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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 Amendment
No. 1  to
 FORM
10-K/A
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 0000-23278
 
 BRAZIL FAST FOOD CORP.
 (Exact name of Registrant as specified in its charter)
 Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    13-3688737
(I.R.S. Employer
Identification No.)
  
 Registrants telephone number, including area code: 55 21 2536-7500
 
 Securities registered pursuant to Section 12(b) of the Act:
 NONE
 
 Securities registered pursuant to Section 12(g) of the Act:
 Common stock, par value $.0001 per share (Title of Class)
 
 o þ
 o þ
 þ o
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ
 o o
 
  
  
 Class
    

Outstanding
at February 9, 2010Common Stock, $0.0001 par value per share
    
    8,472,927 shares
 
 
 EXPLANATORY NOTE




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TABLE OF CONTENTS
 PART I
    
    
    4ITEM 1. BUSINESS
    
    
    4ITEM 1A. RISK FACTORS
    
    
    16ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    18ITEM 2. PROPERTIES
    
    
    19ITEM 3. LEGAL PROCEEDINGS
    
    
    19ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    21PART II
    
    
    22ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    22ITEM 6. SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
    
    
    24ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    25ITEM 7A. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
    
    
    52ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    53ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    54ITEM 9A. CONTROLS AND PROCEDURES
    
    
    55ITEM 9B. OTHER INFORMATION
    
    
    56PART III
    
    
    57ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    57ITEM 11. EXECUTIVE COMPENSATION
    
    
    57ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    57ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    57ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    57ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8 - K
    
    
    58
 ii




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EXHIBIT INDEXREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (DEFICIT)CONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSSec. 302 Certification of CEO & CFOSec. 906 Certification of CEO & CFO
 iii




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Unless otherwise specified, all references in this report to Reais, the Real or R$ are
to the Brazilian Real (singular), or to the Brazilian Reais (plural), the legal currency of Brazil,
and U.S. Dollars or $ are to United States Dollars. Unless otherwise specified, all financial
statements and other financial information presented herein are stated in R$ and are in accordance
with generally accepted accounting principles in the United States (U.S. GAAP).
 
 PART I
 
 ITEM 1. BUSINESS
    Recent Developments
    4




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Restaurant Operations (Bobs, KFC, Pizza Hut, Doggis and IBAL)
   5




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6




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BobsYears Ended December 31,2009
    
    
    2008
    
    
    2007Stores
    
    
    Kiosks
    
    
    Stores
    
    
    Kiosks
    
    
    Stores
    
    
    KiosksOwned and operated restaurants:Opened during period
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    4
    
    
    
    1
    
    
    
    3Closed during period
    
    
    0
    
    
    
    0
    
    
    
    1
    
    
    
    0
    
    
    
    1
    
    
    
    2Sold to franchisees
    
    
    4
    
    
    
    1
    
    
    
    1
    
    
    
    0
    
    
    
    3
    
    
    
    2Bought from franchisees
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1
    
    
    
    0Open at end of period
    
    
    39
    
    
    
    20
    
    
    
    42
    
    
    
    20
    
    
    
    42
    
    
    
    16Franchised restaurantsOpened during period
    
    
    29
    
    
    
    17
    
    
    
    28
    
    
    
    49
    
    
    
    30
    
    
    
    56Closed during period
    
    
    5
    
    
    
    4
    
    
    
    13
    
    
    
    7
    
    
    
    17
    
    
    
    7Sold to us by our franchisees
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1
    
    
    
    0Bought from us by our franchisees
    
    
    4
    
    
    
    1
    
    
    
    1
    
    
    
    0
    
    
    
    3
    
    
    
    2Open at end of period
    
    
    351
    
    
    
    271
    
    
    
    323
    
    
    
    257
    
    
    
    307
    
    
    
    215Total stores & kiosks at end of
period:
    
    
    390
    
    
    
    291
    
    
    
    365
    
    
    
    277
    
    
    
    349
    
    
    
    231
 KFCYears Ended December 31,2009
    
    
    2008
    
    
    2007Stores
    
    
    Kiosks
    
    
    Stores
    
    
    Kiosks
    
    
    Stores
    
    
    KiosksOwned and operated restaurants:Opened during period
    
    
    4
    
    
    
    1
    
    
    
    3
    
    
    
    0
    
    
    
    4
    
    
    
    0Closed during period
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Sold to franchisees
    
    
    1
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Bought from franchisees
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Open at end of period
    
    
    10
    
    
    
    1
    
    
    
    7
    
    
    
    0
    
    
    
    4
    
    
    
    0Franchised restaurants:Opened during period
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Closed during period
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Sold to us by our franchisees
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Bought from us by our franchisees
    
    
    1
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Open at end of period
    
    
    1
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total stores & kiosks at end of
period:
    
    
    11
    
    
    
    1
    
    
    
    7
    
    
    
    0
    
    
    
    4
    
    
    
    0
 7




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PHYears Ended December 31,2009
    
    
    2008
    
    
    2007Stores
    
    
    Kiosks
    
    
    Stores
    
    
    Kiosks
    
    
    Stores
    
    
    KiosksOwned and operated restaurants:Opened during period
    
    
    1
    
    
    
    0
    
    
    
    14
    
    
    
    0
    
    
    
    
    
    
    
    Closed during period
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    Sold to franchisees
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    Bought from franchisees
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    Open at end of period
    
    
    15
    
    
    
    0
    
    
    
    14
    
    
    
    0
    
    
    
    
    
    
    
    Franchised restaurants:Opened during period
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    Closed during period
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    Sold to us by our franchisees
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    Bought from us by our franchisees
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    Open at end of period
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    Total stores & kiosks at end of
period:
    
    
    15
    
    
    
    0
    
    
    
    14
    
    
    
    0
    
    
    
    
    
    
    
    
 DOGGISYears Ended December 31,2009
    
    
    2008
    
    
    2007Stores
    
    
    Kiosks
    
    
    Stores
    
    
    Kiosks
    
    
    Stores
    
    
    KiosksOwned and operated restaurants:Opened during period
    
    
    3
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Closed during period
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sold to franchisees
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bought from franchisees
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Open at end of period
    
    
    3
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Franchised restaurants:Opened during period
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Closed during period
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sold to us by our franchisees
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bought from us by our franchisees
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Open at end of period
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total stores & kiosks at end of
period:
    
    
    3
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   8




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Growth Strategy
      9




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Franchise Program
       10




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Advertising and Promotions
    11




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Sources of Supply
   12




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Trademarks
   Trademark or Service Mark
    
    Expiration DateBFFC
    
    03/25/2017BFFC- BRAZIL FAST FOOD CORP
    
    03/25/2017BIG BOB
    
    01/05/2012BOBS
    
    06/05/2012;BOBS EXPRESS
    
    Patents PendingBOBS GRILL
    
    05/01/2017;CAPUCCINE
    
    11/13/2017;FRANFILE
    
    03/24/2013;SALADÍSSIMAS BOBS
    
    11/29/2013;BOBS DOUBLE CHEESEBURGER
    
    10/23/2010;BOBS BURGÃO
    
    12/16/2015;FRANLITOS
    
    12/04/2016.
   13




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Competition
      Personnel
  14




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(d)
    
    FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
   Availability of Reports and Other Information
  15




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ITEM 1A. RISK FACTORS
 FORWARD LOOKING STATEMENTS
  Risks Relating to Operations
 Our success depends on our ability to efficiently compete in the food service industry.
  Our future success is dependent upon the success and expansion of our franchise program.
  16




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We are subject to extensive regulatory requirements applicable to the food service industry.
  Risks Relating to Brazil
 Our business are subject to changes in Brazils economy.
    Our business may be affected by political and constitutional uncertainty in Brazil.
  17




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Controls on foreign investments may limit our ability to receive capital from our Brazilian
 operating subsidiary
  Risks related to Our Common Stock
 Our common stock has been delisted from The Nasdaq SmallCap Market.
  Risks related to past due fiscal obligations of VENDEX
 We have past due fiscal obligations of VENDEX.
     
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  18




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ITEM 2. PROPERTIES
        
 ITEM 3. LEGAL PROCEEDINGS
   19




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20




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(a)
    
    We have committed ourselves to hire handicap personnel up to a minimum of 5%
of our total employees. And so, we have done our best in hiring and training handicap
personnel, but found it very difficult given the normal conditions of our stores and
the limitation of labor supply. We want to reach an agreement with the General
Attorney Office, but we cannot guarantee we will be successful and avoid fines.(b)
    
    Questioning related to the total amount of taxes paid by Venbo during the Pan
American and Para Pan American Games. Although the Company has proved that the
referred taxes were collected according to a special tax regime of Rio de Janeiro
Estate, we cannot predict judge final outcome.(c)
    
    Questioning related to marketing campaigns for children. We believe our
campaigns were not misleading and we gathered evidence to use against such claim.
During 2008 and 2009 we were exempted from fines concerning these campaigns and we
signed an engagement to respect in the future some methods and procedures used to
address marketing campaigns for kids.
 
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 Removed and reserved.
 21




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 Market Information
  Three Months Ended
    
    Common StockHigh
    
    
    LowMarch 31, 2009
    
    
    3.25
    
    
    
    3.25June 30, 2009
    
    
    3.49
    
    
    
    3.20September 30, 2009
    
    
    3.59
    
    
    
    3.31December 31, 2009
    
    
    4.93
    
    
    
    4.90March 31, 2008
    
    
    7.30
    
    
    
    4.10June 30, 2008
    
    
    7.10
    
    
    
    4.00September 30, 2008
    
    
    6.95
    
    
    
    3.90December 31, 2008
    
    
    6.00
    
    
    
    5.75
   Holders
  22




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Dividends
   Equity Compensation Plans
   23




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ITEM 6.
    
    SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
  Year Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005REVENUESNet Revenues from Own-operated Restaurants
    
    R$
    146,875
    
    
    R$
    90,122
    
    
    R$
    85,904
    
    
    R$
    80,931
    
    
    R$
    75,559Net Revenues from Franchisees
    
    
    24,647
    
    
    
    22,427
    
    
    
    18,811
    
    
    
    16,385
    
    
    
    11,963Revenues from Supply Agreements
    
    
    10,270
    
    
    
    8,317
    
    
    
    6,673
    
    
    
    6,059
    
    
    
    3,655Other Income
    
    
    3,098
    
    
    
    2,499
    
    
    
    3,056
    
    
    
    2,953
    
    
    
    1,283TOTAL REVENUES
    
    
    184,890
    
    
    
    123,365
    
    
    
    114,444
    
    
    
    106,328
    
    
    
    92,460OPERATING COST AND EXPENSESStore Costs and Expenses
    
    
    (135,715
    )
    
    
    (89,729
    )
    
    
    (83,349
    )
    
    
    (74,689
    )
    
    
    (68,384
    )Franchise Costs and Expenses
    
    
    (8,619
    )
    
    
    (6,207
    )
    
    
    (3,623
    )
    
    
    (3,176
    )
    
    
    (2,144
    )Marketing Expenses
    
    
    (4,092
    )
    
    
    (1,053
    )
    
    
    (2,082
    )
    
    
    (4,018
    )
    
    
    (2,453
    )Administrative Expenses
    
    
    (21,298
    )
    
    
    (17,442
    )
    
    
    (13,430
    )
    
    
    (11,333
    )
    
    
    (9,192
    )Other Operating Expenses
    
    
    (4,397
    )
    
    
    (2,876
    )
    
    
    (2,945
    )
    
    
    (4,213
    )
    
    
    (3,848
    )Net result of assets sold
    
    
    1,225
    
    
    
    (205
    )
    
    
    842
    
    
    
    145
    
    
    
    (52
    )Impairment of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (180
    )
    
    
    (148
    )TOTAL OPERATING COST AND EXPENSES
    
    
    (172,896
    )
    
    
    (117,512
    )
    
    
    (104,587
    )
    
    
    (97,464
    )
    
    
    (86,221
    )OPERATING INCOME
    
    
    11,994
    
    
    
    5,853
    
    
    
    9,857
    
    
    
    8,864
    
    
    
    6,239Interest Expense, net
    
    
    (4,882
    )
    
    
    (9,677
    )
    
    
    (697
    )
    
    
    (623
    )
    
    
    537Foreign Exchage and Monetary Restatement Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    (84
    )NET INCOME (LOSS) BEFORE INCOME TAX
    
    
    7,112
    
    
    
    (3,824
    )
    
    
    9,160
    
    
    
    8,199
    
    
    
    6,692Income taxes  deferred
    
    
    
    
    
    
    311
    
    
    
    4,343
    
    
    
    4,543
    
    
    
    Income taxes  current
    
    
    (36
    )
    
    
    (746
    )
    
    
    (46
    )
    
    
    (2,808
    )
    
    
    (2,248
    )NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST
    
    
    7,076
    
    
    
    (4,259
    )
    
    
    13,457
    
    
    
    9,934
    
    
    
    4,444Net (income) loss attributable to non-controlling interest
    
    
    (180
    )
    
    
    317
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME (LOSS) ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.
    
    R$
    6,896
    
    
    R$
    (3,942
    )
    
    R$
    13,457
    
    
    R$
    9,934
    
    
    R$
    4,444NET INCOME PER COMMON SHARE
BASIC AND DILUTED
    
    R$
    0.85
    
    
    R$
    (0.48
    )
    
    R$
    1.65
    
    
    R$
    1.22
    
    
    R$
    0.55WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:BASIC AND DILUTED
    
    
    8,152,505
    
    
    
    8,163,949
    
    
    
    8,169,766
    
    
    
    8,137,291
    
    
    
    8,061,317
 24




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ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Background
  Brazilian Political Environment
    25




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Brazilian Economic Environment
     26




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Year Ended December 312009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002%
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %GDP 1
    
    
    -0.2
    
    
    
    4.5
    
    
    
    5.4
    
    
    
    3.8
    
    
    
    3.2
    
    
    
    5.7
    
    
    
    1.1
    
    
    
    2.7Inflation 2
    
    
    4.1
    
    
    
    6.5
    
    
    
    4.5
    
    
    
    3.1
    
    
    
    5.7
    
    
    
    7.6
    
    
    
    9.3
    
    
    
    12.5Interest Rates 3
    
    
    8.75
    
    
    
    12.75
    
    
    
    11.2
    
    
    
    13.2
    
    
    
    18.1
    
    
    
    17.8
    
    
    
    16.3
    
    
    
    24.9Exchange Rates(4)
    
    
    -25.5
    
    
    
    31.9
    
    
    
    17.2
    
    
    
    8.7
    
    
    
    11.8
    
    
    
    8.1
    
    
    
    18.2
    
    
    
    -52.3
 
 (1)
    
    IBGE(2)
    
    IPCA(3)
    
    SELIC(4)
    
    (Devaluation)/Revaluation of the Brazilian currency along the year (31/12 vs. 01/01) against US $.  27




---



##### Table of Contents



OUR BUSINESS
       28




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##### Table of Contents



29




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##### Table of Contents



RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(Amounts in Brazilian Reais, unless otherwise stated)
  12 Months
    
    
    
    
    
    
    12 Months
    
    
    
    
    
    
    12 MonthsEnded
    
    
    
    
    
    
    Ended
    
    
    
    
    
    
    EndedR$000
    
    31-Dec-09
    
    
    %
    
    
    31-Dec-08
    
    
    %
    
    
    31-Dec-07
    
    
    %REVENUESNet Revenues from Own-operated Restaurants
    
    R$
    146,875
    
    
    
    79.4
    %
    
    R$
    90,122
    
    
    
    73.1
    %
    
    R$
    85,904
    
    
    
    75.1
    %Net Revenues from Franchisees
    
    
    24,647
    
    
    
    13.3
    %
    
    
    22,427
    
    
    
    18.2
    %
    
    
    18,811
    
    
    
    16.4
    %Revenues from Supply Agreements
    
    
    10,270
    
    
    
    5.6
    %
    
    
    8,317
    
    
    
    6.7
    %
    
    
    6,673
    
    
    
    5.8
    %Other Income
    
    
    3,098
    
    
    
    1.7
    %
    
    
    2,499
    
    
    
    2.0
    %
    
    
    3,056
    
    
    
    2.7
    %TOTAL REVENUES
    
    
    184,890
    
    
    
    100.0
    %
    
    
    123,365
    
    
    
    100.0
    %
    
    
    114,444
    
    
    
    100.0
    %OPERATING COST AND EXPENSESStore Costs and Expenses
    
    
    (135,715
    )
    
    
    -73.4
    %
    
    
    (89,729
    )
    
    
    -72.7
    %
    
    
    (83,349
    )
    
    
    -72.8
    %Franchise Costs and Expenses
    
    
    (8,619
    )
    
    
    -4.7
    %
    
    
    (6,207
    )
    
    
    -5.0
    %
    
    
    (3,623
    )
    
    
    -3.2
    %Marketing Expenses
    
    
    (4,092
    )
    
    
    -2.2
    %
    
    
    (1,053
    )
    
    
    -0.9
    %
    
    
    (2,082
    )
    
    
    -1.8
    %Administrative Expenses
    
    
    (21,298
    )
    
    
    -11.5
    %
    
    
    (17,442
    )
    
    
    -14.1
    %
    
    
    (13,430
    )
    
    
    -11.7
    %Other Operating Expenses
    
    
    (4,397
    )
    
    
    -2.4
    %
    
    
    (2,876
    )
    
    
    -2.3
    %
    
    
    (2,945
    )
    
    
    -2.6
    %Net result of assets sold
    
    
    1,225
    
    
    
    0.7
    %
    
    
    (205
    )
    
    
    -0.2
    %
    
    
    842
    
    
    
    0.7
    %TOTAL OPERATING COST AND EXPENSES
    
    
    (172,896
    )
    
    
    -93.5
    %
    
    
    (117,512
    )
    
    
    -95.3
    %
    
    
    (104,587
    )
    
    
    -91.4
    %OPERATING INCOME
    
    
    11,994
    
    
    
    6.5
    %
    
    
    5,853
    
    
    
    4.7
    %
    
    
    9,857
    
    
    
    8.6
    %Interest Expense, net
    
    
    (4,882
    )
    
    
    -2.6
    %
    
    
    (9,677
    )
    
    
    -7.8
    %
    
    
    (697
    )
    
    
    -0.6
    %NET INCOME (LOSS) BEFORE INCOME TAX
    
    
    7,112
    
    
    
    3.8
    %
    
    
    (3,824
    )
    
    
    -3.1
    %
    
    
    9,160
    
    
    
    8.0
    %Income taxes  deferred
    
    
    
    
    
    
    0.0
    %
    
    
    311
    
    
    
    0.3
    %
    
    
    4,343
    
    
    
    3.8
    %Income taxes  current
    
    
    (36
    )
    
    
    0.0
    %
    
    
    (746
    )
    
    
    -0.6
    %
    
    
    (46
    )
    
    
    0.0
    %NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST
    
    
    7,076
    
    
    
    
    
    
    
    (4,259
    )
    
    
    
    
    
    
    13,457
    
    
    
 0.0
    %Net (income) loss attributable to non-controlling interest
    
    
    (180
    )
    
    
    -0.1
    %
    
    
    317
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %NET INCOME (LOSS) ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.
    
    
    6,896
    
    
    
    4.7
    %
    
    
    (3,942
    )
    
    
    -4.4
    %
    
    
    13,457
    
    
    
    15.7
    %
  Introduction
   30




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Net Revenues from Own-Operated Restaurants
      Net Franchise Revenues
  31




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##### Table of Contents



12 months ended December, 31R$000
    
    2009
    
    
    2008
    
    
    2007Net Franchise Royalty Fees
    
    
    22,714
    
    
    
    19,803
    
    
    
    16,205Initial Fee
    
    
    1,933
    
    
    
    2,624
    
    
    
    2,606Net Franchise Revenues
    
    
    24,647
    
    
    
    22.427
    
    
    
    18,811
   Revenue from Supply Agreements and Other Income
 
  
 
  
  
  
 
  
   Store Costs and Expenses
   32




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##### Table of Contents



12 Months
    
    
    
    
    
    
    12 Months
    
    
    
    
    
    
    12 MonthsEnded
    
    
    
    
    
    
    Ended
    
    
    
    
    
    
    EndedR$000
    
    31-Dec-09
    
    
    %
    
    
    31-Dec-08
    
    
    %
    
    
    31-Dec-07STORE RESULTSNet Revenues from Own-operated Restaurants
    
    
    146,875
    
    
    
    100.0
    %
    
    
    90,122
    
    
    
    100.0
    %
    
    
    85,904
    
    
    
    100.0
    %Store Costs and ExpensesFood, Beverage and Packaging
    
    
    (51,720
    )
    
    
    -35.2
    %
    
    
    (34,578
    )
    
    
    -38.4
    %
    
    
    (31,334
    )
    
    
    -36.5
    %Payroll & Related Benefits
    
    
    (33,787
    )
    
    
    -23.0
    %
    
    
    (24,939
    )
    
    
    -27.7
    %
    
    
    (22,807
    )
    
    
    -26.5
    %Restaurant Occupancy
    
    
    (15,446
    )
    
    
    -10.5
    %
    
    
    (10,236
    )
    
    
    -11.4
    %
    
    
    (10,107
    )
    
    
    -11.8
    %Contracted Services
    
    
    (16,768
    )
    
    
    -11.4
    %
    
    
    (10,036
    )
    
    
    -11.1
    %
    
    
    (11,681
    )
    
    
    -13.6
    %Depreciation and Amortization
    
    
    (5,138
    )
    
    
    -3.5
    %
    
    
    (2,819
    )
    
    
    -3.1
    %
    
    
    (2,416
    )
    
    
    -2.8
    %Royalties Charged
    
    
    (3,537
    )
    
    
    -2.4
    %
    
    
    (271
    )
    
    
    -0.3
    %
    
    
    
    
    
    
    0.0
    %Other Store Costs and Expenses
    
    
    (9,319
    )
    
    
    -6.3
    %
    
    
    (6,850
    )
    
    
    -7.6
    %
    
    
    (5,004
    )
    
    
    -5.8
    %Total Store Costs and Expenses
    
    
    (135,715
    )
    
    
    -92.4
    %
    
    
    (89,729
    )
    
    
    -99.6
    %
    
    
    (83,349
    )
    
    
    -97.0
    %STORE OPERATING INCOME
    
    
    11,160
    
    
    
    7.6
    %
    
    
    393
    
    
    
    0.4
    %
    
    
    2,555
    
    
    
    3.0
    %
 Food, Beverage and Packaging Costs
     Payroll & Related Benefits
   33




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Restaurant Occupancy Costs
  Contracted Services
   Depreciation and Amortization
  Other Store Costs and Expenses
   Franchise Costs and Expenses
   34




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12 Months
    
    
    
    
    
    
    12 Months
    
    
    
    
    
    
    12 MonthsEnded
    
    
    
    
    
    
    Ended
    
    
    
    
    
    
    EndedR$000
    
    31-Dec-09
    
    
    %
    
    
    31-Dec-08
    
    
    %
    
    
    31-Dec-07
    
    
    %FRANCHISE RESULTSNet Revenues from Franchisees
    
    
    24,647
    
    
    
    100.0
    %
    
    
    22,427
    
    
    
    100.0
    %
    
    
    18,811
    
    
    
    100.0
    %Franchise Costs and Expenses
    
    
    (8,619
    )
    
    
    -35.0
    %
    
    
    (6,207
    )
    
    
    -27.7
    %
    
    
    (3,623
    )
    
    
    -19.3
    %FRANCHISE OPERATING INCOME
    
    
    16,028
    
    
    
    65.0
    %
    
    
    16,220
    
    
    
    72.3
    %
    
    
    15,188
    
    
    
    80.7
    %
  35




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##### Table of Contents



Marketing, General and Administrative and Other Expenses
 Marketing expenses
 Bobs Brand
        36




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##### Table of Contents



KFC and Pizza Hut Brands
   Doggis
    Administrative Expenses
   37




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##### Table of Contents



Other Operating Expenses
  December 31,R$000
    
    2009
    
    
    2008
    
    
    2007Uncollectable receivables
    
    
    (502
    )
    
    
    (851
    )
    
    
    (1,288
    )Reassessed tax and other tax adjustments
    
    
    187
    
    
    
    
    
    
    
    424Accruals for contingencies
    
    
    (443
    )
    
    
    
    
    
    
    215Depreciation of Headquarters fixed assets
    
    
    (805
    )
    
    
    (682
    )
    
    
    (833
    )Professional fees for tax consulting
    
    
    
    
    
    
    
    
    
    
    (1,793
    )Preoperating and other (expenses) income
    
    
    (2,834
    )
    
    
    (1,343
    )
    
    
    330R$
    (4,397
    )
    
    R$
    (2,876
    )
    
    R$
    (2,945
    )
  Impairment of Assets and Net Result of Assets Sold
   INTEREST EXPENSES AND INCOME TAX
 Interest Expenses, net
  38




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INCOME TAXES
    39




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
(Amounts in Brazilian Reais, unless otherwise stated)
 A) Introduction
      40




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##### Table of Contents



B) Debt Obligation  financial institutions
  December 31,R$000
    
    2009
    
    
    2008Revolving lines of credit (a)
    
    R$
    11,422
    
    
    R$
    4,641Leasing facilities (b)
    
    
    1,373
    
    
    
    3,257Other loan (c)
    
    
    9,638
    
    
    
    13,73722,433
    
    
    
    21,635Less: current portion
    
    
    (13,829
    )
    
    
    (10,536
    )R$
    8,604
    
    
    R$
    11,099
  R$0002010
    
    R$
    13,8292011
    
    
    6,3002012
    
    
    2,304R$
    22,433
  41




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C) Debt Obligation  taxes
        42




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##### Table of Contents



D) Other Obligations
    ContractualFiscal Year
    
    Leases2010
    
    
    6,9142011
    
    
    5,9482012
    
    
    2,6602013
    
    
    1,8302014
    
    
    1,469Thereafter
    
    
    1,630Total
    
    
    20,451
  43




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##### Table of Contents



ContractualFiscal Year
    
    Leases
    
    
    Financial Debt
    
    
    Fiscal Debt
    
    
    Total2010
    
    
    6,914
    
    
    
    13,829
    
    
    
    1,676
    
    
    
    22,4192011
    
    
    5,948
    
    
    
    6,300
    
    
    
    1,134
    
    
    
    13,3822012
    
    
    2,660
    
    
    
    2,304
    
    
    
    1,134
    
    
    
    6,0982013
    
    
    1,830
    
    
    
    
    
    
    
    1,134
    
    
    
    2,9642014
    
    
    1,469
    
    
    
    
    
    
    
    1,134
    
    
    
    2,603Thereafter
    
    
    1,630
    
    
    
    
    
    
    
    6,800
    
    
    
    8,430Total
    
    
    20,451
    
    
    
    22,433
    
    
    
    13,012
    
    
    
    55,896
   44




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##### Table of Contents



-
    
    the expansion of Companys franchisee base, which
may be expected to generate additional cash flows from royalties and
franchise initial fees without significant capital expenditures;-
    
    the improvement of food preparation methods in all
stores to increase the operational margin of the chain, including
acquiring new stores equipment and hiring a consultancy firm for stores
personnel training program;-
    
    the continuing of motivational programs and menu
expansions to meet consumer needs and wishes;-
    
    the improvement and upgrade of our IT system-
    
    the negotiation with suppliers in order to obtain
significant agreements in long term supply contracts; and-
    
    the renegotiation of past due receivables with
franchisees.
 45




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   Constant currency restatement
  Foreign currency
  Accounts receivable
    46




---



##### Table of Contents



Long-Lived Assets
   Revenue recognition
     Marketing fund and expenses
 Bobs Brand
  47




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##### Table of Contents



KFC and Pizza Hut Brands
   48




---



##### Table of Contents



Doggis
   Income taxes
   Stock options
  49




---



##### Table of Contents



NEW ACCOUNTING STANDARDS
 .
     50




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##### Table of Contents



51




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##### Table of Contents



OFF-BALANCE SHEET ARRANGEMENTS
  
 ITEM7A. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
     52




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
        1.
    
    Our activities are essentially focused on the operation of our restaurants and on the
revenues provided by our franchisees (in 2009 only Bobs chain). Concerning the restaurants
(both own operated and operated by franchisees) the main controls of the food service for
our clients are performed by the trained employees that operate the stores and by a
computer software (Snack Control) that registers all transactions, food, currency and tax
records. Along 2009, we decided to upgrade our information system used at our stores and we
started the migration of Snack Control to another computer software (Degust), a modern
software adapted to the present demands of the industry. The migration will be completed in
2010. Degust system is showing a much better performance and allows us to extend our
up-grade of controls to our computerized Enterprise Resource Planning (ERP) used for our
accounting books. This will be a rather long process that can go through 2010. Franchisees
are also satisfied with Degust and this gives us other chances of automate their operation
control, targeting a better process of royalties and marketing contribution collection.
 53




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##### Table of Contents



2.
    
    Our ERP system (Protheus), a software permanently up-dated by the supplier (TOTVS
Informatics) was not fully used in its large possibilities, in part due to the weak
performance of Snack Control. With the migration to Degust and new hardware, (gradually
acquired for our stores along 2009 to support such new store computer system) the
management decided to invest in a whole revision of the administrative, financial and
fiscal processes. The new structures of the group and the new management organization
designed and fixed at the beginning of 2009, forced new and quicker methods for reliably
processing our operations. The management considers that the present
processes and control methods are accurate enough to assure an
efficient administration of our operation and the emission of trusty
financial statements. Nonetheless, the company must be prepared for
expansion, so the management contracted an independent consulting firm which is
specialized in the study and projections of process techniques. The consultants developed
in the last quarter of 2009 the first part of the project that is being finished in the
first quarter of 2010. It will boost an important and gradual change in our administrative
organization and methods, which will be in operation along the second semester. Up-grades
of Protheus and the fitting of special tools to work with it are included in this program.3.
    
    During the last quarter of 2009 we also prepared the company to outsource its
accounting department. We contracted Mazars services, an international firm operating in
Brazil and perfectly mastering local accounting and tax legislation, as well as US-GAAP.
They started our accounting services in January 2010 but we devoted a whole quarter to
assure the migration. Only IRB, our Pizza Hut subsidiary, has its accounting books prepared
by ADDCONT, a Brazilian accounting firm that was in charge of these services at IRB for
several years before our acquisition.4.
    
    We prepared and strengthened our expansion services that will have an important role in
the development of the franchise operation of KFC and Doggis chains. We improved our
methods for selecting franchisees and for the selection of new points of sales. These
procedures are the basis of our growing revenues in the next years and at the same time
they have a great influence in the control of the franchise operation, with impacts in the
brands image and in the income we will be able to get from this activity.5.
    
    No processes can be performing without a tough training of the people that will use and
manage them. Thats why we started in the second half of 2009 a study that will be
completed in the first semester of 2010, which will allow us to start up this year new
methods and plans for training. We will improve and expand our Human Resources Department
that will be in charge of this program.
 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  54




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ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Managements Report on Internal Control Over Financial Reporting
    55




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
    2009#of shares
    
    US$0001st quarter
    
    
    15,445
    
    
    
    522nd quarter
    
    
    23,470
    
    
    
    733rd quarter
    
    
    4,540
    
    
    
    164th quarter
    
    
    2,500
    
    
    
    1445,955
    
    
    
    155
 56




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  
 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
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  57




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##### Table of Contents



ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
        Exhibit No.
    
    Description3.1
    
    
    Certificate of Incorporation of the Registrant, as amended(1)3.2
    
    
    By-laws of the Registrant (2)10.1
    
    
    Amended and Restated 1992 Stock Option Plan (2))21.1
    
    
    Subsidiaries of Registrant (3)24.1
    
    
    Power of Attorney (comprises a portion of the signature page of this
report)31.1*
    
    
    Certification by Ricardo Figueiredo Bomeny, Chief Executive Officer
and Acting Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.1*
    
    
    Certification by Ricardo Figueiredo Bomeny, Chief Executive Officer
and Acting Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
 
 *
    
    Filed herewith.(1)
    
    Filed as an exhibit to Registrants Registration Statement on Form S-1 (File No.
333-3754).(2)
    
    Filed as an exhibit to Registrants Registration Statement on Form S-1 (File
No. 33-71368).(3)
    
    Filed as an exhibit to Registrants Annual Report on Form 10-K for the year
ended December 31, 1997 (File No. 0-23278). 58




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##### Table of Contents



SIGNATURES
 
 th
 
 BRAZIL FAST FOOD CORP.By:
    /s/ Ricardo Figueiredo BomenyRicardo Figueiredo BomenyPresident and Chief Executive OfficerBy:
    /s/ Ricardo Figueiredo BomenyRicardo Figueiredo BomenyActing Chief Financial Officer   
 /s/ Ricardo Figueiredo Bomeny

Ricardo Figueiredo Bomeny
    
    Date: February 11, 2011Chief Executive Officer and Acting Chief Financial Officer/s/ Guillermo Hector Pisano

Guillermo Hector Pisano
    
    Date: February 11, 2011Chairman of the Board/s/ Gustavo Alberto Villela Filho

Gustavo Alberto Villela Filho
    
    Date: February 11, 2011Director
 
 59




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##### Table of Contents



/s/Alexandre Nunes

Alexandre Nunes
    
    Date: February 11, 2011Director/s/ Marcos Rocha

Marcos Rocha
    
    Date: February 11, 2011Director/s/ Marcos Gouvêa

Marcos Gouvêa
    
    Date: February 11, 2011Director/s/ Lúcio Montanini

Lúcio Montanini
    
    Date: February 11, 2011Director
 
 60




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##### 



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 INDEX TO FINANCIAL STATEMENTS
 PageReport of independent registered public accounting firm
    
    F-2Financial statements:Consolidated balance sheets
    
    F-3Consolidated income statements
    
    F-4Consolidated statements of comprehensive income
    
    F-5Consolidated statements of changes in shareholders equity
    
    F-6Consolidated statements of cash flows
    
    F-7Notes to consolidated financial statements
    
    F-8 to F-37EX-31.1EX-32.1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 Report of Independent Registered Public Accounting Firm
 
    ,
 
  F - 2




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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(In thousands of Brazilian Reais, except share amounts)
 December 31,2009
    
    
    2008CURRENT ASSETS:Cash and cash equivalents (note 3)
    
    R$
    13,250
    
    
    R$
    10,424Inventories
    
    
    3,762
    
    
    
    2,970Accounts receivable (note 4)
    
    
    10,342
    
    
    
    10,741Prepaid expenses
    
    
    3,132
    
    
    
    2,419Other current assets (note 5)
    
    
    3,323
    
    
    
    2,642TOTAL CURRENT ASSETS
    
    
    33,809
    
    
    
    29,196Property and equipment, net (note 6)
    
    
    35,003
    
    
    
    31,104Deferred charges, net (note 7)
    
    
    6,799
    
    
    
    4,544Deferred tax asset, net (note 11)
    
    
    13,597
    
    
    
    13,688Goodwill (note 2)
    
    
    799
    
    
    
    2,895Other receivables and other assets (note 5)
    
    
    10,948
    
    
    
    7,716TOTAL ASSETS
    
    R$
    100,955
    
    
    R$
    89,143LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Notes payable (note 8)
    
    R$
    13,829
    
    
    R$
    10,536Accounts payable and accrued expenses (note 9)
    
    
    16,275
    
    
    
    14,383Payroll and related accruals
    
    
    4,668
    
    
    
    4,565Income taxes accruals
    
    
    68
    
    
    
    627Taxes, other than income taxes
    
    
    3,575
    
    
    
    1,765Current portion of deferred income (note 12b)
    
    
    2,837
    
    
    
    1,878Current portion of contingencies and reassessed taxes (note 12c)
    
    
    1,676
    
    
    
    1,677Other current liabilities
    
    
    260
    
    
    
    81TOTAL CURRENT LIABILITIES
    
    
    43,188
    
    
    
    35,512Deferred income, less current portion (note 12b)
    
    
    4,076
    
    
    
    4,836Notes payable, less current portion (note 8)
    
    
    8,604
    
    
    
    11,099Contingencies and reassessed taxes, lesscurrent portion (note 12c)
    
    
    18,803
    
    
    
    18,210TOTAL LIABILITIES
    
    
    74,671
    
    
    
    69,657EQUITYSHAREHOLDERS EQUITY:Preferred stock, $.01 par value, 5,000 shares authorized; no
shares issued
    
    
    
    
    
    
    Common stock, $.0001 par value, 12,500,000 shares authorized;8,472,927 and 8,437,927 shares issued;
    
    
    1
    
    
    
    18,137,762 and 8,148,717 shares outstandingAdditional paid-in capital
    
    
    61,148
    
    
    
    61,062Treasury Stock (335,165 and 289,210 shares)
    
    
    (1,946
    )
    
    
    (1,601
    )Accumulated Deficit
    
    
    (33,021
    )
    
    
    (39,917
    )Accumulated comprehensive loss
    
    
    (1,077
    )
    
    
    (1,040
    )TOTAL SHAREHOLDERS EQUITY
    
    
    25,105
    
    
    
    18,505Non-Controlling Interest
    
    
    1,179
    
    
    
    981TOTAL EQUITY
    
    
    26,284
    
    
    
    19,486TOTAL LIABILITIES AND EQUITY
    
    R$
    100,955
    
    
    R$
    89,143
  F - 3




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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED INCOME STATEMENTS
(in thousands of Brazilian Reais, except share amounts)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007REVENUESNet Revenues from Own-operated Restaurants
    
    R$
    146,875
    
    
    R$
    90,122
    
    
    R$
    85,904Net Revenues from Franchisees
    
    
    24,647
    
    
    
    22,427
    
    
    
    18,811Revenues from Supply Agreements
    
    
    10,270
    
    
    
    8,317
    
    
    
    6,673Other Income
    
    
    3,098
    
    
    
    2,499
    
    
    
    3,056TOTAL REVENUES
    
    
    184,890
    
    
    
    123,365
    
    
    
    114,444OPERATING COST AND EXPENSESStore Costs and Expenses (note 19)
    
    
    (135,715
    )
    
    
    (89,729
    )
    
    
    (83,349
    )Franchise Costs and Expenses (note 19)
    
    
    (8,619
    )
    
    
    (6,207
    )
    
    
    (3,623
    )Marketing Expenses
    
    
    (4,092
    )
    
    
    (1,053
    )
    
    
    (2,082
    )Administrative Expenses (note 14)
    
    
    (21,298
    )
    
    
    (17,442
    )
    
    
    (13,430
    )Other Operating Expenses (note 15)
    
    
    (4,397
    )
    
    
    (2,876
    )
    
    
    (2,945
    )Net result of assets sold
    
    
    1,225
    
    
    
    (205
    )
    
    
    842TOTAL OPERATING COST AND EXPENSES
    
    
    (172,896
    )
    
    
    (117,512
    )
    
    
    (104,587
    )OPERATING INCOME
    
    
    11,994
    
    
    
    5,853
    
    
    
    9,857Interest Expense, net (note 16)
    
    
    (4,882
    )
    
    
    (9,677
    )
    
    
    (697
    )NET INCOME (LOSS) BEFORE INCOME TAX
    
    
    7,112
    
    
    
    (3,824
    )
    
    
    9,160Income taxes  deferred (note 11)
    
    
    
    
    
    
    311
    
    
    
    4,343Income taxes  current (note 11)
    
    
    (36
    )
    
    
    (746
    )
    
    
    (46
    )NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST
    
    
    7,076
    
    
    
    (4,259
    )
    
    
    13,457Net (income) loss attributable to non-controlling interest
    
    
    (180
    )
    
    
    317
    
    
    
    NET INCOME (LOSS) ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.
    
    R$
    6,896
    
    
    R$
    (3,942
    )
    
    R$
    13,457NET INCOME LOSS PER COMMON SHARE BASIC AND DILUTED
    
    R$
    0.85
    
    
    R$
    (0.48
    )
    
    R$
    1.65WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:BASIC AND DILUTED
    
    
    8,152,505
    
    
    
    8,163,949
    
    
    
    8,169,766
  F - 4




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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (AUDITED)
(In thousands of Brazilian Reais)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Net Income (Loss)
    
    R$
    6,896
    
    
    R$
    (3,942
    )
    
    R$
    13,457Other comprehensive income (loss):Foreign currency translation
adjustment
    
    
    (37
    )
    
    
    74
    
    
    
    (134
    )Comprehensive Income (loss)
    
    R$
    6,859
    
    
    R$
    (3,868
    )
    
    R$
    13,323
  F - 5




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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 Additional
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Total
    
    
    Non-Common Stock
    
    
    Paid-In
    
    
    Treasury
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Shareholders
    
    
    Controlling
    
    
    TotalShares
    
    
    Par Value
    
    
    Capital
    
    
    Stock
    
    
    Deficit
    
    
    Loss
    
    
    Equity
    
    
    Interest
    
    
    EquityBalance, December 31, 2006
    
    
    8,182,242
    
    
    R$
    1
    
    
    R$
    60,818
    
    
    
    R$(808)
    
    
    
    R$(48,753
    )
    
    
    R$(980)
    
    
    R$
    10,278
    
    
    R$
    
    
    
    
    R$10,278Exercise of options
    
    
    10,000
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    35Shares granted
    
    
    10,000
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    135Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,457
    
    
    
    
    
    
    
    13,457
    
    
    
    
    
    
    
    13,457Acquisition of Companys own shares
    
    
    (24,555
    )
    
    
    
    
    
    
    
    
    
    
    (252
    )
    
    
    
    
    
    
    
    
    
    
    (252
    )
    
    
    
    
    
    
    (252
    )Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (134
    )
    
    
    (134
    )
    
    
    
    
    
    
    (134
    )Balance, December 31, 2007
    
    
    8,177,687
    
    
    R$
    1
    
    
    R$
    60,988
    
    
    
    R$(1,060
    )
    
    
    R$(35,296
    )
    
    
    R$(1,114
    )
    
    R$
    23,519
    
    
    R$
    
    
    
    R$
    23,519Exercise of options
    
    
    33,750
    
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    74Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,942
    )
    
    
    
    
    
    
    (3,942
    )
    
    
    (317
    )
    
    
    (4,259
    )Acquisition of Companys own shares
    
    
    (62,720
    )
    
    
    
    
    
    
    
    
    
    
    (541
    )
    
    
    
    
    
    
    
    
    
    
    (541
    )
    
    
    
    
    
    
    (541
    )Non-Controling interest on IRB
Acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,298
    
    
    
    1,298Paid dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (679
    )
    
    
    
    
    
    
    (679
    )
    
    
    
    
    
    
    (679
    )Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    74
    
    
    
    
    
    
    
    74Balance, December 31, 2008
    
    
    8,148,717
    
    
    R$
    1
    
    
    R$
    61,062
    
    
    
    R$(1,601
    )
    
    
    R$(39,917
    )
    
    
    R$(1,040
    )
    
    R$
    18,505
    
    
    R$
    981
    
    
    R$
    19,486Exercise of options
    
    
    35,000
    
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    86Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,896
    
    
    
    
    
    
    
    6,896
    
    
    
    180
    
    
    
    7,076Acquisition of Companys own shares
    
    
    (45,955
    )
    
    
    
    
    
    
    
    
    
    
    (345
    )
    
    
    
    
    
    
    
    
    
    
    (345
    )
    
    
    
    
    
    
    (345
    )Non-Controling interest on Doggis
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    (37
    )
    
    
    
    
    
    
    (37
    )Balance, December 31, 2009
    
    
    8,137,762
    
    
    R$
    1
    
    
    R$
    61,148
    
    
    
    R$(1,946
    )
    
    
    R$(33,021
    )
    
    
    R$(1,077
    )
    
    R$
    25,105
    
    
    R$
    1,179
    
    
    R$
    26,284
  F - 6




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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands of Brazilian Reais)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007CASH FLOW FROM OPERATING ACTIVITIES:NET INCOME (LOSS) ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.
    
    R$
    6,896
    
    
    R$
    (3,942
    )
    
    R$
    13,457Adjustments to reconcile net income to cash provided by
operating activities:Depreciation and amortization
    
    
    5,943
    
    
    
    3,501
    
    
    
    3,249(Gain) Loss on assets sold and impairment of assets
    
    
    (1,225
    )
    
    
    205
    
    
    
    (842
    )Deferred income tax asset
    
    
    
    
    
    
    (4,802
    )
    
    
    (4,343
    )Non-controlling interest
    
    
    198
    
    
    
    981
    
    
    
    Changes in assets and liabilities:(Increase) decrease in:Accounts receivable
    
    
    399
    
    
    
    (2,124
    )
    
    
    (1,305
    )Inventories
    
    
    (792
    )
    
    
    308
    
    
    
    (1,091
    )Prepaid expenses and other current assets
    
    
    (1,394
    )
    
    
    (1,393
    )
    
    
    (1,164
    )Other assets
    
    
    (3,232
    )
    
    
    (1,871
    )
    
    
    (1,366
    )(Decrease) increase in:Accounts payable and accrued expenses
    
    
    1,892
    
    
    
    7,777
    
    
    
    (4,108
    )Payroll and related accruals
    
    
    103
    
    
    
    1,641
    
    
    
    98Taxes
    
    
    1,342
    
    
    
    1,323
    
    
    
    (242
    )Other liabilities
    
    
    771
    
    
    
    2,897
    
    
    
    (2,593
    )Deferred income
    
    
    199
    
    
    
    1,132
    
    
    
    3,532CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
    
    
    11,100
    
    
    
    5,633
    
    
    
    3,282CASH FLOW FROM INVESTING ACTIVITIES:Additions to property and equipment
    
    
    (12,605
    )
    
    
    (12,495
    )
    
    
    (6,039
    )Investiment in subsidiaries acquired
    
    
    
    
    
    
    (4,283
    )
    
    
    Goodwill on acquisition
    
    
    
    
    
    
    (2,895
    )
    
    
    Goodwill remeasurement
    
    
    2,096
    
    
    
    
    
    
    
    Proceeds from sale of property, equipment and deferred charges
    
    
    1,733
    
    
    
    1,527
    
    
    
    1,537CASH FLOWS (USED IN) INVESTING ACTIVITIES
    
    
    (8,776
    )
    
    
    (18,146
    )
    
    
    (4,502
    )CASH FLOW FROM FINANCING ACTIVITIES:Net Borrowings (Repayments) under lines of credit
    
    
    798
    
    
    
    2,927
    
    
    
    4,971Loan contracted for acquisition of assets
    
    
    
    
    
    
    13,737
    
    
    
    Acquisition of Companys own shares
    
    
    (345
    )
    
    
    (541
    )
    
    
    (252
    )Dividend paid
    
    
    
    
    
    
    (679
    )
    
    
    Proceeds from exercise of stock options
    
    
    86
    
    
    
    74
    
    
    
    170CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
    
    
    539
    
    
    
    15,518
    
    
    
    4,889EFFECT OF FOREIGN EXCHANGE RATE
    
    
    (37
    )
    
    
    74
    
    
    
    (134
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    2,826
    
    
    
    3,079
    
    
    
    3,535CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    10,424
    
    
    
    7,345
    
    
    
    3,810CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    R$
    13,250
    
    
    R$
    10,424
    
    
    R$
    7,345
   F - 7




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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in Brazilian Reais, unless otherwise stated)
 1
    
    BUSINESS AND OPERATIONSBrazil Fast Food Corp. (the Company) was incorporated in the State of Delaware on
September 16, 1992. During 1996, the Company acquired 100.0% of the capital of Venbo
Comercio de Alimentos Ltda. (Venbo), a Brazilian limited liability company which conducts
business under the trade name Bobs, owns and, directly and through franchisees, operates
a chain of hamburger fast food restaurants in Brazil.On December 2006, the Company established a holding company, called BFFC do Brasil
Participações Ltda. (BFFC do Brasil, formerly 22N Participações Ltda.), via the capital
contribution of the equity interest it held in Venbo. After this restructuring, completed on
December 31, 2006, all of the Companys businesses in Brazil are being consolidated through
BFFC do Brasil, and Venbo started to be prepared to conduct its business through three
primary divisions: fast food restaurants, franchises and real estate. The creation of BFFC
do Brasil also marked the beginning of the Companys multi-brand program, discussed
below:
 KFC
 During the first quarter of 2007, the Company reached an agreement with Yum! Brands,
owner of the KFC brand. By this agreement, BFFC do Brasil started to conduct the
operations of KFCs four directly owned and operated restaurants in Rio de Janeiro as a
Yum! Brands franchisee. In order to operate the KFC brand in Brazil, the Company,
through BFFC do Brasil, set up a new subsidiary, named CFK Comércio de Alimentos Ltda.
(CFK, formerly Clematis Indústria e Comércio de Alimentos e Participações Ltda.), which
is responsible for managing, developing and expanding KFCs chain in Brazil. CFK
initiated its activities on April 1, 2007, and accordingly, the result of its operation
is included in this report since that date.
 Pizza Hut
 On August 5, 2008 the Company, through its wholly-owned holding subsidiary, BFFC do
Brasil, signed an agreement with a North-American company, RCI -Restaurants Connection
International Inc (RCI), for the acquisition of 60% of its Brazilian subsidiary, IRB -
Internacional Restaurantes do Brasil (IRB). On that date, IRB operated 14 restaurants
in the city of São Paulo  Brazil, as a franchisee of Pizza Hut (another Yum!s brand),
with annual revenues of around R$50.0 million. IRB also operates a coffee concept brand
called In Bocca al Lupo Café with 4 stores in São Paulo.After such acquisition BFFC do Brasil begun to control and manage IRB.The remaining 40% of IRB is hold by another Brazilian company of which the current IRBs
CEO is the main stockholder. Such IRB Officer has been operating the stores for the last
years and has been responsible for raising the company that had gone through a long
period of operating losses.The Company has undertaken a bank loan in order to fund such acquisition through the
Companys subsidiary BFFC do Brasil within UBS Pactual (a Brazilian financial
institution) in the total amount of R$9 million.
 F - 8




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##### Table of Contents



According to the purchase and sale agreement dated as of August 5, 2008, POGO
Participações S.A. (POGO) is the buyer of IRBs capital stock. However, BFFC do Brasil
paid the costs of acquisition (US$5.5 million) to RCI -Restaurants Connection
International Inc (RCI) in behalf of POGO. At the moment of this payment, BFFC do
Brasil accounted for a loan receivable (a portion as other current assets and another
portion as other receivables and other assets) with POGO. BFFC intended to subsequently
convert a portion of such loan into POGO capital stock. However, due to pending legal
issues, only during the fourth quarter of 2008, BFFC do Brasil managed to convert US$2.0
million of such loan into 60% of IRBs capital stock. The other portion of the loan will
be repaid considering the same terms as the loan between BFFC do Brasil and UBS Pactual,
including the interest rates (see discussion on MD&A, at Liquidity and Capital
Resources, B) Debt Obligation  financial institutions). The legal closing date for the
purchase occurred in December, 2008 when the acquirer obtained the control of the
acquiree.Effective December 1, 2008, the Company paid for R$9 million for a 60% ownership interest
in IRBs capital stock. The results of the operations have been included in the
consolidated financial statements beginning at the acquisition date.During the first quarter of 2009, POGO, which owns 100% of
IRBs Capital, was merged into IRB.During 2009, one new restaurant was open and, for 2010, two new restaurants will be open
and a complete reform is foreseen to happen in one restaurant, also with adoption of a
new brand image.
 Doggis
 During October 2008, the Company reached an agreement with G.E.D. Sociedad Anonima, one
of the fast-food leaders in Chile, operating hot dog chain under the trade mark Doggis,
with 150 stores in that country. As per such agreement, BFFC do Brasil will develop own
and franchised hot-dog stores in Brazil and Doggis will develop Bobs brand stores in
Chile. This business will be operated in a Master Franchise concept, with a company
created in Brazil, DGS Comercio de Alimento S.A. (DGS), and another company in Chile,
BBS S.A. (BBS). 80% of capital shares will belong to the local controller of the brand
and 20% to the corresponding partner. The transaction involves an investment of US$0.4
million to capitalize the master franchise companies along the first year of the
agreement. The companies expect to open a maximum of 4 own stores in each country, an
investment of around US$4.0 million. The Company opened the first Doggis store in third
quarter of 2009 and another two were open during the fourth quarter of 2009. During the
fourth quarter of 2009 BBS opened its first three stores in Chile. The present
Consolidated Financial Statement also includes DGS accounts. BBS 2009 results were
recorded through the equity method, representing BFFCs share on such results.
 SUPRILOG
 During the second half of 2008 the Company started to operate a new Subsidiary, Suprilog
Transportadora Ltda, which business is to support all the Companys subsidiaries with
maintenance for restaurant and its equipments, including warehouses for spare parts,
engineering and marketing materials. It may also be used for some particular re-sale
activities of special products or raw-materials used in the stores operation. Although
its financial figures are currently not material, they are being entirely consolidated on
the present Financial Staments.
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2
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESGenerally Accepted Accounting Principles (GAAP)These consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States (U.S. GAAP). Such accounting
principles differ in certain respects from accounting principles generally accepted in
Brazil (Brazilian GAAP), which is applied by the Company for its annual consolidated
financial statement preparation. Unless otherwise specified, all references in these
financial statements to (i) reais, the real or R$ are to the Brazilian real
(singular), or to the Brazilian reais(plural), the legal currency of Brazil, and (ii) U.S.
dollars or $ are to United States dollars.Use of estimatesThe preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.Geographic area of operationsThe Company primarily operates, directly and through franchisees, point of sales in all
Brazilian states (primarily in Rio de Janeiro and São Paulo). Besides the Brazilian
operations, the Company is also present, through Bobs franchisees, in Angola, Africa, and
in Chile, South America. These operations are not material to our overall results. The
operation in Brazil is susceptible to changes in Brazilian economic, political, and social
conditions. Brazil has experienced political, economic and social uncertainty in recent
years, including an economic crisis characterized by exchange rate instability and Real
devaluation, increased inflation, high domestic interest rates, negative economic growth,
reduced consumer purchasing power and high unemployment. Under its current leadership, the
Brazilian government has been pursuing economic stabilization policies, including the
encouragement of foreign trade and investment and an exchange rate policy of free market
flotation. Despite the current improvement of Brazilian economic environment, no assurance
can be given that the Brazilian government will continue to pursue these policies, that
these policies will be successful if pursued or that these policies will not be
significantly altered.A decline in the Brazilian economy, political or social problems or a reversal of Brazils
foreign investment policy is likely to have an adverse effect on the Companys results of
operations and financial condition. Additionally, inflation in Brazil may lead to higher
wages and salaries for employees and increase the cost of raw materials, which would
adversely affect the Companys profitability.
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Risks inherent in foreign operations include nationalization, war, terrorism and other
political risks and risks of increases in foreign taxes or U.S. tax treatment of foreign
taxes paid and the imposition of foreign government royalties and fees.Principles of consolidationThe consolidated financial statements include the accounts of the Company and its (directly
and indirectly) subsidiaries.The wholly-owned subsidiaries of the Company as of December 31, 2009 are BFFC do Brasil,
Venbo, CFK and Suprilog. As discussed at note 1, the Company also own a 60% capital interest
of IRB, 80% of DGS and 20% of BBS.IRBs and DGS accounts are entirely added to the present Consolidated Financial Statements
and figures related to its non-controlling interests are stated both in the Companys equity
(in the Consolidated Balance Sheets) and in the Consolidated Income Statements.The investment in BBS was accounted for as per the equity method.The Companys consolidated financial statements include the accounts of CFK and IRB
subsequent to each acquisition, respectively April 1, 2007 and December 1, 2008, as well as
DGS since the beginning of its operation (third quarter of 2009).All material intercompany accounts and transactions have been eliminated in consolidation.GoodwillGoodwill represents the excess of cost over the net tangible assets and identifiable intangible
assets of acquired businesses. The Companys goodwill results from the acquisition of 60% of IRB.For the acquisition of a 60% of IRB to be recorded in the accounting books, the Companys
management requested assistance from a consultant in obtaining the fair value assessment of IRBs fixed assets. The
assistance included making a financial assessment using discounted cash flows prepared on the basis
of assumptions defined in conjunction with the Companys management. The main purpose of such
assessment was whether on that date there were any signs of impairment, based on the FASB ASC
Recognition and Measurement of an Impairment Loss  The first step of the goodwill impairment
test, used to identify potential impairment, compares the fair value of a reporting unit with its
carrying amount, including goodwill. The guidance in paragraphs 2325 were used to determine the
fair value of a reporting unit. If the fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is considered not impaired, thus the second step of the impairment
test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second
step of the goodwill impairment test shall be performed to measure the amount of impairment loss,
if any.The excess of the fair value of the unit over the amounts assigned to the assets and liabilities is
the implied fair value of goodwill, at the amount of R$2.9 million registered in December, 2008 as
non-current assets.The findings of these assessments were analyzed by the Companys management team and by IRBs
independent auditors. Their conclusion was that the amount allocated as goodwill on December 31,
2008, was adequate.During 2009, the Company reviewed the fair value of
IRBs fixed assets. Such review
reduced the goodwill to R$799 thousand and increased the fixed assets in R$2.1 million.These assessments were undertaken to comply with the U.S. GAAP.Constant currency restatementThrough June 30, 1997 the Brazilian economy was hyperinflationary as defined by guidance of
FASB ASC related to Foreign Currency Translation. The financial
statements prior to that time were comprehensively restated for the effects of inflation.
After that date, inflation restatement was not applied, however the non-monetary assets
reflect the effects of inflation through that date.
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Foreign currencyAssets and liabilities recorded in functional currencies other than Brazilian Reais are
translated into Brazilian Reais at the prevailing exchange rate as reported by the Central
Bank of Brazil as of the balance sheet date. Revenue and expenses are translated at the
weighted-average exchange rates for the year. The resulting translation adjustments are
charged or credited to other comprehensive income. Gains or losses from foreign currency
transactions, such as those resulting from the settlement of receivables or payables
denominated in foreign currency, are recognized in the consolidated income statement as they
occur.Cash and cash equivalentsThe Company considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.Accounts receivableAccounts receivable consist primarily of receivables from food sales, franchise royalties
and assets sold to franchisees.As a rule, all invoices past due over 6 months and below the amount of R$5,000 are
written-off. This criterion is recommended by the Brazilian tax authorities to determine
deductible expenses regarding the accounting judgment applied to the realization of account
receivables. We believe that this fiscal rule is conservative and perfectly applicable to
our business. Despite writing-off those receivables on the accounting books, the finance
department keeps these records to conduct the commercial negotiations.In addition, the Company records a provision for doubtful receivables to allow for any
amounts which may be unrecoverable and is based upon an analysis of the Companys prior
collection experience, customer credit worthiness, and current economic trends. After all
attempts to collect a receivable have failed, the receivable is written off against the
allowance.InventoriesInventories, primarily consisting of food, beverages and supplies, are stated at the lower
of cost or replacement value. Cost of inventories is determined principally on the average
cost method.Property and equipmentProperty and equipment are stated at cost, less accumulated depreciation. Depreciation on
property and equipment is provided using the straight-line method over the following
estimated useful lives of the related assets:
 YearsBuildings and building improvements
    
    
    50Leasehold improvements
    
    
    4-5Machinery and equipment
    
    
    10-15Furniture and fixtures
    
    
    10-15Software
    
    
    35Vehicles
    
    
    5
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Deferred chargesDeferred charges, which relate to leasehold premiums paid in advance for rented outlet
premises are stated at cost, less accumulated amortization. Leasehold premiums related to
unprofitable stores written off.The amortization periods, which range from 5 to 20 years, are the terms of managements
estimate of the related rental contracts including renewal options, which are solely at the
discretion of the Company.Preopening costsLabor costs and the costs of hiring and training personnel and certain other costs relating
to the opening of new restaurants are expensed as incurred.Revenue recognitionRestaurant sales revenue is recognized when purchase in the store is effected.Initial franchise fee revenue is recognized when all material services and conditions
relating to the franchise have been substantially performed or satisfied which normally
occurs when the restaurant is opened. Monthly royalty fees equivalent to on a percentage of the
franchisees gross sales are recognized when earned.Revenue from trade partners, when received in cash is straight recognized as a credit in the
Companys income statement, when received in advance, is recorded as an entry in the Banks
account with counterpart in deferred income (in the liabilities section of the Balance Sheet) and
monthly is proportionally transferred to the income statement (when one year bonus is advanced, the
total amount received is divided by 12, and monthly 1/12 is credited in the income statement), and
when received in products is recognized as cost reduction.Revenues obtained by lease of Companys properties, by administration fees on marketing fund
and nonrecurring gains are recognized as other income when incurred.The Companys subsidiaries record their revenues gross of taxes on sales, since in Brazil these
taxes are included both in sales prices and in royalty fees. In addition, because of specific
tax rules in Brazil, local companies are required to account for sales, even when they are
canceled, recording a separate caption in the general ledger to offset the original sales
amount recorded.However, for reporting purposes, the company states its revenues net of taxes and net of
canceled sales.The following tables set forth gross sales, sales deductions and reported revenues:
 
 NineMonthsTwelve Months ended 31 December,
    
    
    ended September 30,2007
    
    
    2008
    
    
    2009
    
    
    2010Gross Revenues  Own Operated Restaurants
    
    
    90,990
    
    
    
    99,748
    
    
    
    164,402
    
    
    
    125,665(-) Tax on revenues
    
    
    (5,598
    )
    
    
    (9,279
    )
    
    
    (17,248
    )
    
    
    (13,022
    )(-) Canceled Sales
    
    
    (262
    )
    
    
    (347
    )
    
    
    (279
    )
    
    
    (255
    )Net Revenues  Own Operated Restaurant
    
    
    85,130
    
    
    
    90,122
    
    
    
    146,875
    
    
    
    12,388
 
 
 NineMonthsTwelves Months ended 31 December,
    
    
    ended September 30,2007
    
    
    2008
    
    
    2009
    
    
    2010Gross Revenues from Franchises
    
    
    21,789
    
    
    
    25,982
    
    
    
    28,632
    
    
    
    22,860(-) Tax on revenues
    
    
    (2,978
    )
    
    
    (3,555
    )
    
    
    (3,985
    )
    
    
    (3,112
    )Net Revenues from Franchises
    
    
    18,811
    
    
    
    22,427
    
    
    
    24,647
    
    
    
    19,748
 
 
 NineMonthsTwelves Months ended 31 December,
    
    
    ended September 30,2007
    
    
    2008
    
    
    2009
    
    
    2010Gross Revenues from Trade Partners
    
    
    7,351
    
    
    
    9,117
    
    
    
    11,062
    
    
    
    15,811(-) Tax on revenues
    
    
    (678
    )
    
    
    (800
    )
    
    
    (792
    )
    
    
    (1,276
    )Net Revenues from Trade Partners
    
    
    6,673
    
    
    
    8,317
    
    
    
    10,270
    
    
    
    14,535
 
 The relationship between the Company and each of its franchisees is legally bound by a formal
contract, where the franchisee agrees to pay monthly royalty fees equivalent to a percentage of
its gross sales. The formal contract and the franchisees sales (as a consequence of their
business) address three of four requirements for revenue recognition:
 
    
    Persuasive evidence that an arrangement exists  the contract is signed by the
franchisee;
    
    Delivery has occurred or services have been rendered  franchisee sales are the
basis of royalty revenues;
    
    The sellers price to the buyer is fixed or determinable  the contract states that
royalties are a percentage of the franchisees gross sales;
 Regarding the fourth requirement for revenue recognition, that collectability is
reasonably assured, we do cover the issue of collectability when we record the Companys
royalty revenues. First, we record all invoices in the accounts receivable system, so that we
can control when the invoice is due or how long it has been outstanding. These records are all
uploaded to the general ledger. If a franchisee fails to pay its invoices for more than six
months, one of the following procedures is adopted: either (i) the franchisees accounts
receivable are written off if the individual invoices are below R$5,000; or (ii) the Company
records a provision for doubtful accounts if the individual invoices are over R$5,000 .
 The Company records a provision for doubtful receivables to allow for any amounts that may be
unrecoverable based upon an analysis of the Companys prior collection experience, customer
creditworthiness and current economic trends. After all attempts to collect a receivable have
failed, the receivable is written off against the allowance.
 Despite writing-off those receivables on the accounting books or recording a provision for
doubtful accounts, the finance department keeps these records to conduct the commercial
negotiations.
 The Company does not stop invoicing a franchisee if he fails to pay six invoices in a row.
However, it does offset any additional revenues from the debtor franchisee by reversing the
entry uploaded from the accounts receivable system to the general ledger.
 Renegotiated Past Due Accounts
 Currently the Company has approximately 200 franchisees. A few of them may undergo financial
difficulties in the course of their business and may therefore fail to pay their monthly
royalty fees. When a franchisee has past due accounts derived from unpaid royalty fees, the
Company may reassess such debts with the franchisee and reschedule them in installments. The
Company may also intermediate the sale of the franchise business to another franchisee (new or
owner of another franchised store) and reschedule such debts as a portion of the purchase
price. When either kind of agreement is reached, the Company accounts for these amounts as
renegotiated past due accounts. The Company records a provision for doubtful receivables to allow for any amounts that may be
unrecoverable based upon an analysis of the Companys prior collection experience, customer
creditworthiness and current economic trends. After all attempts to collect a receivable have
failed, the receivable is written off against the allowance.

When revenues incurred from franchisees that already have
past due accounts are reversed in the Companys general ledger.
 Marketing expense, Marketing fund and advertising expensesBobs BrandAccording to our franchise agreements, Bobs marketing fund we have dedicated to advertising
and promotion is comprised of financial contributions paid by the franchisees and also by
the contributions due by the Company. The fund resources are administrated by the Company
and must be used in the common interest of Bobs chain, through the best marketing
department efforts, to increase its restaurant sales.Therefore, the marketing contribution from franchisees, are recorded on accrual basis, in
the assets as accounts receivables and cross entry in the liabilities as marketing fund. The
contributions due by Venbo are recorded on accrual basis, as marketing expenses and cross
entry in liabilities as marketing fund.
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In general, Bobs franchisees monthly contribute with 4.0% of their monthly gross sales to
Bobs marketing fund, and since 2006, the Company is also committed to contribute at least
4.0% of its own-operated restaurant monthly gross sales (sales derived from special events
are not subject to such contribution). These contributions can be deducted by the Companys
marketing department expenses, if previously agreed with the Companys franchisees. However,
the total of marketing investments may be greater than 4.0% of combined sales, if there is
any supplier additional contribution (joint marketing programs) or if the Company use
additional own cash on marketing advertising and promotion. Currently, the company
reached around of 10% of gross sales.The Company primarily invests Bobs marketing fund resources on nationwide advertising
programs (commercials or sponsorship on TV, radio and outdoors). The Companys franchisees
may also directly invest in advertising and promotions for their own stores, upon previous
consent from the Company, which freely decides whether the cost of such single advertisement
or promotion could be deducted from the marketing contribution owed.The Bobs marketing fund resources are not required to be invested during the same month or
year that they were received, but they must be used in subsequent periods.Periodically, the Company meets Bobs Franchisee Council to demonstrate the marketing fund
accounts, through a report similar to a statement of cash flows. This statement discloses
the marketing contributions received and the marketing expenses, both in cash basis. To
provide absolute transparency and comply with the Companys franchisees request, all
accounts included in the Marketing Fund are revised by independent auditors.The balance of eventual non-invested marketing fund is recorded as accounts payable accrued
expenses at the balance sheet. This balance represents contributions made by Venbo and by
the franchisees, but not used in campaigns yet, thus, these balances are, as agreed with the
franchisees chain, an obligation of Venbo on that date.The marketing fund expenses on advertising and promotions are recognized as incurred. Total
marketing investments financed by the marketing fund amounted R$19.3 million, R$20.3 million
and R$19.4million for the years ended December 31, 2009, 2008 and 2007, respectively.
 KFC and Pizza Hut Brands
 KFC and Pizza Hut brands have no Marketing Fund since they have no franchisees up to
the end of 2009.However, the Company monthly contributes with 0.5% of KFC and Pizza Hut monthly net
sales to a marketing fund managed by YUM! Brands  Brazil. In addition, the Company is also
committed to invest 5.0% of KFC and Pizza Hut monthly net sales on local marketing and
advertising activities.The marketing expenses on KFC and Pizza Hut advertising and promotions are recognized as
incurred and amounted R$3.6 million and R$3.4 million for the years ended December 31, 2009
and 2008, respectively.
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Doggis
 The Company is committed to invest at least 4% of Doggis restaurant sales in local
marketing expenses. There is no contribution to a marketing fund.Local marketing expenses on Doggis advertising and promotions are recognized as
incurred and amounted R$0.2 million for its four month period of operations during 2009.Stock optionsSince January, 2006, the Company adopted the guidance of FASB ASC on Share-Based Payment,
using the modified-prospective transition method. Under this transition method, compensation
cost beginning in 2006 includes the portion vesting in the period for (1) all share-based
payments granted prior to, but not vested as of January 1, 2006, based on the grant date
fair value estimated in accordance with the original guidance on Share-Based Payment and (2)
all share-based payments granted subsequent to January 1, 2006, based on the grant date fair
value estimated in accordance with the provisions of most recent guidance. Results for prior
periods have not been restated.During 2005, the Companys Board of Directors and a majority of the shareholders of the
Company decided that Board compensation would be paid in cash and that no more stock options
would be granted. Accordingly, during 2009, 2008 and 2007, no options were granted.Compensation expense related to share-based awards is generally amortized on a straight-line
basis over the vesting period other income (expenses) in the consolidated statement of
results. In the beginning of 2009 the last 35,000 outstanding options were exercised and no
share-based compensation was charged to Companys results. In 2008, results included
share-based compensation expense of R$5 thousand both in 2008 and in 2007.Income taxesThe Company accounts for income taxes in accordance with guidance provided by the FASC ASC
on Accounting for Income Taxes. Under the asset and liability method of such guidance,
deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis and operating loss carry-forwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be
recovered or settled. Under the above referred guidance, the effect of a change in tax rates
or deferred tax assets and liabilities is recognized in income in the period that includes
the enactment date.The effect of income tax positions are recorded only if those positions are more likely
than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Although we do not currently have any material charges related to interest and penalties, such costs, if incurred, are reported within the provision for income taxes.Long-lived and intangibles assetsThe Company adopted guidance on the impairment or disposal of long-lived assets in the
Property Plant and Equipment Topic of the FASB ASC, which requires that long-lived assets
being disposed of be measured at the lower of carrying amount or fair value less cost to
sell, whether reported in continuing operations or in discontinued operations.
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If an indicator of impairment (e.g., negative operating cash flows for the most recent
trailing twelve-month period) exists for any grouping of assets, an estimate of undiscounted
future cash flows produced by each restaurant within the asset grouping is compared to its
carrying value. If any asset is determined to be impaired, the loss is measured by the
excess of the carrying amount of the asset over its fair value as determined by an estimate
of discounted future cash flows.The Company applied annually impairment tests, mainly at its goodwill, property, equipment
and deferred charges. For the year ended December 31, 2009 no adjustments were required
according to those tests.Net income (loss) per common shareThe Company applies adopted guidance on Earnings per Share Topic of the FASB
ASC, in the calculation of earnings per share. Under this standard, Basic EPS is
computed based on weighted average shares outstanding and excludes any potential dilution;
Diluted EPS reflects potential dilution from the exercise or conversion of securities into
common stock or from other contracts to issue common stock. There were no common share
equivalents outstanding as of December 31, 2009, 2008 and 2007 that would have had a
dilutive effect on earnings for those respective years.Recently issued accounting standardsIn 2006, the FASB issued guidance on accounting for uncertainty in income taxes, codified
primarily in the Income Taxes Topic of the FASB ASC .This guidance clarifies the
accounting for income taxes by prescribing the minimum recognition threshold a tax position
is required to meet before being recognized in the financial statements. This guidance also
provides guidance on derecognition, measurement, classification, interest and penalties,
accounting in interim periods, disclosure and transition. The provisions of this guidance
establish the cumulative effect of the change in accounting principle to be recorded as an
adjustment to retained earnings. The Company adopted guidance on accounting for uncertainty
in income taxes effective January 1, 2007, as required, however, its adoption did not
derived material effects on the Companys consolidated financial statements.In April 2009, the FASB provided additional guidance for estimating fair value in
accordance with FASB ASC Fair Value Measurements and Disclosures when there is no active
market or where the price inputs being used represent distressed sales. This guidance
reaffirms the objective of fair value measurement, which is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a
forced liquidation or distressed sale). It also reaffirms the need to use judgment to
determine if a formerly active market has become inactive, as well as to determine fair
values when markets have become inactive. This update to FASB ASC Fair Value Measurements
and Disclosures was effective prospectively for reporting periods ending after June 15,
2009. The adoption of this update in the second quarter of 2009 did not impact our
consolidated financial position, results of operations, or cash flows.Derivatives and Hedging  We adopted the amendment to FASB ASC Derivatives and Hedging on
January 1, 2009. This amendment expands the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative instruments
and related hedged items are accounted for under FASB ASC Derivatives and Hedging, and (c)
how derivative instruments and related hedged items affect an entitys financial position,
financial performance, and cash flows. The adoption of this accounting standard on January
1, 2009 did not impact our consolidated financial position, results of operations, or cash
flows.
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Non-controlling Interest  During 2009 the Company adopted certain provisions of FASB ASC
805-20 Business Combinations  Identifiable Assets and Liabilities, and Any Noncontrolling
Interest. These establish accounting and reporting standards for the non-controlling
interest (formerly known as minority interest) in a subsidiary (which may include variable
interest entities) and for the deconsolidation of a subsidiary. Significant changes include:
balance sheet and income statement presentation and expanded disclosures; accounting for
changes in a parent ownership interest in a subsidiary that do not result in
deconsolidation; and recognition and measurement of a gain or loss when a subsidiary is
deconsolidated. For balance sheet presentation, non-controlling interests are now recorded
within equity and so-called mezzanine display is not permitted. In income statements, the
amount of income attributable to the non-controlling interest is now a deduction that impacts
net income. The statement requires prospective application except for the presentation and
disclosure requirements, which must be applied retrospectively for all periods presented.
Prior periods were reclassified to conform to the current period presentation.Interim Disclosures  Fair Value of Financial Instruments  We adopted the amendment to
FASB ASC Interim Disclosures about Fair Value of Financial Instruments in the second
quarter of 2009. This amendment requires the existing disclosure requirements related to the
fair value of financial instruments be extended to interim periods that were previously only
required in annual financial statements. The adoption of this accounting standard in the
second quarter of 2009 did not impact our consolidated financial position, results of
operations, or cash flows.Subsequent Events  We adopted FASB ASC Subsequent Events in the second quarter of 2009.
This accounting standard establishes the accounting for and disclosure of events that occur
after the balance sheet date but before financial statements are issued or are available to
be issued. It requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date; that is, whether that date represents the date
the financial statements were issued or were available to be issued. Consistent with the
requirements of this accounting standard for public entities, we evaluate subsequent events
through the date the financial statements are issued. FASB ASC Subsequent Events should
not result in significant changes in the subsequent events that an entity reports, either
through recognition or disclosure, in its financial statements. The adoption of this
accounting standard in the second quarter of 2009 did not impact our consolidated financial
position, results of operations, or cash flows. The FASB amended this accounting guidance in
March 2010, effective immediately, to exclude public entities from the requirement to
disclose the date on which subsequent events have been evaluated. In addition, the amendment
modified the requirement to disclose the date on which subsequent events have been evaluated
in reissued financial statements to apply only to such statements that have been restated to
correct an error or to apply U.S. GAAP retrospectively. As a result of this amendment, we
did not disclose the date through which we evaluated subsequent events in this report on Form
10-K.FASB Accounting Standards Codification  In June 2009, the FASB issued FASB ASC The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles. The FASB Accounting Standards Codification has become the source of
authoritative accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in accordance with GAAP. All existing
accounting standard documents are superseded by the FASB ASC and any accounting literature
not included in the FASB ASC will not be authoritative. However, rules and interpretive
releases of the SEC issued under the authority of federal securities laws will continue to be
sources of authoritative GAAP for SEC registrants. This accounting standard is effective for
interim and annual reporting periods ending after September 15, 2009. Therefore, beginning
with our third quarter 2009 report on Form 10-Q, all references made to GAAP in our
consolidated financial statements now reference the new FASB
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ASC. This accounting standard does not change or alter existing GAAP and, therefore, did not impact our consolidated financial
position, results of operations, or cash flows.In June 2009, the FASB issued changes on guidelines of consolidation of variable
interest entities. Such new guidelines determine when an entity that is insufficiently
capitalized or not controlled through voting interests should be consolidated. According to
this recent accounting pronouncement, the company has to determine whether it should provide
consolidated reporting of an entity based upon the entitys purpose and design and the parent
companys ability to direct the entitys actions. The guidance is to be adopted during 2010
fiscal year. The Company does not expect adoption of this guidance to have a material impact
on its consolidated financial statements.In January 2010, the FASB issued amendments to the existing fair value measurements and
disclosures guidance which requires new disclosures and clarifies existing disclosure
requirements. The purpose of these amendments is to provide a greater level of disaggregated
information as well as more disclosure around valuation techniques and inputs to fair value
measurements. The guidance is to be adopted during 2010 fiscal year. The Company does not
expect adoption of this guidance to have a material impact on its consolidated financial
statements.
 3
    
    CASH AND CASH EQUIVALENTSCash and cash equivalent consists of the following:
 December 31,R$000
    
    2009
    
    
    2008Cash at point of sales
    
    R$
    1,435
    
    
    R$
    1,354Cash with money collectors
    
    
    561
    
    
    
    288Bank accounts
    
    
    2,028
    
    
    
    281Investments funds
    
    
    9,226
    
    
    
    8,501R$
    13,250
    
    
    R$
    10,424
 Bank account figures are comprised of the amount of R$298,000 (R$54,000 in 2008) which is
deposited in a financial institution located in the U.S.A. and the remaining balance in
financial institutions located in Brazil.The Company invests its temporary overflow of cash in financial funds linked, in their
majority, to fixed-income securities. In 2009, a portion of those investments were pledged to
UBS Pactual loan (note 8.c), related to the acquisition of Pizza Hut business in
Brazil.
 F - 18




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##### Table of Contents



4
    
    ACCOUNTS RECEIVABLEAccounts Receivables consists of the following:
 
 December 31,R$000
    
    2009
    
    
    2008Clients  food sales
    
    R$
    6,199
    
    
    R$
    3,952Clients  other
    
    
    102
    
    
    
    Franchisees  current accounts
    
    
    4,385
    
    
    
    5,684Franchisees  renegotiated past due accounts
    
    
    1,498
    
    
    
    1,726Franchisees  receivable from
sales of assets
    
    
    419
    
    
    
    593Allowance for doubtful accounts
    
    
    (2,261
    )
    
    
    (1,214
    )R$
    10,342
    
    
    R$
    10,741
 
 5
    
    OTHER CURRENT ASSETS, OTHER RECEIVABLES AND OTHER ASSETSOther assets consist of the following:R$000Other current assets:
 December 31,2009
    
    
    2008Witholding taxes
    
    R$
    600
    
    
    R$
    772Receivables from franchisees and from FBD (a)
    
    
    2.689
    
    
    
    897Other current receivables
    
    
    34
    
    
    
    973R$
    3.323
    
    
    R$
    2.642
 R$000Other receivables and other assets:
 December 31,2009
    
    
    2008Receivables from franchisees  assets sold (b)
    
    R$
    700
    
    
    
    267Judicial deposits (c)
    
    
    10.134
    
    
    
    7.419Other receivables
    
    
    114
    
    
    
    30R$
    10.948
    
    
    R$
    7.716
 
 (a)
    
    Short term receivables from franchisees developed from rights other than
royalties and sale of assets and receivables derived from transaction discussed at
note 1;(b)
    
    Long term portion of receivables derived from selling of restaurants to
franchisees; and(c)
    
    Deposits required by Brazilian court in connection to some legal disputes,
also discussed at note 12.c; F - 19




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##### Table of Contents



6 PROPERTY AND EQUIPMENT, NET
  December 31,R$000
    
    2009
    
    
    2008Land
    
    R$
    2,322
    
    
    R$
    2,322Buildings and building improvements
    
    
    4,831
    
    
    
    5,077Leasehold improvements
    
    
    18,785
    
    
    
    16,525Machinery, equipment and software
    
    
    29,177
    
    
    
    27,691Furniture and fixtures
    
    
    6,147
    
    
    
    6,569Assets under capitalized leases
    
    
    1,949
    
    
    
    3,218Vehicles
    
    
    409
    
    
    
    348Work in progress
    
    
    674
    
    
    
    6464,294
    
    
    
    61,814Less: Accumulated depreciation and
amortization
    
    
    (29,291
    )
    
    
    (30,710
    )R$
    35,003
    
    
    R$
    31,104
 7 DEFERRED CHARGES, NET
  December 31,R$000
    
    2009
    
    
    2008Leasehold premiums
    
    R$
    13,120
    
    
    R$
    10,374Franchise Charges
    
    
    1,218
    
    
    
    Less: Accumulated amortization
    
    
    (7,539
    )
    
    
    (5,830
    )R$
    6,799
    
    
    R$
    4,544
 F - 20




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##### Table of Contents



8 NOTES PAYABLE
  December 31,R$000
    
    2009
    
    
    2008Revolving lines of credit (a)
    
    R$
    11,422
    
    
    R$
    4,641Leasing facilities (b)
    
    
    1,373
    
    
    
    3,257Other loan (c)
    
    
    9,638
    
    
    
    13,73722,433
    
    
    
    21,635Less: current portion
    
    
    (13,829
    )
    
    
    (10,536
    )R$
    8,604
    
    
    R$
    11,099
  R$0002010
    
    R$
    13,8292011
    
    
    6,3002012
    
    
    2,304R$
    22,433
     F - 21




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##### Table of Contents



9 ACCOUNTS PAYABLE AND ACCRUED EXPENSES
  December 31,R$000
    
    2009
    
    
    2008Suppliers
    
    R$
    10,751
    
    
    R$
    9,804Rent payable
    
    
    1,657
    
    
    
    1,191Consulting fees
    
    
    596
    
    
    
    260Accrued utilities
    
    
    805
    
    
    
    367Accrued maintenance
    
    
    267
    
    
    
    447Accrued advertising
    
    
    158
    
    
    
    778Marketing fund
    
    
    1,010
    
    
    
    184Royalty payable
    
    
    444
    
    
    
    264Other accrued liabilities
    
    
    587
    
    
    
    1,088R$
    16,275
    
    
    R$
    14,383
  10 CASH FLOW INFORMATION
  December 31,R$000
    
    2008
    
    
    2008
    
    
    2007Interest paid
    
    R$
    4,836
    
    
    R$
    1,644
    
    
    R$
    465Income taxes paid
    
    R$
    103
    
    
    R$
    270
    
    
    R$
    69
 F - 22




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##### Table of Contents



11 INCOME TAXES
    December 31,R$000
    
    2009
    
    
    2008
    
    
    2007Tax (expense) income at the combined statutory rate
    
    R$
    (2,418
    )
    
    R$
    1,300
    
    
    R$
    (3,114
    )Current income tax offset by
accumulated tax loss credits
    
    
    
    
    
    
    
    
    
    
    1,114Combined statutory rate applied to differences between
taxable results in Brazil and reported results
    
    
    2,382
    
    
    
    (2,046
    )
    
    
    1,954Income tax (expense) as reported in the accompanying
consolidated statement of operations
    
    R$
    (36
    )
    
    R$
    (746
    )
    
    R$
    (46
    )
  F - 23




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##### Table of Contents



December 31,R$000
    
    2009
    
    
    2008Deferred tax assets:Tax loss carry forward
    
    R$
    20,738
    
    
    R$
    21,790Provision for contingencies
    
    
    2,539
    
    
    
    2,100Deferred charges
    
    
    2,126
    
    
    
    (28
    )Total deferred tax assets
    
    
    25,403
    
    
    
    23,862Deferred tax liabilities:Property and equipment
    
    
    3,881
    
    
    
    3,448Total deferred tax liabilities
    
    
    3,881
    
    
    
    3,448Net deferred tax asset
    
    
    21,522
    
    
    
    20,414Valuation allowance
    
    
    (7,925
    )
    
    
    (6,726
    )R$
    13,597
    
    
    R$
    13,688
  12 COMMITMENTS AND LITIGATION
 a) Operating leases
  R$000Fiscal Year
    
    Contractual Leases2010
    
    
    6,9142011
    
    
    5,9482012
    
    
    2,6602013
    
    
    1,8302014
    
    
    1,469Thereafter
    
    
    1,630Total
    
    
    20,451
 F - 24




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##### Table of Contents



b) Other commitments
    F - 25




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##### Table of Contents



c) Reassessed taxes and Contingencies
  December 31,2009
    
    
    
    
    
    
    
    
    
    
    2008Long
    
    
    
    
    
    
    
    
    
    
    LongTotal
    
    
    Current
    
    
    Term
    
    
    Total
    
    
    Current
    
    
    TermR$000
    
    Liability
    
    
    Liability
    
    
    Liability
    
    
    Liability
    
    
    Liability
    
    
    LiabilityReassessed taxesFederal taxes
    
    
    13,011
    
    
    
    1,676
    
    
    
    11,335
    
    
    
    13,712
    
    
    
    1,677
    
    
    
    12,035ContingenciesISS tax litigation
    
    
    5,123
    
    
    
    
    
    
    
    5,123
    
    
    
    3,828
    
    
    
    
    
    
    
    3,828Labor litigation
    
    
    2,137
    
    
    
    
    
    
    
    2,137
    
    
    
    2,065
    
    
    
    
    
    
    
    2,065Property leasing litigation
and other litigation
    
    
    208
    
    
    
    
    
    
    
    208
    
    
    
    282
    
    
    
    
    
    
    
    282TOTAL
    
    
    20,479
    
    
    
    1,676
    
    
    
    18,803
    
    
    
    19,887
    
    
    
    1,677
    
    
    
    18,210
 Reassessed taxes
      F - 26




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##### Table of Contents



Contingencies
 
    
    ISS litigation
     F - 27




---



##### Table of Contents




    
    Labor litigations
  Other contingencies
       F - 28




---



##### Table of Contents



F - 29




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##### Table of Contents



13 SHAREHOLDERS EQUITY
 Preferred stock
  Common Stock
  December 31,2009
    
    
    2008Issued shares
    
    
    8,472,927
    
    
    
    8,437,927Less: Treasury stock
    
    
    (335,165
    )
    
    
    (289,210
    )Outstanding shares
    
    
    8,137,762
    
    
    
    8,148,717
 Stock repurchase plan
   F - 30




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##### Table of Contents



Severance agreement
  Stock option plan
        F - 31




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOptions outstanding
at beginning of year
    
    
    35,000
    
    
    $
    1.06
    
    
    
    68,750
    
    
    $
    1.22
    
    
    
    78,750
    
    
    $
    1.35Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (35,000
    )
    
    
    1.06
    
    
    
    (33,750
    )
    
    
    1.39
    
    
    
    (10,000
    )
    
    
    2.19Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options outstanding
at December 31,
    
    
    
    
    
    $
    
    
    
    
    35,000
    
    
    $
    1.06
    
    
    
    68,750
    
    
    $
    1.22Options exercisable
at December 31,
    
    
    
    
    
    $
    
    
    
    
    35,000
    
    
    $
    1.06
    
    
    
    68,750
    
    
    $
    1.22
 14 ADMINISTRATIVE EXPENSES
  Year Ended December 31,R$000
    
    2009
    
    
    2008
    
    
    2007Payroll & Related Benefits
    
    
    9,575
    
    
    
    7,628
    
    
    
    6,522Occupancy expenses
    
    
    2,182
    
    
    
    1,940
    
    
    
    1,445Legal, accounting and
consulting
    
    
    4,714
    
    
    
    3,310
    
    
    
    1,821Maintenance Expenses
    
    
    337
    
    
    
    629
    
    
    
    401IT Expenses
    
    
    705
    
    
    
    777
    
    
    
    613Travel and transport expenses
    
    
    1,021
    
    
    
    550
    
    
    
    525Bank Charges
    
    
    410
    
    
    
    227
    
    
    
    179Other Administrative Expenses
    
    
    2,354
    
    
    
    2,381
    
    
    
    1,92421,298
    
    
    
    17,442
    
    
    
    13,430
 F - 32




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##### Table of Contents



15 OTHER OPERATING EXPENSES
  December 31,R$000
    
    2009
    
    
    2008
    
    
    2007Uncollectable receivables
    
    
    (502
    )
    
    
    (851
    )
    
    
    (1,288
    )Reassessed tax and other tax adjustments
    
    
    187
    
    
    
    
    
    
    
    424Accruals for contingencies
    
    
    (443
    )
    
    
    
    
    
    
    215Depreciation of Headquarters fixed assets
    
    
    (805
    )
    
    
    (682
    )
    
    
    (833
    )Professional fees for tax consulting
    
    
    
    
    
    
    
    
    
    
    (1,793
    )Preoperating and other (expenses) income
    
    
    (2,834
    )
    
    
    (1,343
    )
    
    
    330R$
    (4,397
    )
    
    R$
    (2,876
    )
    
    R$
    (2,945
    )
 16 INTEREST EXPENSE, NET
  December 31,R$000
    
    2009
    
    
    2008
    
    
    2007Interest income
    
    
    1,424
    
    
    
    1,896
    
    
    
    579Interest expenses
    
    
    (6,306
    )
    
    
    (11,573
    )
    
    
    (1,276
    )R$
    (4,882
    )
    
    R$
    (9,677
    )
    
    R$
    (697
    )
  17 TRANSACTIONS WITH RELATED PARTIES
  F - 33




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##### Table of Contents



18 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
 2009First
    
    
    Second
    
    
    Third
    
    
    FourthR$000
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterNet Restaurant Sales
    
    
    34,974
    
    
    
    33,356
    
    
    
    36,986
    
    
    
    41,559Net Franchise Revenues
    
    
    6,092
    
    
    
    4,936
    
    
    
    6,120
    
    
    
    7,499Operating income (loss)
    
    
    1,832
    
    
    
    1,670
    
    
    
    3,299
    
    
    
    5,193Net income (loss)
    
    
    1,123
    
    
    
    350
    
    
    
    2,151
    
    
    
    3,272Basic and diluted income per share
    
    
    0.14
    
    
    
    0.04
    
    
    
    0.26
    
    
    
    0.41Weighted average common shares
outstanding
    
    
    8,172,166
    
    
    
    8,157,902
    
    
    
    8,142,061
    
    
    
    8,138,321
 R$000
    
    2008Net Restaurant Sales
    
    
    20,628
    
    
    
    18,539
    
    
    
    21,670
    
    
    
    29,285Net Franchise Revenues
    
    
    4,965
    
    
    
    5,151
    
    
    
    5,699
    
    
    
    6,612Operating income
    
    
    2,278
    
    
    
    (10
    )
    
    
    1,878
    
    
    
    1,707Net income (loss)
    
    
    2,029
    
    
    
    39
    
    
    
    1,935
    
    
    
    (7,945
    )Basic and diluted
income  per
share
    
    
    0.25
    
    
    
    0.00
    
    
    
    0.24
    
    
    
    (0.97
    )Weighted average
common shares
outstanding
    
    
    8,192,720
    
    
    
    8,166,961
    
    
    
    8,149,919
    
    
    
    8,146,612
 F - 34




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##### Table of Contents



19 SEGMENT INFORMATION
        Results from own-stores operationsYear Ended December 31,R$000
    
    2009
    
    
    2008
    
    
    2007Revenues
    
    R$
    146,875
    
    
    R$
    90,122
    
    
    R$
    85,904Food, Beverage and Packaging
    
    
    (51,720
    )
    
    
    (34,578
    )
    
    
    (31,334
    )Payroll & Related Benefits
    
    
    (33,787
    )
    
    
    (24,939
    )
    
    
    (22,807
    )Restaurant Occupancy
    
    
    (15,446
    )
    
    
    (10,236
    )
    
    
    (10,107
    )Contracted Services
    
    
    (16,768
    )
    
    
    (10,036
    )
    
    
    (11,681
    )Depreciation and Amortization
    
    
    (5,138
    )
    
    
    (2,819
    )
    
    
    (2,416
    )Royalties charged
    
    
    (3,537
    )
    
    
    (271
    )
    
    
    Other Store Costs and Expenses
    
    
    (9,319
    )
    
    
    (6,850
    )
    
    
    (5,004
    )Total Own-stores cost and expenses
    
    
    (135,715
    )
    
    
    (89,729
    )
    
    
    (83,349
    )Operating margin
    
    R$
    11,160
    
    
    R$
    393
    
    
    R$
    2,555
 F - 35




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##### Table of Contents



Results from franchise operationsYear Ended December 31,R$000
    
    2009
    
    
    2008
    
    
    2007Revenues
    
    R$
    24,647
    
    
    R$
    22,427
    
    
    R$
    18,811Payroll & Related Benefits
    
    
    (5,393
    )
    
    
    (3,110
    )
    
    
    (2,600
    )Occupancy expenses
    
    
    (709
    )
    
    
    (671
    )
    
    
    (283
    )Travel expenses
    
    
    (784
    )
    
    
    (758
    )
    
    
    (334
    )Contracted Services
    
    
    (715
    )
    
    
    (665
    )
    
    
    (68
    )Other franchise cost and expenses
    
    
    (1,018
    )
    
    
    (1,003
    )
    
    
    (338
    )Total franchise cost and expenses
    
    
    (8,619
    )
    
    
    (6,207
    )
    
    
    (3,623
    )Operating margin
    
    R$
    16,028
    
    
    R$
    16,220
    
    
    R$
    15,188
     F - 36




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##### Table of Contents



Results from Bobs brand operations
    
    
    Results from KFCs brand operationsYear Ended December 31,
    
    
    Year Ended December 31,R$000
    
    2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007 *Revenues
    
    R$
    78,686
    
    
    R$
    75,133
    
    
    R$
    80,111
    
    
    R$
    18,868
    
    
    R$
    10,640
    
    
    R$
    5,793Food, Beverage and Packaging
    
    
    (29,272
    )
    
    
    (29,255
    )
    
    
    (29,502
    )
    
    
    (7,293
    )
    
    
    (4,082
    )
    
    
    (1,832
    )Payroll & Related Benefits
    
    
    (18,523
    )
    
    
    (20,127
    )
    
    
    (21,096
    )
    
    
    (4,617
    )
    
    
    (3,156
    )
    
    
    (1,711
    )Occupancy expenses
    
    
    (8,560
    )
    
    
    (8,359
    )
    
    
    (9,209
    )
    
    
    (2,417
    )
    
    
    (1,437
    )
    
    
    (898
    )Contracted Services
    
    
    (9,124
    )
    
    
    (8,383
    )
    
    
    (10,913
    )
    
    
    (2,393
    )
    
    
    (1,653
    )
    
    
    (768
    )Depreciation and Amortization
    
    
    (2,569
    )
    
    
    (2,611
    )
    
    
    (2,410
    )
    
    
    (879
    )
    
    
    (95
    )
    
    
    (6
    )Royalties charged
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (555
    )
    
    
    (189
    )
    
    
    Other Store Costs and Expenses
    
    
    (5,800
    )
    
    
    (6,356
    )
    
    
    (4,872
    )
    
    
    (676
    )
    
    
    (305
    )
    
    
    (132
    )Total Own-stores cost and expenses
    
    
    (73,848
    )
    
    
    (75,091
    )
    
    
    (78,002
    )
    
    
    (18,830
    )
    
    
    (10,917
    )
    
    
    (5,347
    )Operating margin
    
    R$
    4,838
    
    
    R$
    42
    
    
    R$
    2,109
    
    
    R$
    38
    
    
    R$
    (277
    )
    
    R$
    446
 Results fromDoggis brandoperationsResults from Pizza Huts brand operations
    
    
    Year EndedYear Ended December 31,
    
    
    December 31,R$000
    
    2009
    
    
    2008 **
    
    
    2009 ***Revenues
    
    R$
    48,764
    
    
    R$
    4,349
    
    
    R$
    557Food, Beverage and Packaging
    
    
    (14,808
    )
    
    
    (1,241
    )
    
    
    (347
    )Payroll & Related Benefits
    
    
    (10,442
    )
    
    
    (1,656
    )
    
    
    (205
    )Occupancy expenses
    
    
    (4,377
    )
    
    
    (440
    )
    
    
    (92
    )Contracted Services
    
    
    (5,191
    )
    
    
    
    
    
    
    (60
    )Depreciation and Amortization
    
    
    (1,658
    )
    
    
    (113
    )
    
    
    (32
    )Royalties charged
    
    
    (2,982
    )
    
    
    
    
    
    
    Other Store Costs and Expenses
    
    
    (2,798
    )
    
    
    (271
    )
    
    
    (45
    )Total Own-stores cost and expenses
    
    
    (42,256
    )
    
    
    (3,721
    )
    
    
    (781
    )Operating margin
    
    R$
    6,508
    
    
    R$
    628
    
    
    R$
    (224
    )
 
 *
    
    KFCs 2007 figures are comprised of nine months, since its operations started on April 1,
2007.**
    
    Pizza Huts 2008 figures are comprised of one month, since its operations started on December 1,
2008.***
    
    Doggis 2009 figures are comprised of four months, since its operations started on September 1,
2009. F-37




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    Certificate of Incorporation of the Registrant, as amended(1)3.2
    
    By-laws of the Registrant (2)10.1
    
    Amended and Restated 1992 Stock Option Plan (2))21.1
    
    Subsidiaries of Registrant (3)24.1
    
    Power of Attorney (comprises a portion of the signature page of this report)31.1*
    
    Certification by Ricardo Figueiredo Bomeny, Chief Executive Officer and
Acting Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
of 200232.1*
    
    Certification by Ricardo Figueiredo Bomeny, Chief Executive Officer and
Acting Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 200299.1
    
    Certifying Statement of the Chief Executive Officer and Acting Chief
Financial Officer pursuant to Section 1350 of the Title 18 of the United States
Code.
 
 *
    
    Filed herewith.(1)
    
    Filed as an exhibit to Registrants Registration Statement on Form S-1 (File No.
333-3754).(2)
    
    Filed as an exhibit to Registrants Registration Statement on Form S-1 (File
No. 33-71368).(3)
    
    Filed as an exhibit to Registrants Annual Report on Form 10-K for the year
ended December 31, 1997 (File No. 0-23278). 61