
123.9


$
116.6Current liabilities:Accounts payable

$
4.8


$
4.8Other current liabilities


7.6



13.7Current debt maturities


4.0



1.3Advertising cooperative liabilities


16.1



16.0Total current liabilities


32.5



35.8Long-term liabilities:Long-term debt


62.0



81.3Deferred credits and other long-term liabilities


20.2



17.7Total long-term liabilities


82.2



99.0Commitments and contingenciesShareholders equity (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; 25,685,705 and 25,455,917 shares issued and
    outstanding at the end of fiscal years 2010 and 2009,
    respectively)


0.3



0.3Capital in excess of par value


116.4



112.3Accumulated deficit


(107.4
)


(130.3
)Accumulated other comprehensive loss


(0.1
)


(0.5
)Total shareholders equity (deficit)


9.2



(18.2
)Total liabilities and shareholders equity (deficit)

$
123.9


$
116.6    F-3




---



##### Table of Contents



AFC
    Enterprises, Inc.Consolidated Statements of
    Operations For Fiscal Years 2010, 2009, and 2008
    (In millions, except per share data)
  2010


2009


2008Revenues:Sales by company-operated restaurants

$
52.7


$
57.4


$
78.3Franchise revenues


89.4



86.0



84.6Rent and other revenues


4.3



4.6



3.9Total revenues


146.4



148.0



166.8Expenses:Restaurant employee, occupancy and other expenses


25.8



29.5



41.4Restaurant food, beverages and packaging


16.8



18.9



27.1Rent and other occupancy expenses


2.1



2.6



2.4General and administrative expenses


56.4



56.0



53.9Depreciation and amortization


3.9



4.4



6.3Other expenses (income), net


0.2



(2.1
)


(4.6
)Total expenses


105.2



109.3



126.5Operating profit


41.2



38.7



40.3Interest expense, net


8.0



8.4



8.1Income before income taxes


33.2



30.3



32.2Income tax expense


10.3



11.5



12.8Net income

$
22.9


$
18.8


$
19.4Earnings per common share, basic:

$
0.91


$
0.74


$
0.76Earnings per common share, diluted:

$
0.90


$
0.74


$
0.76Weighted-average shares outstanding:Basic


25.3



25.3



25.6Diluted


25.5



25.4



25.7    F-4




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##### Table of Contents



AFC
    Enterprises, Inc.Consolidated Statements of Changes
    in Shareholders Equity (Deficit)For Fiscal Years 2010, 2009, and 2008
    (In millions)
  Capital in





AccumulatedCommon Stock


Excess of





OtherNumber of





Par


Accumulated


ComprehensiveShares


Amount


Value


Deficit


(Loss)


TotalBalance 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
)Net income














22.9







22.9Other comprehensive income:Derivative loss realized in earnings during the period (net of
    tax impact of $0.2 million)


















0.4



0.4Total comprehensive income






















23.3Issuance of common stock under stock option plans


137,775







1.5











1.5Issuance of restricted stock awards, net of forfeitures


92,013







(0.1
)










(0.1
)Stock-based compensation expense










2.7











2.7Balance at December 26, 2010


25,685,705


$
0.3


$
116.4


$
(107.4
)

$
(0.1
)

$
9.2    F-5




---



##### Table of Contents



AFC
    Enterprises, Inc.Consolidated Statements of Cash
    FlowsFor Fiscal Years 2010, 2009, and 2008
    (In millions)
  2010


2009


2008Cash flows provided by (used in) operating activities:Net income

$
22.9


$
18.8


$
19.4Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:Depreciation and amortization


3.9



4.4



6.3Asset write-downs


0.7



0.6



9.5Net gain on sale of assets


(0.5
)


(3.3
)


(0.9
)(Gain) loss on insurance recoveries related to asset damages, net






0.4



(0.5
)Deferred income taxes


1.5



1.0



Non-cash interest expense, net


1.7



1.9



(0.1
)Provision for credit losses (recoveries)


(0.5
)


2.1



0.1Stock-based compensation expense


2.7



1.9



2.5Change in operating assets and liabilities:Accounts receivable


1.5



(1.5
)


Other operating assets


(1.7
)


1.3



0.4Accounts payable and other operating liabilities


(3.8
)


(4.4
)


(7.0
)Net cash provided by operating activities


28.4



23.2



29.7Cash flows provided by (used in) investing activities:Capital expenditures


(3.2
)


(1.4
)


(2.7
)Proceeds from dispositions of property and equipment






7.9



3.8Proceeds from notes receivable and other investing activities


3.0



11.2



0.8Net cash provided by (used in) investing activities


(0.2
)


17.7



1.9Cash flows provided by (used in) financing activities:Principal payments  2005 credit facility (term loan)


(78.3
)


(35.9
)


(8.9
)Borrowings under 2005 revolving credit facility










20.0Principal payments  2005 revolving credit facility






(0.5
)


(24.5
)Borrowings under 2010 credit facility (term loan)


40.0







Borrowings under 2010 revolving credit facility


22.0







Special cash dividend










(0.5
)Share repurchases










(19.0
)Proceeds from exercise of employee stock options


1.5







Debt issuance costs


(1.2
)


(1.8
)


Other financing activities, net


(0.4
)


(0.7
)


(1.6
)Net cash used in financing activities


(16.4
)


(38.9
)


(34.5
)Net increase (decrease) in cash and cash equivalents


11.8



2.0



(2.9
)Cash and cash equivalents at beginning of year


4.1



2.1



5.0Cash and cash equivalents at end of year

$
15.9


$
4.1


$
2.1    F-6




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008
  Note 1 
    Description
    of Business  ® ®
  Note 2 
    Summary
    of Significant Accounting Policies  Principles of Consolidation.
  Use of Estimates.
  Fiscal Year.
  Cash and Cash Equivalents.
  Supplemental
    Cash Flow Information.
  (in millions)

2010


2009


2008Interest paid

$
6.4


$
6.6


$
8.9Income taxes paid, net


10.3



8.9



13.2   Accounts Receivable, Net.
  (in millions)

2010


2009


2008Balance, beginning of year

$
2.1


$
0.5


$
0.4Provisions for credit recoveries (losses)


(0.5
)


1.9



0.1Write-offs


(0.4
)


(0.3
)


Balance, end of year

$
1.2


$
2.1


$
0.5   Notes Receivable, Net.
   F-7




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
    note-by-note
    Inventories. (first-in,
  Property and Equipment.
      Goodwill, Trademarks, and Other Intangible
    Assets.
      F-8




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
      Fair Value Measurements.
  Level 1
    Inputs based upon quoted prices in active markets for identical
    assets.Level 2
    Inputs other than quoted prices included within Level 1 that are
    observable for the asset, either directly or indirectly.Level 3
    Inputs that are unobservable for the asset.  Debt Issuance Costs.
  Advertising Cooperative.
   F-9




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
    Leases.
    Accumulated Other Comprehensive Income
    (Loss).
    (In millions)

2010


2009Net unrealized loss on an interest rate swap agreement

$
(0.1
)

$
(0.1
)Unrealized loss on interest rate swaps settled in cash






(0.4
)Total accumulated other comprehensive loss

$
(0.1
)

$
(0.5
)     Revenue Recognition  Sales by Company-Operated
    Restaurants.
  Revenue Recognition  Franchise Operations
  Rent and Other Revenues.
  Cash Consideration from Vendors.
 F-10




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
    Gains and Losses Associated With
    Re-franchising.
      Research and Development.
  Foreign Currency
    Transactions.
  Income Taxes.
      Stock-Based Compensation Expense.
 F-11




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
      Subsequent Events.
  Derivative Financial Instruments.
  Note 3 
    Recent
    Accounting Pronouncements That the Company Has Not Yet
    Adopted    Note 4 
    Other
    Current Assets  (in millions)

2010


2009Deferred tax assets

$
0.3


$
1.7Prepaid expenses and other current assets


4.0



2.2$
4.3


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

2010


2009Land

$
3.2


$
3.2Buildings and improvements


24.6



23.6Equipment


23.2



22.6Properties held for sale and other


0.2



0.151.2



49.5Less accumulated depreciation and amortization


(30.0
)


(28.0
)$
21.2


$
21.5    F-12




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
  Note 6 
    Trademarks
    and Other Intangible Assets, Net  (in millions)

2010


2009Non-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


(2.7
)


(2.1
)4.4



5.0$
47.0


$
47.6     Note 7 
    Other
    Current Liabilities  (in millions)

2010


2009Accrued wages, bonuses and severances

$
5.0


$
4.2Accrued income taxes payable and income tax reserves


0.2



6.0Other


2.4



3.5$
7.6


$
13.7  F-13




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
  Note 8 
    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 26, 2010Financial AssetsCash equivalents

$
15.8


$



$



$
15.8Advertising cooperative assets, restricted


4.3











4.3Total assets at fair value

$
20.1


$



$



$
20.1Financial LiabilitiesInterest rate swap agreement (Note 9)

$



$
0.1


$



$
0.1Total liabilities at fair value

$



$
0.1


$



$
0.1December 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 9)

$



$
0.1


$



$
0.1Total liabilities at fair value

$



$
0.1


$



$
0.1    F-14




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
  Note 9 
    Long-Term
    Debt and Other Borrowings  (in millions)

2010


20092005 Credit Facilities:Term loan

$



$
78.32010 Credit Facilities:Revolving credit facility


22.0



Term loan


40.0



Capital lease obligations


1.4



1.6Other notes


2.6



2.766.0



82.6Less current portion


(4.0
)


(1.3
)$
62.0


$
81.3   2010 Credit Facility.
    
    The term loan and revolving credit facility maturity date is
    December 23, 2015.
    The Company must maintain a Total Leverage Ratio of
    £
    2.75 to 1.
    The initial interest rate is LIBOR plus 250 basis points.
    The Company must maintain a Minimum Fixed Charge Coverage Ratio
    of
    3
    1.25 to 1.
    The Company may repurchase and retire its common shares at any
    time the Total Leverage Ratio is less than 2.00 to 1.
    The Company may make Permitted Acquisitions at any time the
    Total Leverage Ratio is less than 2.50 to 1.     F-15




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
        2005 Credit Facility.
      Future Debt Maturities.
  (in millions)2011

$
4.02012


5.22013


6.02014


6.32015


41.8Thereafter


1.3$
64.6   Interest
    Rate Swap Agreements.
   F-16




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
      Fair
    Values of Derivative Instruments
 Derivative Liabilities
 (in millions)

Balance Sheet Location


12/26/10


12/27/09Interest rate swap agreements


Other current liabilities


$
0.1


$
Interest rate swap agreements


Deferred credits and other long-term liabilities







0.1   The
    Effect of Derivative Instruments on the Statement of
    Operations
  Location of Gain


Amount of Gain (Loss)Amount of Gain (Loss)


(Loss) Reclassified


Reclassified from AOCI toRecognized into AOCI


from AOCI to Income


Income(in millions)

2010


2009


2008





2010


2009


2008Interest rate swap agreements, net of tax

$



$
(0.2
)

$
(1.3
)


Interest expense, net


$
(0.6
)

$
(1.1
)

$
(0.1
)$



$
(0.2
)

$
(1.3
)





$
(0.6
)

$
(1.1
)

$
(0.1
)     Note 10 
    Leases      Capital


Operating(in millions)

Leases


Leases2011

$
0.2


$
5.82012


0.2



4.52013


0.2



4.32014


0.2



4.02015


0.2



3.7Thereafter


3.1



48.4Future minimum lease payments


4.1



70.7Less amounts representing interest


(2.7
)


$
1.4


$
70.7  F-17




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
      Note 11 
    Deferred
    Credits and Other Long-Term Liabilities  (in millions)

2010


2009Deferred franchise revenues

$
2.9


$
3.4Deferred gains on unit conversions


2.0



2.4Deferred rentals


3.0



4.0Above-market rent obligations


2.8



2.8Deferred income taxes


5.8



3.3Other


3.7



1.8$
20.2


$
17.7   Note 12 
    Common
    Stock  Share Repurchase Program.
    Dividends.
  Note 13 
    Stock
    Option Plans  The 2002 Incentive Stock Plan.
  The 2006 Incentive Stock Plan.
 F-18




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
          A Summary of Stock Option Plan
    Activity.
  WeightedAverageRemaining


AggregateWeighted


Contractual


IntrinsicAverage


Term


Value(shares in thousands)

Shares


Exercise Price


(years)


(millions)Stock options:Outstanding at beginning of year


864


$
11.22Granted options


152



10.94Exercised options


(138
)


10.97Cancelled and expired options


(5
)


9.41Outstanding at end of year


873


$
11.22



6.0


$
3.1Exercisable at end of year


330


$
11.42



5.2


$
1.1Shares available for future grants under the plans at end of year


1,896      F-19




---



##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
      2010


2009


2008Risk-free interest rate


2.8
%


2.6
%


2.9
%Expected dividend yield


0.0
%


0.0
%


0.0
%Expected term (in years)


4.50



4.50



6.25Expected volatility


58.0
%


60.6
%


41.9
%       WeightedAverageGrant Date(shares in thousands)

Shares


ValueUnvested stock options outstanding at beginning of period


534


$
5.15Granted


152



5.41Vested


(140
)


5.03Cancelled


(3
)


4.34Unvested stock options outstanding at end of period


543


$
5.16   Restricted
    Share Awards
   F-20




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##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
    WeightedAverageGrantDate Fair(share awards in thousands)

Shares


ValueUnvested restricted share awards:Outstanding beginning of year


190


$
8.31Granted


105



10.89Vested


(60
)


8.54Outstanding end of year


235


$
9.40       Restricted
    Share Units
      WeightedAverageGrantDate Fair(share awards in thousands)

Units


ValueUnvested restricted stock units:Outstanding beginning of year


125


$
9.90Granted


27



10.46Vested






Outstanding end of year


152


$
10.00     Note 14 
    401(k)
    Savings Plan   F-21




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##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
    Note 15 
    Commitments
    and Contingencies  Supply Contracts. not-for-profit
        Formula and Supply Agreements with Former
    Owner.
  King Features Agreements.
 F-22




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##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
    Business Process Services.
  Information Technology
    Outsourcing.
  Employment Agreements.
  Litigation.
  Insurance Programs.
  and/or
  Environmental Matters. and/or
 F-23




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##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
    Foreign Operations.
  Significant Franchisee.
  Geographic Concentrations.
  Note 16 
    Other
    Expenses (Income), Net  (in millions)

2010


2009


2008Net recoveries of directors and officers liability insurance
    claims and shareholder litigation

$



$



$
(12.9
)Impairments and disposals of fixed assets


0.7



0.6



9.5Net gain on sale of assets


(0.5
)


(3.3
)


(0.9
)Other






0.6



(0.3
)$
0.2


$
(2.1
)

$
(4.6
)          F-24




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##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
  Note 17 
    Interest
    Expense, Net  (in millions)

2010


2009


2008Interest on debt, less capitalized amounts

$
6.5


$
7.5


$
8.1Amortization and write-offs of debt issuance costs


1.1



1.3



0.6Other debt related charges


0.6



0.5



0.6Interest income


(0.2
)


(0.9
)


(1.2
)$
8.0


$
8.4


$
8.1   Note 18 
    Income
    Taxes      (in millions)

2010


2009


2008Income taxes in the statements of operations, net

$
10.3


$
11.5


$
12.8Income taxes charged (credited) to statements of
    shareholders deficit:Compensation expense for tax purposes less than (in excess of)
    amounts recognized for financial reporting purposes


(0.1
)






0.5Other comprehensive income


0.2



0.3



(0.7
)Total

$
10.4


$
11.8


$
12.6     (in millions)

2010


2009


2008United States

$
26.9


$
24.6


$
26.6Foreign


6.3



5.7



5.6Total

$
33.2


$
30.3


$
32.2     (In millions)

2010


2009


2008Current income tax expense:Federal

$
6.9


$
8.7


$
10.5Foreign


1.1



0.9



0.9State


0.8



0.9



1.48.8



10.5



12.8Deferred income tax expense (benefit):Federal


1.5



1.0



State










1.5



1.0



$
10.3


$
11.5


$
12.8  F-25




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##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
      2010


2009


2008Federal income tax rate


35.0
%


35.0
%


35.0
%State taxes, net of federal benefit


1.5



0.1



1.5Valuation allowance


0.4



2.1



0.8Provision to return adjustments


(0.3
)


(0.1
)


0.2Adjustments to estimated tax reserves


(5.1
)


0.6



1.4Non-deductible goodwill impairment










0.7Other items, net


(0.5
)


0.3



0.2Effective income tax benefit rate


31.0
%


38.0
%


39.8
%       (in millions)

2010


2009Deferred tax assets:Deferred franchise fee revenue

$
1.5


$
2.3State net operating loss carry forwards


4.8



4.7Deferred rentals


2.6



2.9Deferred compensation


2.5



1.8Property, plant and equipment


1.5



1.1Allowance for doubtful accounts


0.5



1.0Insurance accruals


0.2



0.5Other accruals


0.3



1.0Reorganization costs


2.2



4.0Total gross deferred tax assets


16.1



19.3Deferred tax liabilities:Franchise value and trademarks


(16.8
)


(16.2
)Total gross deferred liabilities


(16.8
)


(16.2
)Valuation allowance


(4.8
)


(4.7
)Net deferred tax liability

$
(5.5
)

$
(1.6
)      F-26




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##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
        (in millions)

2010


2009


2008Balance, beginning of year

$
4.9


$
4.7


$
4.5Additions related to current year


0.2



0.2



0.2Reductions related to prior years


(2.7
)






Reductions due to statute expiration


(0.3
)






Balance, end of year

$
2.1


$
4.9


$
4.7       Note 19 
    Components
    of Earnings Per Share Computation  (in millions)

2010


2009


2008Net income

$
22.9


$
18.8


$
19.4Denominator for basic earnings per share  weighted
    average shares


25.3



25.3



25.6Dilutive employee stock options


0.2



0.1



0.1Denominator for diluted earnings per share


25.5



25.4



25.7      F-27




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##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
  Note 20 
    Segment
    Information    (in millions)

2010


2009


2008RevenuesFranchise operations(a)

$
93.7


$
90.6


$
88.5Company-operated restaurants


52.7



57.4



78.3$
146.4


$
148.0


$
166.8Operating profit before unallocated expensesFranchise operations

$
39.7


$
36.8


$
38.9Company-operated restaurants


5.6



4.2



3.145.3



41.0



42.0Less unallocated expensesDepreciation and amortization


3.9



4.4



6.3Other expenses (income), net


0.2



(2.1
)


(4.6
)Operating profit

$
41.2


$
38.7


$
40.3Capital expendituresFranchise operations

$
0.7


$
0.4


$
0.2Company-operated restaurants


2.5



1.0



2.5$
3.2


$
1.4


$
2.7Goodwill  year endFranchise operations

$
8.9


$
8.9


$
8.9Company-operated restaurants


2.2



2.2



2.2$
11.1


$
11.1


$
11.1Total assets  year endFranchise operations

$
99.0


$
90.3


$
98.6Company-operated restaurants


24.9



26.3



33.4$
123.9


$
116.6


$
132.0   (a)
    
    Franchise operations revenues excludes 5% inter-segment royalties F-28




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##### Table of Contents



AFC
    ENTERPRISES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For Fiscal Years 2010, 2009, and 2008 
    (Continued)
  Note 21 
    Quarterly
    Financial Data  (Unaudited)  2010First(a)


Second


Third


Fourth(in millions, except per share data)

Quarter


Quarter


Quarter


QuarterResults of OperationsTotal revenues

$
43.8


$
34.3


$
34.1


$
34.2Operating profit


12.2



10.2



10.6



8.2Net income


5.8



6.8



5.9



4.4Basic earnings per common share


0.23



0.27



0.23



0.18Diluted earnings per common share


0.23



0.26



0.23



0.18   2009First(a)


Second


Third


FourthQuarter


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   (a)
    
    The Companys first quarters for 2010 and 2009 contained
    sixteen weeks. The remaining quarters of 2010 and 2009 contained
    twelve weeks each.  Note 22 
    Subsequent
    Event   F-29