##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 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.
  Delaware
    
    13-3688737(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 Rua Voluntários da Pátria 89, 9o andar
 Botafogo, CEP 22.270-010, Rio de Janeiro, Brazil
       o þ
  o þ
  þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
   Class
    
    Outstanding at April 6, 2009Common Stock, $0.0001 par value per share
    
    8,437,927 shares
 Documents Incorporated By Reference




---



##### 



PART I
    
    
    4ITEM 1. BUSINESS
    
    
    4ITEM 1A. RISK FACTORS
    
    
    13ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    15ITEM 2. PROPERTIES
    
    
    15ITEM 3. LEGAL PROCEEDINGS
    
    
    16ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
    
    
    18PART II
    
    
    19ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    19ITEM 6. SELECTED CONSOLIDATED HISTORICAL FINANCIAL
DATA
    
    
    21ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    22ITEM 7A. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET
RISK
    
    
    44ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    45ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    64ITEM 9A. CONTROLS AND PROCEDURES
    
    
    64ITEM 9B. OTHER INFORMATION
    
    
    66PART III
    
    
    67ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    67ITEM 11. EXECUTIVE COMPENSATION
    
    
    67ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    67ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    67ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    67ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8 - K
    
    
    68EX-31.1EX-32.1
  2




---



##### Table of Contents



EXHIBIT INDEX
    
    70REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    F-2REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONSOLIDATED BALANCE SHEETS
    
    F-3CONSOLIDATED STATEMENTS OF OPERATIONS
    
    F-4CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
    
    F-5CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (DEFICIT)
    
    F-6CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    F-7NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    F-8 to F-38Sec. 302 Certification of CEO & CFOSec. 906 Certification of CEO & CFO
 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).
 3




---



##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
     Recent Developments
    4




---



##### Table of Contents



Restaurant Operations (Bobs & KFC)
    5




---



##### Table of Contents



Years Ended December 31,2008
    
    2007
    
    2006Stores
    
    Kiosks
    
    Stores
    
    Kiosks
    
    Stores
    
    KiosksOwned and operated restaurants:Opened during period
    
    
    2
    
    
    
    4
    
    
    
    1
    
    
    
    3
    
    
    
    0
    
    
    
    3Closed during period
    
    
    1
    
    
    
    0
    
    
    
    1
    
    
    
    2
    
    
    
    5
    
    
    
    2Sold to franchisees
    
    
    1
    
    
    
    0
    
    
    
    3
    
    
    
    2
    
    
    
    0
    
    
    
    0Bought from franchisees
    
    
    0
    
    
    
    0
    
    
    
    1
    
    
    
    0
    
    
    
    0
    
    
    
    0Open at end of period
    
    
    42
    
    
    
    20
    
    
    
    42
    
    
    
    16
    
    
    
    44
    
    
    
    17Franchised restaurants:Opened during period
    
    
    28
    
    
    
    49
    
    
    
    30
    
    
    
    56
    
    
    
    40
    
    
    
    43Closed during period
    
    
    13
    
    
    
    7
    
    
    
    17
    
    
    
    7
    
    
    
    7
    
    
    
    6Sold to us by our franchisees
    
    
    0
    
    
    
    0
    
    
    
    1
    
    
    
    0
    
    
    
    0
    
    
    
    0Bought from us by our franchisees
    
    
    1
    
    
    
    0
    
    
    
    3
    
    
    
    2
    
    
    
    0
    
    
    
    0Open at end of period
    
    
    323
    
    
    
    257
    
    
    
    307
    
    
    
    215
    
    
    
    292
    
    
    
    164Total stores & kiosks at end of period:
    
    
    365
    
    
    
    277
    
    
    
    349
    
    
    
    231
    
    
    
    336
    
    
    
    181
   6




---



##### Table of Contents



Growth Strategy
       Franchise Program
  7




---



##### Table of Contents



8




---



##### Table of Contents



Advertising and Promotions
        9




---



##### Table of Contents



Sources of Supply
     Trademarks
  10




---



##### Table of Contents



Trademark or Service Mark
    
    Expiration DateBFFC
    
    
    03/25/2017BFFC- BRAZIL FAST FOOD CORP
    
    
    03/25/2017BIG BOB
    
    
    01/05/2012BOBS
    
    
    06/05/2012BOBS EXPRESS
    
    
    08/14/2009BOBS GRILL
    
    
    05/01/2017CAPUCCINE
    
    
    11/13/2017FRANFILE
    
    
    03/24/2013SALADÍSSIMAS BOBS
    
    
    11/29/2013BOBS DOUBLE CHEESEBURGER
    
    
    10/23/2010BOBS BURGÃO
    
    
    12/16/2015FRANLITOS
    
    
    12/04/2016
  Competition
     11




---



##### Table of Contents



Personnel
       
 12




---



##### Table of Contents



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.
  13




---



##### Table of Contents




    
    We are subject to extensive regulatory requirements applicable to the food service
industry.
  Risks Relating to Brazil
 
    
    Our business is subject to changes in Brazils economy.
    
    
    Our business may be affected by political and constitutional uncertainty in Brazil.
  
    
    Controls on foreign investments may limit our ability to receive capital from our Brazilian
operating subsidiary
  14




---



##### Table of Contents



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
 
    
    Past due fiscal obligations of VENDEX.
     
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
    15




---



##### Table of Contents



ITEM 3. LEGAL PROCEEDINGS
     16




---



##### Table of Contents



(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 Public
Ministry, but we cannot guarantee we will be successful and avoid fines.(b)
    
    The Public Ministry is questioning the total amount of taxes paid by Venbo
during the Pan American and Para Pan American Games. We proved that under the special
tax regime Rio de Janeiro has for events, we paid the total amount due, but we havent
yet received the judge final approval.(c)
    
    The Public Ministry has criticized our marketing campaigns for children. We
believe our campaigns were not misleading and we gathered evidence to use against such
claim. During 2008 we were exempted from fines concerning these
 17




---



##### Table of Contents



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
  18




---



##### Table of Contents



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, 2008
    
    
    7.30
    
    
    
    4.10June 30, 2008
    
    
    7.10
    
    
    
    4.00September 30, 2008
    
    
    6.95
    
    
    
    3.90December 30, 2008
    
    
    5.75
    
    
    
    6.00March 30, 2007
    
    
    5.50
    
    
    
    4.10June 29, 2007
    
    
    5.85
    
    
    
    4.51September 28, 2007
    
    
    8.00
    
    
    
    5.30December 31, 2007
    
    
    7.77
    
    
    
    6.00
 Holders
  Dividends
    19




---



##### Table of Contents



Equity Compensation Plans
    EQUITY COMPENSATION PLAN INFORMATION
 RemainingAvailable ForFuture IssuanceSecurities to be
    
    
    
    Under Equityissued upon
    
    
    
    Compensationexercise of
    
    Weighted-Average
    
    Plans (excludingoutstanding
    
    Exercise Price Of
    
    securitiesoptions, warrants
    
    Outstanding
    
    reflected inand rights
    
    Options, Warrants
    
    column (a)Plan Category
    
    (a)
    
    And Rights
    
    (c)Equity compensation plans approved by security holders (1)
    
    
    35,000
    
    
    $
    1.06
    
    
    Equity compensation plans not approved by security holders (2)
    
    
    
    
    
    
    
    
    
    Total (1) + (2)
    
    
    35,000
    
    
    $
    1.06
    
    
    
 20




---



##### Table of Contents



ITEM 6. SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
  Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004REVENUESNet Revenues from
Own-operated Restaurants
    
    R$
    90,122
    
    
    R$
    85,904
    
    
    R$
    80,931
    
    
    R$
    75,559
    
    
    R$
    65,338Net Revenues from
Franchisees
    
    
    22,427
    
    
    
    18,811
    
    
    
    16,385
    
    
    
    11,963
    
    
    
    8,035Revenues from Supply
Agreements
    
    
    8,317
    
    
    
    6,673
    
    
    
    6,059
    
    
    
    3,655
    
    
    
    3,949Other Income
    
    
    2,499
    
    
    
    3,056
    
    
    
    2,953
    
    
    
    1,283
    
    
    
    (3,541
    )TOTAL REVENUES
    
    
    123,365
    
    
    
    114,444
    
    
    
    106,328
    
    
    
    92,460
    
    
    
    73,781OPERATING COST AND EXPENSESStore Costs and Expenses
    
    
    (89,729
    )
    
    
    (83,349
    )
    
    
    (74,689
    )
    
    
    (68,384
    )
    
    
    (60,653
    )Franchise Costs and Expenses
    
    
    (6,207
    )
    
    
    (3,623
    )
    
    
    (3,176
    )
    
    
    (2,144
    )
    
    
    (1,916
    )Marketing Expenses
    
    
    (1,053
    )
    
    
    (2,082
    )
    
    
    (4,018
    )
    
    
    (2,453
    )
    
    
    342Administrative Expenses
    
    
    (17,442
    )
    
    
    (13,430
    )
    
    
    (11,333
    )
    
    
    (9,192
    )
    
    
    (7,828
    )Other Operating Expenses
    
    
    (2,876
    )
    
    
    (2,945
    )
    
    
    (4,213
    )
    
    
    (3,848
    )
    
    
    445Net result of assets sold
    
    
    (205
    )
    
    
    842
    
    
    
    145
    
    
    
    (52
    )
    
    
    432Impairment of assets
    
    
    
    
    
    
    
    
    
    
    (180
    )
    
    
    (148
    )
    
    
    TOTAL OPERATING COST AND EXPENSES
    
    
    (117,512
    )
    
    
    (104,587
    )
    
    
    (97,464
    )
    
    
    (86,221
    )
    
    
    (69,178
    )OPERATING INCOME
    
    
    5,853
    
    
    
    9,857
    
    
    
    8,864
    
    
    
    6,239
    
    
    
    4,603Interest Expense, net
    
    
    (9,677
    )
    
    
    (697
    )
    
    
    (623
    )
    
    
    537
    
    
    
    (3,151
    )Foreign Exchange and
Monetary Restatement Loss
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    (84
    )
    
    
    (252
    )NET INCOME (LOSS) BEFORE
INCOME TAX
    
    
    (3,824
    )
    
    
    9,160
    
    
    
    8,199
    
    
    
    6,692
    
    
    
    1,200Income taxes  deferred
    
    
    311
    
    
    
    4,343
    
    
    
    4,543
    
    
    
    
    
    
    
    Income taxes  current
    
    
    (746
    )
    
    
    (46
    )
    
    
    (2,808
    )
    
    
    (2,248
    )
    
    
    (599
    )NET INCOME BEFORE MINORITY
INTEREST
    
    
    (4,259
    )
    
    
    13,457
    
    
    
    9,934
    
    
    
    4,444
    
    
    
    601Minority interest
    
    
    317
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME (LOSS)
    
    R$
    (3,942
    )
    
    R$
    13,457
    
    
    R$
    9,934
    
    
    R$
    4,444
    
    
    R$
    601NET INCOME PER COMMON SHAREBASIC AND DILUTED
    
    R$
    (0.48
    )
    
    R$
    1.65
    
    
    R$
    1.22
    
    
    R$
    0.55
    
    
    R$
    0.08WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:BASIC AND DILUTED
    
    
    8,169,496
    
    
    
    8,169,766
    
    
    
    8,137,291
    
    
    
    8,061,317
    
    
    
    7,970,473Balance Sheet Data (End of
Period):WORKING CAPITAL (DEFICIT)
    
    
    (6,316
    )
    
    
    5,577
    
    
    
    (3,543
    )
    
    
    (4,371
    )
    
    
    (5,235
    )TOTAL ASSETS
    
    
    89,143
    
    
    
    61,742
    
    
    
    46,843
    
    
    
    38,070
    
    
    
    37,859ACCUMULATED DEFICIT
    
    
    (39,917
    )
    
    
    (35,296
    )
    
    
    (48,753
    )
    
    
    (58,687
    )
    
    
    (63,131
    )TOTAL SHAREHOLDERS EQUITY
(DEFICIT)
    
    
    18,505
    
    
    
    23,519
    
    
    
    10,278
    
    
    
    34
    
    
    
    (4,192
    )
  21




---



##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  Background
  Brazilian Political Environment
    Brazilian Economic Environment
  22




---



##### Table of Contents



Year Ended December 312008
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001%
    
    %
    
    %
    
    %
    
    %
    
    %
    
    %
    
    %GDP1
    
    
    4.5
    *
    
    
    5.4
    
    
    
    3.8
    
    
    
    3.2
    
    
    
    5.7
    
    
    
    1.1
    
    
    
    2.7
    
    
    
    1.3Inflation2
    
    
    6.5
    
    
    
    4.5
    
    
    
    3.1
    
    
    
    5.7
    
    
    
    7.6
    
    
    
    9.3
    
    
    
    12.5
    
    
    
    7.7Interest Rates3
    
    
    12.75
    
    
    
    11.2
    
    
    
    13.2
    
    
    
    18.1
    
    
    
    17.8
    
    
    
    16.3
    
    
    
    24.9
    
    
    
    19.1Exchange Rates(4)
    
    
    31.9
    
    
    
    17.2
    
    
    
    8.7
    
    
    
    11.8
    
    
    
    8.1
    
    
    
    18.2
    
    
    
    -52.3
    
    
    
    -18.7
 
 (1)
    
    IBGE(2)
    
    IPCA(3)
    
    SELIC(4)
    
    Devaluation/Revaluation of the Brazilian currency along the year (31/12 vs. 01/01) against US $*
    
    Estimated (not yet published as of March 20, 2009)   23




---



##### Table of Contents



OUR BUSINESS
          24




---



##### Table of Contents



RESULTS OF OPERATIONS
 COMPARISON OF YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (Amounts in Brazilian Reais, unless
otherwise stated)
  12 Months
    
    
    
    
    
    
    12 Months
    
    
    
    
    
    
    12 MonthsEnded
    
    
    
    
    
    
    Ended
    
    
    
    
    
    
    EndedR$ 000
    
    31-Dec-08
    
    
    %
    
    
    31-Dec-07
    
    
    %
    
    
    31-Dec-06
    
    
    %REVENUESNet Revenues from Own-operated Restaurants
    
    R$
    90,122
    
    
    
    73.1
    %
    
    R$
    85,904
    
    
    
    75.1
    %
    
    R$
    80,931
    
    
    
    76.1
    %Net Revenues from Franchisees
    
    
    22,427
    
    
    
    18.2
    %
    
    
    18,811
    
    
    
    16.4
    %
    
    
    16,385
    
    
    
    15.4
    %Revenues from Supply Agreements
    
    
    8,317
    
    
    
    6.7
    %
    
    
    6,673
    
    
    
    5.8
    %
    
    
    6,059
    
    
    
    5.7
    %Other Income
    
    
    2,499
    
    
    
    2.0
    %
    
    
    3,056
    
    
    
    2.7
    %
    
    
    2,953
    
    
    
    2.8
    %TOTAL REVENUES
    
    
    123,365
    
    
    
    100.0
    %
    
    
    114,444
    
    
    
    100.0
    %
    
    
    106,328
    
    
    
    100.0
    %OPERATING COST AND EXPENSESStore Costs and Expenses
    
    
    (89,729
    )
    
    
    -72.7
    %
    
    
    (83,349
    )
    
    
    -72.8
    %
    
    
    (74,689
    )
    
    
    -70.2
    %Franchise Costs and Expenses
    
    
    (6,207
    )
    
    
    -5.0
    %
    
    
    (3,623
    )
    
    
    -3.2
    %
    
    
    (3,176
    )
    
    
    -3.0
    %Marketing Expenses
    
    
    (1,053
    )
    
    
    -0.9
    %
    
    
    (2,082
    )
    
    
    -1.8
    %
    
    
    (4,018
    )
    
    
    -3.8
    %Administrative Expenses
    
    
    (17,442
    )
    
    
    -14.1
    %
    
    
    (13,430
    )
    
    
    -11.7
    %
    
    
    (11,333
    )
    
    
    -10.7
    %Other Operating Expenses
    
    
    (2,876
    )
    
    
    -2.3
    %
    
    
    (2,945
    )
    
    
    -2.6
    %
    
    
    (4,213
    )
    
    
    -4.0
    %Net result of assets sold
    
    
    (205
    )
    
    
    -0.2
    %
    
    
    842
    
    
    
    0.7
    %
    
    
    145
    
    
    
    0.1
    %Impairment of assets
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    (180
    )
    
    
    -0.2
    %TOTAL OPERATING COST AND EXPENSES
    
    
    (117,512
    )
    
    
    -95.3
    %
    
    
    (104,587
    )
    
    
    -91.4
    %
    
    
    (97,464
    )
    
    
    -91.7
    %OPERATING INCOME
    
    
    5,853
    
    
    
    4.7
    %
    
    
    9,857
    
    
    
    8.6
    %
    
    
    8,864
    
    
    
    8.3
    %Interest Expense, net
    
    
    (9,677
    )
    
    
    -7.8
    %
    
    
    (697
    )
    
    
    -0.6
    %
    
    
    (665
    )
    
    
    -0.6
    %NET INCOME (LOSS) BEFORE INCOME TAX
    
    
    (3,824
    )
    
    
    -3.1
    %
    
    
    9,160
    
    
    
    8.0
    %
    
    
    8,199
    
    
    
    7.7
    %Income taxes  deferred
    
    
    311
    
    
    
    0.3
    %
    
    
    4,343
    
    
    
    3.8
    %
    
    
    4,543
    
    
    
    4.3
    %Income taxes  current
    
    
    (746
    )
    
    
    -0.6
    %
    
    
    (46
    )
    
    
    0.0
    %
    
    
    (2,808
    )
    
    
    -2.6
    %NET INCOME (LOSS) BEFORE MINORITY INTEREST
    
    
    (4,259
    )
    
    
    
    
    
    
    13,457
    
    
    
    
    
    
    
    9,934Minority Interest
    
    
    317
    
    
    
    0.4
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %NET INCOME (LOSS)
    
    
    (3,942
    )
    
    
    -4.4
    %
    
    
    13,457
    
    
    
    15.7
    %
    
    
    9,934
    
    
    
    12.3
    %
  Introduction
   25




---



##### Table of Contents



Net Revenues from Own-Operated Restaurants
    26




---



##### Table of Contents



Net Franchise Revenues
  12 months ended December, 31R$000
    
    2008
    
    2007
    
    2006Net Franchise Royalty Fees
    
    
    19,803
    
    
    
    16,205
    
    
    
    13,638Initial Fee
    
    
    2,624
    
    
    
    2,606
    
    
    
    2,747Net Franchise Revenues
    
    
    22.427
    
    
    
    18,811
    
    
    
    16,385
    Revenue from Supply Agreements and Other Income
   27




---



##### Table of Contents



Store Costs and Expenses
   12 Months
    
    
    
    
    
    12 Months
    
    
    
    
    
    12 MonthsEnded
    
    
    
    
    
    Ended
    
    
    
    
    
    EndedR$ 000
    
    31-Dec-08
    
    %
    
    31-Dec-07
    
    %
    
    31-Dec-06STORE RESULTSNet Revenues from Own-operated Restaurants
    
    
    90,122
    
    
    
    100.0
    %
    
    
    85,904
    
    
    
    100.0
    %
    
    
    80,931
    
    
    
    100.0
    %Store Costs and ExpensesFood, Beverage and Packaging
    
    
    (34,578
    )
    
    
    -38.4
    %
    
    
    (31,334
    )
    
    
    -36.5
    %
    
    
    (30,240
    )
    
    
    -37.4
    %Payroll & Related Benefits
    
    
    (24,939
    )
    
    
    -27.7
    %
    
    
    (22,807
    )
    
    
    -26.5
    %
    
    
    (19,447
    )
    
    
    -24.0
    %Restaurant Occupancy
    
    
    (10,236
    )
    
    
    -11.4
    %
    
    
    (10,107
    )
    
    
    -11.8
    %
    
    
    (9,311
    )
    
    
    -11.5
    %Contracted Services
    
    
    (10,036
    )
    
    
    -11.1
    %
    
    
    (11,681
    )
    
    
    -13.6
    %
    
    
    (9,523
    )
    
    
    -11.8
    %Depreciation and Amortization
    
    
    (2,819
    )
    
    
    -3.1
    %
    
    
    (2,416
    )
    
    
    -2.8
    %
    
    
    (2,319
    )
    
    
    -2.9
    %Other Store Costs and Expenses
    
    
    (7,121
    )
    
    
    -7.9
    %
    
    
    (5,004
    )
    
    
    -5.8
    %
    
    
    (3,849
    )
    
    
    -4.8
    %Total Store Costs and Expenses
    
    
    (89,729
    )
    
    
    -99.6
    %
    
    
    (83,349
    )
    
    
    -97.0
    %
    
    
    (74,689
    )
    
    
    -92.3
    %STORE OPERATING INCOME
    
    
    393
    
    
    
    0.4
    %
    
    
    2,555
    
    
    
    3.0
    %
    
    
    6,242
    
    
    
    7.7
    %
     28




---



##### Table of Contents



29




---



##### Table of Contents



12 Months
    
    
    
    
    
    12 Months
    
    
    
    
    
    12 MonthsEnded
    
    
    
    
    
    Ended
    
    
    
    
    
    EndedR$ 000
    
    31-Dec-08
    
    %
    
    31-Dec-07
    
    %
    
    31-Dec-06
    
    %FRANCHISE RESULTSNet Revenues from Franchisees
    
    
    22,427
    
    
    
    100.0
    %
    
    
    18,811
    
    
    
    100.0
    %
    
    
    16,385
    
    
    
    100.0
    %Franchise Costs and Expenses
    
    
    (6,207
    )
    
    
    -27.7
    %
    
    
    (3,623
    )
    
    
    -19.3
    %
    
    
    (3,176
    )
    
    
    -19.4
    %FRANCHISE OPERATING INCOME
    
    
    16,220
    
    
    
    72.3
    %
    
    
    15,188
    
    
    
    80.7
    %
    
    
    13,209
    
    
    
    80.6
    %
    30




---



##### Table of Contents



Marketing, General and Administrative and Other Expenses
 Marketing expenses
          31




---



##### Table of Contents



Administrative Expenses
    Other Operating Expenses
  December 31,R$000
    
    2008
    
    
    2007
    
    
    2006Uncollectable receivables
    
    
    (851
    )
    
    
    (1,288
    )
    
    
    (482
    )Reassessed tax and other tax adjustments
    
    
    
    
    
    
    424
    
    
    
    (701
    )Accruals for contingencies
    
    
    
    
    
    
    215
    
    
    
    (936
    )Depreciation of Headquarters fixed assets
    
    
    (682
    )
    
    
    (833
    )
    
    
    (626
    )Professional fees for tax consulting
    
    
    
    
    
    
    (1,793
    )
    
    
    (1,175
    )Preoperating and other (expenses) income
    
    
    (1,343
    )
    
    
    330
    
    
    
    (293
    )R$
    (2,876
    )
    
    R$
    (2,945
    )
    
    R$
    (4,213
    )
     32




---



##### Table of Contents



Impairment of Assets and Net Result of Assets Sold
   INTEREST EXPENSES AND INCOME TAX
 Interest Expenses, net
    INCOME TAXES
    33




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 (Amounts in Brazilian Reais, unless otherwise stated)
 A) Introduction
       34




---



##### Table of Contents



B) Debt Obligation  financial institutions
  December 31,
    
    
    December 31,R$ 000
    
    2008
    
    
    2007Revolving lines of credit (a)
    
    R$
    4,641
    
    
    R$
    3,242Leasing facilities (b)
    
    
    3,257
    
    
    
    1,729Other loan (c)
    
    
    13,737
    
    
    
    21,635
    
    
    
    4,971Less: current portion
    
    
    (10,536
    )
    
    
    (4,010
    )R$
    11,099
    
    
    R$
    961
  R$ 0002009
    
    R$
    10,5362010
    
    
    5,2362011
    
    
    3,7582012
    
    
    2,105R$
    21,635
 
 (a)
    
    A portion of such debt obligation (R$2,0 million) is due on demand from two Brazilian
financial institutions with interest rates of approximately 19.1% p.y. Another portion (R$2.5
million) is payable in different terms to two Brazilian financial institutions. One of them is
payable in ten installments of R$115,000, plus interests of 17.7% p.y. The other one is payable in
twelve installments of R$125,000, plus interests of 21.9% p.y. All debts of this category are
collateralized by certain officers and receivables.(b)
    
    Comprised of various lease facilities with Brazilian private institutions for the funding
of store equipment; payable in a range from 10 to 34 monthly payments, together with interests
range from 14.3% p.y. per annum to 23.4% p.y. per annum. All debts of this category are collateralized by
assets leased ;(c)
    
    4 loans contracted within UBS Pactual related to the acquisition of Pizza Hut business in
Brazil (see note 1). Repayment of those loans range from 24 to 48 monthly installments, averaging
R$286,000, plus average interest of 20% p.y., starting on January 31, 2009. Loan is guaranteed by
Companys financial funds (see note 3). C) Debt Obligation  taxes
   35




---



##### Table of Contents




    
    Value added state tax  ICMS
  
    
    Federal Taxes and Social Security penalties  PAES
      36




---



##### Table of Contents



D) Debt Obligation  summary of tax debts
  E) Other Obligations
   R$000
    
    ContractualFiscal Year
    
    Leases2009
    
    
    6.3402010
    
    
    3.3452011
    
    
    2.8842012
    
    
    1.2722013
    
    
    864Thereafter
    
    
    1.346Total
    
    
    16.051
      37




---



##### Table of Contents



R$000
    
    ContractualFiscal Year
    
    Leases
    
    Financial Debt
    
    Fiscal Debt
    
    Total2009
    
    
    6,340
    
    
    
    10,536
    
    
    
    1,677
    
    
    
    18,5532010
    
    
    3,345
    
    
    
    5,236
    
    
    
    1,204
    
    
    
    9,7852011
    
    
    2,884
    
    
    
    3,758
    
    
    
    1,204
    
    
    
    7,8462012
    
    
    1,272
    
    
    
    2,105
    
    
    
    1,204
    
    
    
    4,5812013
    
    
    864
    
    
    
    
    
    
    
    1,204
    
    
    
    2,068Thereafter
    
    
    1,346
    
    
    
    
    
    
    
    7,220
    
    
    
    8,566Total
    
    
    16,051
    
    
    
    21,635
    
    
    
    13,713
    
    
    
    51,399
   -
    
    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.
 38




---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   Constant currency restatement
  Foreign currency
  Accounts receivable
   39




---



##### Table of Contents



Long-Lived Assets
  Revenue recognition
     Marketing fund and expenses
     40




---



##### Table of Contents



Income taxes
   Stock options
   Share-Based Payment
 41




---



##### Table of Contents



NEW ACCOUNTING STANDARDS
      42




---



##### Table of Contents



Determining the Fair
Value of a Financial Asset When the Market for That Asset Is Not Active,
 43




---



##### Table of Contents



OFF-BALANCE SHEET ARRANGEMENTS
  
 ITEM7A. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
   44




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  SARBANES OXLEY  SECTION 404
ADMINISTRATORS REPORT  FINANCIAL YEAR 2008
MANAGEMENT ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL
REPORTING
 1. INTRODUCTION
       45




---



##### Table of Contents



2. BFFCS ACTIVITIES
    46




---



##### Table of Contents



3. ORGANIZATIONAL CHARTS
  4. PROCESSES THAT INFLUENCE THE ACCOUNTING AND FINANCIAL STATUS
 4.1 Stores
      47




---



##### Table of Contents



48




---



##### Table of Contents



49




---



##### Table of Contents



4.2 Support for the chain and franchiser
        50




---



##### Table of Contents



51




---



##### Table of Contents



5. REVIEW OF FINANCIAL STANDARDS (2002-2008)
  5.1 Store information system
    52




---



##### Table of Contents



5.2 Central IT systems and accounting
     5.3 Expense controls
  53




---



##### Table of Contents



a
posteriori
   5.4 Revenue controls
   54




---



##### Table of Contents



55




---



##### Table of Contents



5.5 Chain expansion
   56




---



##### Table of Contents



5.6 Operations
  5.7 Training
  5.8 Human resources
 th
   57




---



##### Table of Contents



5.9 Supplies
    6. CONCLUSIONS
   58




---



##### Table of Contents



59




---



##### Table of Contents



60




---



##### Table of Contents



61




---



##### Table of Contents



BFFC ORGANIZATION CHART
December, 2008
 
 62




---



##### Table of Contents



BFFC MANAGEMENT ORGANIZATION CHART
December, 2008
 
 63




---



##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Managements Report on Internal Control over Financial Reporting
 Internal ControlIntegrated Framework
     64




---



##### Table of Contents



Changes in Internal Control over Financial Reporting
  REPORT OF INDEPENDENT REGISTRETED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 
 Internal Control - Integrated
Framework
       
 65




---



##### Table of Contents



ITEM 9B. OTHER INFORMATION
     2008#of shares
    
    US$0001st quarter
    
    
    1,550
    
    
    
    92nd quarter
    
    
    49,900
    
    
    
    2463rd quarter
    
    
    1,170
    
    
    
    64th quarter
    
    
    10,100
    
    
    
    4662,720
    
    
    
    307
 66




---



##### Table of Contents



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
  67




---



##### Table of Contents



ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
              
 *
    
    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 Current Report on Form 8-K, dated May 15, 2002(4)
    
    Filed as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 31,
1997 (File No. 0-23278). 68




---



##### Table of Contents



SIGNATURES
  BRAZIL FAST FOOD CORP.By:
    /s/ Ricardo Figueiredo BomenyRicardo Figueiredo BomenyPresident and Chief Executive Officer   /s/ Ricardo Figueiredo Bomeny
    
    Date: April 9, 2009Ricardo Figueiredo Bomeny 
Chief Executive Officer and Acting Chief Financial
Officer/s/ Omar Carneiro da Cunha

Omar Carneiro da Cunha 
Chairman of the Board
    
    Date: April 9, 2009/s/ Peter J.F. van Voorst Vader

Peter J.F. van Voorst Vader
Director
    
    Date: April 9, 2009/s/ Romulo Borges Fonseca
    
    Date: April 9, 2009Romulo Borges Fonseca 
Director/s/ José Ricardo Bousquet Bomeny
    
    Date: April 9, 2009José Ricardo Bousquet Bomeny 
Director/s/ Stephen J. Rose
    
    Date: April 9, 2009Stephen J. Rose
Director/s/ Guillermo Hector Pisano
    
    Date: April 9, 2009Guillermo Hector Pisano 
Director/s/ Gustavo Figueiredo Bomeny
    
    Date: April 9, 2009Gustavo Figueiredo Bomeny 
Director
 69




---



##### Table of Contents



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-38
 F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
  F - 2




---



##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(In thousands of Brazilian Reais, except share amounts)
 December 31,2008
    
    
    2007CURRENT ASSETS:Cash and cash equivalents (note 3)
    
    R$
    10,424
    
    
    R$
    7,345Inventories
    
    
    2,970
    
    
    
    3,278Accounts receivable (note 4)
    
    
    10,741
    
    
    
    8,617Prepaid expenses
    
    
    2,419
    
    
    
    1,401Other current assets (note 5)
    
    
    2,642
    
    
    
    2,267TOTAL CURRENT ASSETS
    
    
    29,196
    
    
    
    22,908Property and equipment, net (note 6)
    
    
    31,104
    
    
    
    19,536Deferred charges, net (note 7)
    
    
    4,544
    
    
    
    4,567Deferred tax asset (note 11)
    
    
    13,688
    
    
    
    8,886Goodwill (note 2)
    
    
    2,895
    
    
    
    Other receivables and other assets (note 5)
    
    
    7,716
    
    
    
    5,845TOTAL ASSETS
    
    R$
    89,143
    
    
    R$
    61,742LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Notes payable (note 8)
    
    R$
    10,536
    
    
    R$
    4,010Accounts payable and accrued expenses (note 9)
    
    
    14,383
    
    
    
    6,606Payroll and related accruals
    
    
    4,565
    
    
    
    2,924Income taxes accruals
    
    
    627
    
    
    
    Taxes, other than income taxes
    
    
    1,765
    
    
    
    1,069Current portion of deferred income
(note 12b)
    
    
    1,878
    
    
    
    956Current portion of contingencies and
reassessed taxes (note 12c)
    
    
    1,677
    
    
    
    1,696Other current liabilities
    
    
    81
    
    
    
    70TOTAL CURRENT LIABILITIES
    
    
    35,512
    
    
    
    17,331Deferred income, less current portion (note
12b)
    
    
    4,836
    
    
    
    4,626Notes payable, less current portion (note 8)
    
    
    11,099
    
    
    
    961Contingencies and reassessed taxes, less
current portion (note 12c)
    
    
    18,210
    
    
    
    15,305TOTAL LIABILITIES
    
    
    69,657
    
    
    
    38,223MINORITY INTEREST
    
    
    981
    
    
    
    SHAREHOLDERS EQUITY:Preferred stock, $.01 par value, 5,000
shares authorized; no
shares issued
    
    
    
    
    
    
    Common stock, $.0001 par value,
12,500,000 shares authorized;
8,437,927 and 8,404,177 shares issued; 8,148,718 and 8,177,687 shares
outstanding
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    61,062
    
    
    
    60,988Treasury Stock ( 289,210 and 226,490
shares)
    
    
    (1,601
    )
    
    
    (1,060
    )Accumulated Deficit
    
    
    (39,917
    )
    
    
    (35,296
    )Accumulated comprehensive loss
    
    
    (1,040
    )
    
    
    (1,114
    )TOTAL SHAREHOLDERS EQUITY
    
    
    18,505
    
    
    
    23,519TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
    
    R$
    89,143
    
    
    R$
    61,742
  F - 3




---



##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED INCOME STATEMENTS
(in thousands of Brazilian Reais, except share amounts)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006REVENUESNet Revenues from Own-operated Restaurants
    
    R$
    90,122
    
    
    R$
    85,904
    
    
    R$
    80,931Net Revenues from Franchisees
    
    
    22,427
    
    
    
    18,811
    
    
    
    16,385Revenues from Supply Agreements
    
    
    8,317
    
    
    
    6,673
    
    
    
    6,059Other Income
    
    
    2,499
    
    
    
    3,056
    
    
    
    2,953TOTAL REVENUES
    
    
    123,365
    
    
    
    114,444
    
    
    
    106,328OPERATING COST AND EXPENSESStore Costs and Expenses (note 19)
    
    
    (89,729
    )
    
    
    (83,349
    )
    
    
    (74,689
    )Franchise Costs and Expenses (note 19)
    
    
    (6,207
    )
    
    
    (3,623
    )
    
    
    (3,176
    )Marketing Expenses
    
    
    (1,053
    )
    
    
    (2,082
    )
    
    
    (4,018
    )Administrative Expenses (note 14)
    
    
    (17,442
    )
    
    
    (13,430
    )
    
    
    (11,333
    )Other Operating Expenses (note 15)
    
    
    (2,876
    )
    
    
    (2,945
    )
    
    
    (4,213
    )Net result of assets sold
    
    
    (205
    )
    
    
    842
    
    
    
    145Impairment of assets
    
    
    
    
    
    
    
    
    
    
    (180
    )TOTAL OPERATING COST AND EXPENSES
    
    
    (117,512
    )
    
    
    (104,587
    )
    
    
    (97,464
    )OPERATING INCOME
    
    
    5,853
    
    
    
    9,857
    
    
    
    8,864Interest Expense, net (note 16)
    
    
    (9,677
    )
    
    
    (697
    )
    
    
    (665
    )NET INCOME (LOSS) BEFORE INCOME TAX
    
    
    (3,824
    )
    
    
    9,160
    
    
    
    8,199Income taxes  deferred (note 11)
    
    
    311
    
    
    
    4,343
    
    
    
    4,543Income taxes  current (note 11)
    
    
    (746
    )
    
    
    (46
    )
    
    
    (2,808
    )NET INCOME BEFORE MINORITY INTEREST
    
    
    (4,259
    )
    
    
    13,457
    
    
    
    9,934MINORITY INTEREST
    
    
    317
    
    
    
    
    
    
    
    NET INCOME (LOSS)
    
    R$
    (3,942
    )
    
    R$
    13,457
    
    
    R$
    9,934NET INCOME (LOSS) PER COMMON SHAREBASIC AND DILUTED
    
    R$
    (0.48
    )
    
    R$
    1.65
    
    
    R$
    1.22WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:BASIC AND DILUTED
    
    
    8,163,949
    
    
    
    8,169,766
    
    
    
    8,137,291
  F - 4




---



##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of Brazilian Reais)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Net Income (Loss)
    
    R$
    (3,942
    )
    
    R$
    13,457
    
    
    R$
    9,934Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    74
    
    
    
    (134
    )
    
    
    (33
    )Comprehensive Income (loss)
    
    R$
    (3,868
    )
    
    R$
    13,323
    
    
    R$
    9,901
 
 F - 5




---



##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 Additional
    
    
    
    
    
    
    
    
    
    
    AccumulatedCommon Stock
    
    
    Paid-In
    
    
    Treasury
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Par Value
    
    
    Capital
    
    
    Stock
    
    
    Deficit
    
    
    Loss
    
    
    TotalBalance, December 31, 2005
    
    
    8,026,527
    
    
    R$
    1
    
    
    R$
    59,883
    
    
    R$
    (216
    )
    
    R$
    (58,687
    )
    
    R$
    (947
    )
    
    R$
    34Exercise of options
    
    
    255,750
    
    
    
    
    
    
    
    935
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    935Acquisition of Companys own shares
    
    
    (100,035
    )
    
    
    
    
    
    
    
    
    
    
    (592
    )
    
    
    
    
    
    
    
    
    
    
    (592
    )Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,934
    
    
    
    
    
    
    
    9,934Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33
    )
    
    
    (33
    )Balance, December 31, 2006
    
    
    8,182,242
    
    
    R$
    1
    
    
    R$
    60,818
    
    
    R$
    (808
    )
    
    R$
    (48,753
    )
    
    R$
    (980
    )
    
    R$
    10,278Exercise of options
    
    
    10,000
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35Shares granted
    
    
    10,000
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,457
    
    
    
    
    
    
    
    13,457Acquisition of Companys own shares
    
    
    (24,555
    )
    
    
    
    
    
    
    
    
    
    
    (252
    )
    
    
    
    
    
    
    
    
    
    
    (252
    )Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (134
    )
    
    
    (134
    )Balance, December 31, 2007
    
    
    8,177,687
    
    
    R$
    1
    
    
    R$
    60,988
    
    
    R$
    (1,060
    )
    
    R$
    (35,296
    )
    
    R$
    (1,114
    )
    
    R$
    23,519Exercise of options
    
    
    33,750
    
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,942
    )
    
    
    
    
    
    
    (3,942
    )Acquisition of Companys own shares
    
    
    (62,720
    )
    
    
    
    
    
    
    
    
    
    
    (541
    )
    
    
    
    
    
    
    
    
    
    
    (541
    )Paid dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (679
    )
    
    
    
    
    
    
    (679
    )Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
 
 F - 6




---



##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Brazilian Reais)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006CASH FLOW FROM OPERATING ACTIVITIES:NET INCOME (LOSS)
    
    R$
    (3,942
    )
    
    R$
    13,457
    
    
    R$
    9,934Adjustments to reconcile net income to cash provided by
operating activities:Depreciation and amortization
    
    
    3,501
    
    
    
    3,249
    
    
    
    2,945(Gain) Loss on assets sold and impairment of assets
    
    
    205
    
    
    
    (842
    )
    
    
    35Deferred income tax asset
    
    
    (4,802
    )
    
    
    (4,343
    )
    
    
    (4,543
    )Minority interest
    
    
    981
    
    
    
    
    
    
    
    Changes in assets and liabilities:(Increase) decrease in:Accounts receivable
    
    
    (2,124
    )
    
    
    (1,305
    )
    
    
    (1,706
    )Inventories
    
    
    308
    
    
    
    (1,091
    )
    
    
    (133
    )Prepaid expenses and other current assets
    
    
    (1,393
    )
    
    
    (1,164
    )
    
    
    (808
    )Other assets
    
    
    (1,871
    )
    
    
    (1,366
    )
    
    
    344(Decrease) increase in:Accounts payable and accrued expenses
    
    
    7,777
    
    
    
    (4,108
    )
    
    
    2,188Payroll and related accruals
    
    
    1,641
    
    
    
    98
    
    
    
    509Taxes
    
    
    1,323
    
    
    
    (242
    )
    
    
    (440
    )Other liabilities
    
    
    2,897
    
    
    
    (2,593
    )
    
    
    (1,765
    )Deferred income
    
    
    1,132
    
    
    
    3,532
    
    
    
    (1,004
    )CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
    
    
    5,633
    
    
    
    3,282
    
    
    
    5,556CASH FLOW FROM INVESTING ACTIVITIES:Additions to property and equipment
    
    
    (12,495
    )
    
    
    (6,039
    )
    
    
    (4,059
    )Investiment in subsidiaries acquired
    
    
    (4,283
    )Goodwill on acquisition
    
    
    (2,895
    )
    
    
    
    
    
    
    Proceeds from sale of property, equipment and deferred charges
    
    
    1,527
    
    
    
    1,537
    
    
    
    518CASH FLOWS (USED IN) INVESTING ACTIVITIES
    
    
    (18,146
    )
    
    
    (4,502
    )
    
    
    (3,541
    )CASH FLOW FROM FINANCING ACTIVITIES:Net Borrowings (Repayments) under lines of credit
    
    
    2,927
    
    
    
    4,971
    
    
    
    (959
    )Loan contracted for acquisition of assets
    
    
    13,737Acquisition of Companys own shares
    
    
    (541
    )
    
    
    (252
    )
    
    
    (592
    )Dividend paid
    
    
    (679
    )
    
    
    
    
    
    
    Proceeds from exercise of stock options
    
    
    74
    
    
    
    170
    
    
    
    935CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    15,518
    
    
    
    4,889
    
    
    
    (616
    )EFFECT OF FOREIGN EXCHANGE RATE
    
    
    74
    
    
    
    (134
    )
    
    
    (33
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    3,079
    
    
    
    3,535
    
    
    
    1,366CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    7,345
    
    
    
    3,810
    
    
    
    2,444CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    R$
    10,424
    
    
    R$
    7,345
    
    
    R$
    3,810
   F - 7




---



##### 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 (the Acquisition) 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.During the second half of 2004, Venbo established, in an association with a Brazilian
individual (Associate), a new company, Suprilog Transportadora Ltda. (Suprilog), to
render transportation services at usual market value to Venbo, to Bobs franchisees and to
other Brazilian companies. During the first quarter of 2005, the Associate left the joint
venture and Venbo became wholly-owner of Suprilog. By the end of 2005, Venbo renegotiated
the contract with one of the main suppliers, Fast Food Distributor Ltda. (FBD a
non-affiliate company), considering different basis from the previous one, including
logistics and transportation services. Because of such renewal, Venbo sold the main
operating assets and liabilities of Suprilog to FBD, which is now providing the
transportation. Suprilog operated the transportation business until the end of November
2005. Suprilog was kept as a non-operating company until the second quarter of 2008.
Currently it is starting its new operations as supporting 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 Statements.On December 2006, the Company set up a new 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 is being 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
  F - 8




---



##### Table of Contents



Pizza Hut
       F - 9




---



##### Table of Contents



Total current assets
    
    
    3,575Deferred tax asset
    
    
    4,491Property & Equipment, net
    
    
    3,667Deferred charges
    
    
    503Goodwill
    
    
    2,895Other receivables and other assets LT
    
    
    619Total
    
    
    15,750
 
 Doggis
  F - 10




---



##### Table of Contents



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 operates, directly and through franchisees, point of sales in all Brazilian
states (primarily in Rio de Janeiro and São Paulo). 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.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.
 F - 11




---



##### Table of Contents



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, 2008 are BFFC do Brasil,
Venbo, CFK and Suprilog. As discussed at note 1, the Company own a 60% capital interest of
IRB.IRBs accounts are entirely added to the present Consolidated Financial Statements and
figures related to its minority interests are stated both in the Companys liabilities (in
the Consolidated Balance Sheets) and in the Consolidated Income Statements.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.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s equity. In order to determine fair value of goodwill at IRB
acquisition, the Company allocated the fair value of all IRBs assets and liabilities
(determined by independent consultants) against an increase of IRB equity. 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.In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and
Intangible Assets, the annual goodwill impairment test, conducted in the fourth quarter,
compares the fair value of a reporting unit, generally based on discounted future cash
flows, with its carrying amount including goodwill. If goodwill is determined to be
impaired, the loss is measured by the excess of the carrying amount of the reporting unit
over its fair value.Constant currency restatementThrough June 30, 1997 the Brazilian economy was hyperinflationary as defined in Statement of
Financial Accounting Standards (SFAS) No.52 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.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.
 F - 12




---



##### Table of Contents



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 price-level adjusted cost, less price-level adjusted
accumulated depreciation through June 30, 1997. 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13
 Deferred chargesDeferred charges, which relate to leasehold premiums paid in advance for rented outlet
premises are stated at price-level adjusted cost, less price-level adjusted accumulated
amortization until June 30, 1997. 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.
 F - 13




---



##### Table of Contents



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 franchise fees based on a percentage of the
revenues of the franchisee are recognized when earned.Amounts related to exclusivity agreements received from suppliers linked to exclusivity
agreements (see note 12b) are recorded as deferred income and are being recognized on a
straight line basis over the term of such agreements or the related supply agreement.The income received from suppliers, related to performance bonus, is recognized when the
suppliers agree that the contracted performance has been reached. Performance bonuses
received in cash, are recognized on income statement; performance bonuses received in
products, are recognized as a 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.Marketing expense, Marketing fund and advertising expensesAccording to our franchise agreements, the 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.In general, franchisees monthly contribute with 4.0% of their monthly gross sales to
the marketing fund, and since 2006, the Company is also committed to contribute with 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 an amount previously
agreed with the Companys franchisees, today of 10.0% of the total marketing fund
contributions, to balance the Companys marketing department expenses. 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.The Company primarily invests the marketing fund resources on nationwide advertising
programs (commercials or sponsorship on TV). 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
 F - 14




---



##### Table of Contents



whether the cost of such single advertisement or promotion could be deducted from the
marketing contribution owed.The marketing fund expenses on advertising and promotions are recognized as incurred. Total
marketing investments financed by the marketing fund amounted R$23.7 million, R$19.4 million
and R$16.9 million for the years ended December 31, 2008, 2007 and 2006, respectively.The 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 the 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 balances presented on December 31, 2008 in the caption Marketing Fund represent
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.Stock optionsPrior to January 1, 2006, the Company accounts for awards granted to employees and directors
under Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, under which no compensation cost was recognized for stock options granted. In
addition, as permitted by Statement of Financial Accounting Standards No. 123Accounting for
Share-Based Compensation, the company included its stock option compensations as a pro
forma disclosure in notes of its financial statements during that period.All transactions with individuals other than those considered employees, as set forth within
the scope of APB No. 25, must be accounted for under the provisions of SFAS No. 123
Accounting for Share-Based Compensation.Effective January 1, 2006, the Company adopted the provisions of the Statement of Financial
Accounting Standards No. 123(R), Share-Based Payment(SFAS No. 123(R)), 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 provisions of SFAS No. 123 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 SFAS No. 123(R). 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 2008, 2007 and 2006, no options were granted to
outside consultants.
 F - 15




---



##### Table of Contents



In 2008, results included share-based compensation expense of R$5,588 (R$5,125 in 2007 and
R$12,744 in 2006). 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.Income taxesThe Company accounts for income taxes in accordance with SFAS No. 109, Accounting for
Income Taxes. Under the asset and liability method of SFAS No. 109, 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
SFAS No. 109, 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.Long-lived and intangibles assetsThe Company adopted SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived
Assets, 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.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, 2008 no adjustments were required
according to those tests.Net income (loss) per common shareThe Company applies SFAS No. 128 Earnings per Share, 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,
2008, 2007 and 2006 that would have had a dilutive effect on earnings for those respective
years.
 F - 16




---



##### Table of Contents



Recently issued accounting standardsIn September 2006 the FASB issued Statement of Financial Accounting Standards No. 157, Fair
Value Measurements, which establishes a framework for measuring fair value and expands
disclosures about fair value measurements. This statement is effective for fiscal years
beginning after November 15, 2007 except for nonfinancial assets and nonfinancial
liabilities, for which the effective date is fiscal years beginning after November 15, 2008.
During the 2008 third quarter, FSP FAS 157-3 was issued. Such FSP amended SFAS 157 by giving
further guidance in determining fair value of a financial asset when there is no active
market for such assets at the measurement date. This new guidance illustrates the fact that
approaches other than the Market Value Approach to determining fair value may be appropriate
for instruments such as those for which the market is no longer active. In utilizing these
other approaches, however, the guidance reiterates certain of the measurement principles
described in SFAS 157.The adoption of SFAS No. 157 and FSP FAS 157-3 did not have a material
impact on the Companys consolidated financial statements.In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an
amendment of FASB Statements No. 87, 88, 106 and 132(R) (SFAS No. 158). SFAS No. 158
requires the Company to recognize the overfunded or underfunded status of a defined benefit
postretirement plan as an asset or liability in the Consolidated balance sheet and to
recognize changes in that funded status in the year changes occur through other
comprehensive income. The provisions of SFAS 158 did not affect the Companys Consolidated
financial statements since the Company has no pension plans for its employees.In December 2007, the FASB issued SFAS No. 141(R), Business Combinations. This Statement
 F - 17




---



##### Table of Contents



requires an acquirer to recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured at their fair
values as of that date. This Statement changes the accounting for acquisition-related costs
and restructuring costs, now requiring those costs to be recognized separately from the
acquisition. This Statement also makes various other amendments to the authoritative
literature intended to provide additional guidance or to conform the guidance in that
literature to that provided in this Statement. SFAS No. 141(R) shall be applied
prospectively to business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December 15, 2008 and
early adoption is prohibited. The Company does not expect the adoption of SFAS No. 141(R) to
have a significant impact on our consolidated financial statements.In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51. This Statement establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary (previously referred to
as minority interest) and for the deconsolidation of a subsidiary. This Statement shall be
applied prospectively as of the beginning of the fiscal year in which this Statement is
initially applied, except for the presentation and disclosure requirements, which shall be
applied retrospectively for all periods presented. This Statement is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after December 15,
2008, with early adoption prohibited. The Company does not expect the adoption of SFAS No.
160 to have a significant impact on its consolidated financial statements.In April 2008, the FASB issued FASB Staff Position No. FAS 142-3, Determination of the
Useful Life of Intangible Assets (FSP FAS 142-3). This FASB Staff position eliminates
the obligation, when computing the useful life of acquired intangible assets, to consider
whether an intangible asset can be renewed without substantial cost or material
modifications to the existing terms and conditions and, instead, requires an entity to
consider its own historical experience in renewing similar arrangements. FSP FAS 142-3 also
requires expanded disclosure related to the determination of intangible asset useful lives.
This FASB Staff Position is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. The Company is currently evaluating
the impact on its consolidated financial statements derived by the adoption of SFAS No.
142-3. However such adoption is not expected to have a significant impact on its
consolidated financial statements.In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities (SFAS 161). SFAS 161 requires companies with derivative instruments to
disclose information that should enable financial-statement users to understand how and why
a company uses derivative instruments, how derivative instruments and related hedged items
are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS 133) and how these items affect a companys financial position, results
of operations and cash flows. SFAS 161 affects only these disclosures and does not change
the accounting for derivatives. SFAS 161 is to be applied prospectively beginning with the
first quarter of 2009 fiscal year.In October 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-3, Determining the
Fair Value of a Financial Asset When the Market for That Asset Is Not Active,which
clarifies the application of FASB Statement No. 157 in an inactive market and illustrates
how an entity would determine fair value when the market for a financial asset is not
active. The Staff Position is effective immediately and applies to prior periods for which
financial statements have not been issued, including interim or annual periods ending on or
before December 30, 2008. The implementation of FSP FAS 157-3 did not have a material impact
on the Companys consolidated financial statements.
 F - 18




---



##### Table of Contents



3
    
    CASH AND CASH EQUIVALENTSCash and cash equivalent consists of the following:
 December 31,R$000
    
    2008
    
    
    2007Cash at point of sales
    
    R$
    1,354
    
    
    R$
    778Cash with money collectors
    
    
    288
    
    
    
    929Bank accounts
    
    
    281
    
    
    
    846Investments funds
    
    
    8,501
    
    
    
    4,792R$
    10,424
    
    
    R$
    7,345
   4
    
    ACCOUNTS RECEIVABLEAccounts Receivables consists of the following:
 December 31,R$000
    
    2008
    
    
    2007Clients  food sales
    
    R$
    3,952
    
    
    R$
    2,282Franchisees  current accounts
    
    
    5,684
    
    
    
    4,227Franchisees  renegotiated past due accounts
    
    
    1,726
    
    
    
    1,643Franchisees  receivable from sales of assets
    
    
    593
    
    
    
    1,312Allowance for doubtful accounts
    
    
    (1,214
    )
    
    
    (847
    )R$
    10,741
    
    
    R$
    8,617
 F - 19




---



##### Table of Contents



5
    
    OTHER CURRENT ASSETS, OTHER RECEIVABLES AND OTHER ASSETSOther assets consist of the following:
  Other current assets:
 December 31,2008
    
    
    2007Witholding taxes
    
    R$
    772
    
    
    R$
    115Receivables from franchisees and
from FBD  Suprilog assets (a)
    
    
    897
    
    
    
    1,758Rent receivable from franchisee
    
    
    295
    
    
    
    305Other current receivables
    
    
    678
    
    
    
    89R$
    2,642
    
    
    R$
    2,267
  Other receivables and other assets:
 December 31,2008
    
    
    2007Receivables from franchisees  assets sold (b)
    
    R$
    267
    
    
    R$
    415Judicial deposits (c)
    
    
    7,419
    
    
    
    5,345Other receivables
    
    
    30
    
    
    
    85R$
    7,716
    
    
    R$
    5,845
 
 (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 - 20




---



##### Table of Contents



6
    
    PROPERTY AND EQUIPMENT, NETProperty and equipment consists of the following:
 December 31,R$000
    
    2008
    
    
    2007Land
    
    R$
    2,322
    
    
    R$
    2,322Buildings and building improvements
    
    
    8,980
    
    
    
    3,717Leasehold improvements
    
    
    12,622
    
    
    
    8,714Machinery, equipment and software
    
    
    27,691
    
    
    
    19,026Furniture and fixtures
    
    
    3,724
    
    
    
    3,245Assets under capitalized leases
    
    
    6,063
    
    
    
    2,039Vehicles
    
    
    348
    
    
    
    286Work in progress
    
    
    64
    
    
    
    61,814
    
    
    
    39,349Less: Accumulated depreciation and amortization
    
    
    (30,710
    )
    
    
    (19,813
    )R$
    31,104
    
    
    R$
    19,536
 7
    
    DEFERRED CHARGES, NETDeferred charges consist of the following:
 December 31,R$000
    
    2008
    
    
    2007Leasehold premiums and other deferred charges
    
    R$
    10,374
    
    
    R$
    9,982Less: Accumulated amortization
    
    
    (5,830
    )
    
    
    (5,415
    )R$
    4,544
    
    
    R$
    4,567
 F - 21




---



##### Table of Contents



8
    
    NOTES PAYABLENotes payable consists of the following:
 December 31,R$ 000
    
    2008
    
    
    2007Revolving lines of credit (a)
    
    R$
    4,641
    
    
    R$
    3,242Leasing facilities (b)
    
    
    3,257
    
    
    
    1,729Other loan (c)
    
    
    13,737
    
    
    
    21,635
    
    
    
    4,971Less: current portion
    
    
    (10,536
    )
    
    
    (4,010
    )R$
    11,099
    
    
    R$
    961
 
 R$ 0002009
    
    R$
    10,5362010
    
    
    5,2362011
    
    
    3,7582012
    
    
    2,105R$
    21,635
 
 (a)
    
    A portion of such debt obligation (R$2,0 million) is due on demand from two
Brazilian financial institutions with interest rates of approximately 19.1%p.y.
Another portion (R$2.5 million) is payable in different terms to two Brazilian
financial institutions. One of them is payable in ten installments of R$115,000, plus
interests of 17.7%p.y. The other one is payable in twelve installments of R$125,000,
plus interests of 21.9%p.y. All debts of this category are collateralized by certain
officers and receivables.(b)
    
    Comprised of various lease facilities with Brazilian private institutions
for the funding of store equipment; payable in a range from 10 to 34 monthly
payments, together with interests range from 14.3% p.y. to 23.4% p.y.. All debts of
this category are collateralized by assets leased ;(c)
    
    4 loans contracted within UBS Pactual related to the acquisition of Pizza
Hut business in Brazil (note 1). Repayment of those loans range from 24 to 48
monthly installments, averaging R$ 286,000, plus average interest of 20%p.y.,
starting on January 31, 2009. Loan is guaranteed by Companys financial funds (note
3).  F - 22




---



##### Table of Contents



9
    
    ACCOUNTS PAYABLE AND ACCRUED EXPENSESAccounts payable and accrued expenses consist of the following:
 December 31,R$000
    
    2008
    
    
    2007Suppliers
    
    R$
    9,804
    
    
    R$
    4,306Rent payable
    
    
    1,191
    
    
    
    488Consulting fees
    
    
    260
    
    
    
    68Accrued utilities
    
    
    367
    
    
    
    447Accrued maintenance
    
    
    447
    
    
    
    267Accrued advertising
    
    
    778
    
    
    
    311Marketing fund
    
    
    184
    
    
    
    Royalty payable
    
    
    264
    
    
    
    Other accrued liabilities
    
    
    1,088
    
    
    
    719R$
    14,383
    
    
    R$
    6,606
 As mentioned at note 2, the balances presented in the caption Marketing Fund (R$184,000)
represent contributions made by Venbo and by the franchisees, but not used in campaigns yet.
At December 31, 2007, Venbo had completely invested Marketing Fund on marketing campaigns.
 10
    
    CASH FLOW INFORMATIONSupplemental Disclosure of Cash Flow Information:
 December 31,R$000
    
    2008
    
    
    2007
    
    
    2006Interest paid
    
    R$
    1,644
    
    
    R$
    465
    
    
    R$
    1,108Income taxes paid
    
    R$
    270
    
    
    R$
    69
    
    
    R$
    2,533
 F - 23




---



##### Table of Contents



11
    
    TAXATIONTax loss carryforwards through December 31, 2008 relating to income tax were R$64.6 million
and to social contribution tax were R$63.9 million, comprised mainly of fiscal results at
Venbo, CFK and IRB. Social contribution tax is a Brazilian tax levied on taxable income and
is by its nature comparable to corporate income tax.The accumulated tax loss position can be offset against future taxable income. Brazilian
tax legislation restricts the offset of accumulated tax losses to 30.0% of taxable profits
on an annual basis. These losses can be used indefinitely and are not impacted by a change
in ownership of the Company.The following is a reconciliation of the amount of reported income tax benefit and the
amount computed by applying the combined statutory tax rate of 34.0% to the loss before
income taxes:
 December 31,R$000
    
    2008
    
    
    2007
    
    
    2006Tax (expense) income at the combined statutory rate
    
    R$
    1,300
    
    
    R$
    (3,114
    )
    
    R$
    (2,788
    )Current income tax offset by
accumulated tax loss credits
    
    
    
    
    
    
    
    
    
    
    1,114Combined statutory rate applied to differences between
taxable results in Brazil and reported results
    
    
    (2,046
    )
    
    
    3,068
    
    
    
    (1,134
    )Income tax (expense) income as reported in the
accompanying
consolidated statement of operations
    
    R$
    (746
    )
    
    R$
    (46
    )
    
    R$
    (2,808
    )
 Differences
between Brazilian GAAP and U.S. GAAP also result on reconcile of reported income tax.As mentioned in note 1, in December 2006, the Company set up a new holding company, called
BFFC do Brasil, via the capital contribution of the equity interest it held in Venbo.
Following this restructuring, completed on December 31, 2006, all of the Companys
businesses in Brazil is being consolidated through BFFC do Brasil. During 2007 and 2008,
this transaction generated tax free credits (performed by independent consults) to income
statement on the amount of approximately R$200,000 per month.In addition, during 2007 and 2008, the Company recorded other tax free credits to income
statement related to Venbos deferred income taxes (see comment below).
 F - 24




---



##### Table of Contents



The following summarizes the composition of deferred tax assets and liabilities and the
related valuation allowance at December 31, 2008 and 2007, based on temporary differences
and tax loss carry forwards determined by applying rates of 9.0% for social contribution tax
and 25.0% for income tax.
 December 31,R$000
    
    2008
    
    
    2007Deferred tax assets:Tax loss carry forward
    
    R$
    21,790
    
    
    R$
    11,669Provision for contingencies
    
    
    2,100
    
    
    
    1,570Deferred charges
    
    
    (28
    )
    
    
    Total deferred tax assets
    
    
    23,862
    
    
    
    13,239Deferred tax liabilities:Property and equipment
    
    
    3,448
    
    
    
    1,773Deferred charges
    
    
    
    
    
    
    979Total deferred tax liabilities
    
    
    3,448
    
    
    
    2,752Net deferred tax asset
    
    
    20,414
    
    
    
    10,487Valuation allowance
    
    
    (6,726
    )
    
    
    (1,601
    )R$
    13,688
    
    
    R$
    8,886
 The valuation allowance reflects the Companys assessment of the likelihood of realizing the
net deferred tax assets in view of current operations and is mostly comprised of tax loss
carryfowards held by the Company through CFK.Before the year 2006, the valuation allowance has been accounted for in the total amount of
net deferred tax assets due the uncertainty of future positive results and, as a
consequence, doubtful taxable income. As of December 31, 2006, Venbos business forecasts
indicated taxable income for the subsequent 10 years. Accordingly, the Company reduced its
valuation allowance and this adjustment derived the recognition of such asset in the balance
sheet and a positive and tax free impact on the income statement of the year 2006 in amount
of R$4.5 million.Subsequently, at year end of 2007 and 2008, Venbos business projections still indicate
positive results for the next 10 years. Therefore, as of December 31, 2008 and 2007, the
Company reduced its valuation allowance and increased the caption Deferred Income Tax Assets
in the balance sheet. Such adjustments derived positive and tax free impacts of R$0.3
million and R$4.3 million on the income statement of the years of 2008 and 2007,
respectively.As of December 31, 2008, the Companys also held Deferred Income Tax Assets in the balance
sheet in the amount of R$4.5 million related to IRBs tax loss carryfoward, based on its
business forecasts (performed by independent consultants), which also indicates taxable
income for the subsequent 10 years. Such Deferred Income Tax was allocated against and
reducing the goodwill derived by the IRB acquisition.
 F - 25




---



##### Table of Contents



12
    
    COMMITMENTS AND LITIGATION
 a) Operating leases
 The future minimum lease payments under those obligations with an initial or remaining
non-cancelable lease terms in excess of one year at December 31, 2008 are as follows:
 R$000
    
    ContractualFiscal Year
    
    Leases2009
    
    
    6,3402010
    
    
    3,3452011
    
    
    2,8842012
    
    
    1,2722013
    
    
    864Thereafter
    
    
    1,346Total
    
    
    16,051
 Rent expense was R$14.5 million, R$7.2 million, and R$6.6 million for the years ended
December 31, 2008, 2007, and 2006, respectively.
 b) Other commitments
 The Company has long term contracts (5 to 10 years) with all of its franchisees. Under
these contracts the franchisee has the right to use the Bobs name and formulas in a
specific location or area. The Company has no specific financial obligations in respect of
these contracts.The Company has exclusivity supply agreements with some of its food and beverage providers.
Under these agreements the Company receives cash in order to exclusively trade the
suppliers products, for a period of time. Amounts received upon such agreements are
recorded as deferred income and are being recognized on a straight line basis over the term
of such agreements or the related supply agreement. The most relevant of them  the one
with Brazilian subsidiary of Coca-Cola  was renewed on March, 31 2008 for an additional
five-year of exclusivity.As of December 31, 2008 the company had the amount of R$6.7 million (R$5.6 million in 2007)
recorded as Deferred Income in its balance sheet, related to such commitments.
 F - 26




---



##### Table of Contents



c) Reassessed taxes and Contingencies
 Liabilities related to tax amnesty programs and litigation consist of the following:
 December 31,2008
    
    2007Long
    
    
    
    
    
    
    
    
    
    LongTotal
    
    Current
    
    Term
    
    Total
    
    Current
    
    TermR$000
    
    Liability
    
    Liability
    
    Liability
    
    Liability
    
    Liability
    
    LiabilityReassessed taxesFederal taxes (PAES)
    
    
    13,712
    
    
    
    1,677
    
    
    
    12,035
    
    
    
    12,383
    
    
    
    1,696
    
    
    
    10,687ContingenciesISS tax litigation
    
    
    3,828
    
    
    
    
    
    
    
    3,828
    
    
    
    2,703
    
    
    
    
    
    
    
    2,703Labor litigation
    
    
    2,065
    
    
    
    
    
    
    
    2,065
    
    
    
    1,700
    
    
    
    
    
    
    
    1,700Property leasing litigation
and other litigation
    
    
    282
    
    
    
    
    
    
    
    282
    
    
    
    215
    
    
    
    
    
    
    
    215TOTAL
    
    
    19,887
    
    
    
    1,677
    
    
    
    18,210
    
    
    
    17,001
    
    
    
    1,696
    
    
    
    15,305
 Reassessed taxesDuring 1999, 2001 and in the beginning of 2002, certain Brazilian state and federal taxes
levied on Venbo were not paid. In addition during 2002, Brazilian Social Security
Authorities applied penalties against Venbo, by charging certain operating transactions not
covered by Venbos previous calculation of Social Security contributions. Those debts were
renegotiated in different moments and with different levels of Brazilian Government.Since September 2002, the Company has been paying all its current taxes on a timely basis.The tax debt evolution and their current status are summarized as follows:
 
    
    Value added state tax  ICMS
 Since the second quarter of 2000, Venbo has been reaching a sequence of agreements with the
Rio de Janeiro state government to settle unpaid taxes in installments. The last agreement
with the Rio de Janeiro state government was settled during the third quarter of 2004.
Through this last agreement, the fiscal authorities of Rio de Janeiro have computed some
portions of the debt, promptly paid by Venbo, at the amount of approximately R$681,915.
Another portion of those unpaid taxes (R$414,628) was not recognized by the fiscal
authorities at that time. The Company had accrued such amount as long-term liability until
the third quarter of 2007. During the last quarter of 2007 the Rio de Janeiro state
government issued a statement confirming that Venbo no longer had past due tax debts.
Therefore, the Company reversed such liability, obtaining a positive impact of such amount
in the Consolidated Statement of Operations during the last quarter of 2007.
 F - 27




---



##### Table of Contents




    
    Federal Taxes and Social Security penalties  PAES
 Concerning the unpaid federal taxes and the Social Security penalties, the Company applied
to join and was accepted into two subsequent amnesty programs offered by the Brazilian
federal government (REFIS during 1999 and PAES during 2003).The second amnesty program (PAES) included the balance of the previous federal tax amnesty
program (REFIS) and unpaid 2001 and 2002 federal tax, as well as the Social Security
penalties. The total debt included in such program is being paid in monthly installments, on
a timely basis, equivalent to 1.5% of the Companys gross sales, with interest accruing at
rates set by the Brazilian federal government, which currently are 6.25% per year per year
(6.25% per year in 2007).During the year ended December 31, 2008, the Company paid approximately R$2.0 million (R$1.9
million in 2007) related to such Brazilian federal tax amnesty program, including R$360,069
(R$311,163 in 2007) of interests.In addition, during 2008 the Brazilian Federal Government reviewed their records and
detected that the computation of PAES was incorrect for most of the companies which have
adhered to such program. At most cases, there was miscalculation of interest beard on debts
of Brazilian Social Security (INSS).During the last quarter of 2008, the Company adjusted its liabilities in additional R$2.8
million in order to comply with such fiscal review.In February 2005, the Company compared its remaining debt regarding PAES with statements
provided by the Brazilian Federal Government. Those statements reported that Companys total
debt would be greater than the figures in the Companys balance sheet, in the amount of
approximately R$3.2 million. During March, 2005, the Company filed a formal request with the
Brazilian Federal Authorities, claiming to have its total debt reviewed. Such request,
reconciled the amounts the Company had accrued at its accounting books to the amounts
reported in the official statement at the same period. The Company believes that the amounts
accrued at the balance sheet as of December 31, 2008, total of R$13.7 million (R$12.3
million in 2007) are correct, however, there is no assurance that the outcome of this
situation will derive further liability to the Company. As of December 31, 2008, the
difference between such debt at the statements provided by the Brazilian Federal Government
and the statements reported by the Companys was R$4.8 million (R$4.7 million in December
31, 2007).Contingencies
 
    
    ISS tax litigation
   F - 28




---



##### Table of Contents




    
    Labor litigations
  Other contingencies
      F - 29




---



##### Table of Contents



F - 30




---



##### Table of Contents



13
    
    SHAREHOLDERS EQUITYPreferred stockThe Board of Directors of the Company is empowered, without shareholder approval, to issue
up to 5,000 shares of blank check preferred stock (the Preferred Stock) with dividend,
liquidation, conversion, voting or other rights which could adversely affect the voting
power or other rights of the holders of the Companys common stock. To date no Preferred
Stock had been issued.Common StockThe table below states issued, treasury and outstanding shares of common stock:
 December 31,2007
    
    2007Issued shares
    
    
    8,437,927
    
    
    
    8,404,177Less: Treasury stock
    
    
    (289,210
    )
    
    
    (226,490
    )Outstanding shares
    
    
    8,148,717
    
    
    
    8,177,687
 Private placementsOn December 20, 2004, Bigburger Ltda. (BigBurger) and CCC Empreendimentos e Participações
Ltda. (CCC) completed a total buyout of AIG Latin America Equity Partners (AIG) 375,000
share position in Brazil Fast Food Corp. (BFFC). This buyout nullified the pre-existing
shareholders agreement, which granted AIG certain rights over BFFCs administration, and
increases the collective share of Bigburger and CCC in BFFC by 5.0% to approximately 60.0%
of the Companys common stock.Stock repurchase planDuring the last quarter of 2004, the Companys Board of Directors approved a stock
repurchase plan covering the repurchase of as many as 200,000 shares of its own common
stock. The plan goal was to optimize the cash generated in the United States and its
repurchase limit has been increased by 200,000 shares on October 18, 2006.During 2008, the Company repurchased a total amount of 62,720 shares (24,555 in 2007 and
100,035 in 2006), under the referred stock repurchase plan. The Companys total disbursement
for these transactions totaled R$1.6 million and is accounted for as a deduction of Paid in
Capital, in the Shareholders Equity section of the accompanying balance sheets.
 F - 31




---



##### Table of Contents



Severance agreementIn December, 2007 we granted 10,000 shares to Mr. Bruce Bennet as a severance payment for
leaving Venbos management. Exemption from registration under the Securities Act of 1933, as
amended, was claimed for this issuance in reliance upon the exemption afforded by Section
4(2) of the Securities Act as a transaction by an issuer not involving any public offering.
During 2007 the Company charged R$135,000 to operating results related to those severance
agreement. Such amount is a result of number of shares granted, multiplied by their fair
value.Stock option planThe Companys Stock Option Plan terminated on September 17, 2002, ten years from the date of
its adoption by the Board of Directors.The stock options of Brazil Fast Food Corp. pursuant to the 1992 Stock Option Plan, as
amended, and the grant of stock options outside of plan by Brazil Fast Food Corp.s Board of
Directors, were included in a Registration Statement on Form S-8 filed by the Company with
the U.S. Securities and Exchange Commission. The Registration Statement, which was assigned
File No. 333-133981, was declared effective by the SEC on May 10, 2006.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. The provisions set by the Plan are still valid for all vesting options
until the last option grant (November, 2004).During 2007, options to purchase an aggregate of 33,750 shares of common stock were
exercised, having an aggregate purchase price of US$47,055 equivalent to R$74,000.Intrinsic value for stock options is defined as the difference between the current market
value and the exercise price. During 2008 and 2007, the total intrinsic value of stock
options exercised was approximately US$150,075 and US$48,120, respectively. The total
intrinsic value of options exercisable at December 31, 2008 is approximately US$104,650.
 F - 32




---



##### Table of Contents



All options are immediately vesting. Option activity for the years ended December 31, 2008,
2007 and 2006 is summarized as follows:
 2008
    
    
    2007
    
    
    2006Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOptions outstanding
at beginning of
year
    
    
    68,750
    
    
    $
    1.22
    
    
    
    78,750
    
    
    $
    1.35
    
    
    
    347,000
    
    
    $
    1.35Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (33,750
    )
    
    
    1.39
    
    
    
    (10,000
    )
    
    
    2.19
    
    
    
    (255,750
    )
    
    
    1.68Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,500
    )
    
    
    2.88Canceled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options outstanding
at December 31,
    
    
    35,000
    
    
    $
    1.060
    
    
    
    68,750
    
    
    $
    1.224
    
    
    
    78,750
    
    
    $
    1.35Options exercisable
at December 31,
    
    
    35,000
    
    
    $
    1.060
    
    
    
    68,750
    
    
    $
    1.224
    
    
    
    78,750
    
    
    $
    1.35
 All 35,000 options outstanding at December 31, 2008 were subsequently exercised during the
first quarter of 2009.
 14
    
    ADMINISTRATIVE EXPENSES
  Year Ended December 31,R$ 000
    
    2008
    
    2007
    
    2006Payroll & Related Benefits
    
    
    7,628
    
    
    
    6,522
    
    
    
    5,141Occupancy expenses
    
    
    1,940
    
    
    
    1,445
    
    
    
    1,146Legal, accounting and consulting
    
    
    3,310
    
    
    
    1,821
    
    
    
    2,971Maintenance Expenses
    
    
    629
    
    
    
    401
    
    
    
    75IT Expenses
    
    
    777
    
    
    
    613
    
    
    
    358Travel and transport expenses
    
    
    550
    
    
    
    525
    
    
    
    688Other Administrative Expenses
    
    
    2,608
    
    
    
    2,103
    
    
    
    95417,442
    
    
    
    13,430
    
    
    
    11,333
 F - 33




---



##### Table of Contents



15
    
    OTHER OPERATING EXPENSES
  December 31,R$000
    
    2008
    
    
    2007
    
    
    2006Uncollectable receivables
    
    
    (851
    )
    
    
    (1,288
    )
    
    
    (482
    )Reassessed tax and other tax adjustments
    
    
    
    
    
    
    424
    
    
    
    (701
    )Accruals for contingencies
    
    
    
    
    
    
    215
    
    
    
    (936
    )Depreciation of Headquarters fixed assets
    
    
    (682
    )
    
    
    (833
    )
    
    
    (626
    )Professional fees for tax consulting
    
    
    
    
    
    
    (1,793
    )
    
    
    (1,175
    )Preoperating and other (expenses) income
    
    
    (1,343
    )
    
    
    330
    
    
    
    (293
    )R$
    (2,876
    )
    
    R$
    (2,945
    )
    
    R$
    (4,213
    )
 16
    
    INTEREST EXPENSE, NET
  December 31,R$000
    
    2008
    
    
    2007
    
    
    2006Interest income
    
    
    1,896
    
    
    
    579
    
    
    
    618Interest expenses
    
    
    (11,573
    )
    
    
    (1,276
    )
    
    
    (1,283
    )R$
    (9,677
    )
    
    R$
    (697
    )
    
    R$
    (665
    )
 R$ R$
 17
    
    TRANSACTIONS WITH RELATED PARTIES
 R$ R$
 F - 34




---



##### Table of Contents



18
    
    SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)(In thousand of Brazilian Reais, except share amounts)
 2008First
    
    Second
    
    Third
    
    FourthR$000
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterNet Restaurant Sales
    
    
    20,628
    
    
    
    18,539
    
    
    
    21,670
    
    
    
    29,285Net Franchise Revenues
    
    
    4,965
    
    
    
    5,151
    
    
    
    5,699
    
    
    
    6,612Operating income (loss)
    
    
    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
 R$000
    
    2007Net Restaurant Sales
    
    
    21,243
    
    
    
    17,102
    
    
    
    25,759
    
    
    
    21,800Net Franchise Revenues
    
    
    4,463
    
    
    
    3,976
    
    
    
    4,547
    
    
    
    5,825Operating income
    
    
    3,903
    
    
    
    1,367
    
    
    
    1,822
    
    
    
    2,765Net income (loss)
    
    
    3,692
    
    
    
    1,259
    
    
    
    1,625
    
    
    
    6,881Basic and diluted income per share
    
    
    0.45
    
    
    
    0.15
    
    
    
    0.20
    
    
    
    0.85Weighted average common shares
outstanding
    
    
    8,182,242
    
    
    
    8,171,688
    
    
    
    8,159,048
    
    
    
    8,167,367
 F - 35




---



##### Table of Contents



19
    
    SEGMENT INFORMATION
      Results from own-stores operationsYear Ended December 31,R$ 000
    
    2008
    
    
    2007
    
    
    2006Revenues
    
    R$
    90,122
    
    
    R$
    85,904
    
    
    R$
    80,931Food, Beverage and Packaging
    
    
    (34,578
    )
    
    
    (31,334
    )
    
    
    (30,240
    )Payroll & Related Benefits
    
    
    (24,939
    )
    
    
    (22,807
    )
    
    
    (19,447
    )Restaurant Occupancy
    
    
    (10,236
    )
    
    
    (10,107
    )
    
    
    (9,311
    )Contracted Services
    
    
    (10,036
    )
    
    
    (11,681
    )
    
    
    (9,523
    )Depreciation and Amortization
    
    
    (2,819
    )
    
    
    (2,416
    )
    
    
    (2,319
    )Other Store Costs and Expenses
    
    
    (7,121
    )
    
    
    (5,004
    )
    
    
    (3,849
    )Total Own-stores cost and expenses
    
    
    (89,729
    )
    
    
    (83,349
    )
    
    
    (74,689
    )Operating margin
    
    R$
    393
    
    
    R$
    2,555
    
    
    R$
    6,242
 F - 36




---



##### Table of Contents



Results from franchise operationsYear Ended December 31,R$ 000
    
    2008
    
    
    2007
    
    
    2006Revenues
    
    R$
    22,427
    
    
    R$
    18,811
    
    
    R$
    16,385Payroll & Related Benefits
    
    
    (3,110
    )
    
    
    (2,600
    )
    
    
    (2,068
    )Occupancy expenses
    
    
    (671
    )
    
    
    (283
    )
    
    
    (375
    )Travel expenses
    
    
    (758
    )
    
    
    (334
    )
    
    
    (296
    )Other franchise cost and expenses
    
    
    (1,668
    )
    
    
    (406
    )
    
    
    (437
    )Total franchise cost and expenses
    
    
    (6,207
    )
    
    
    (3,623
    )
    
    
    (3,176
    )Operating margin
    
    R$
    16,220
    
    
    R$
    15,188
    
    
    R$
    13,209
  Results from Bobs
    
    
    Results from KFCsbrand operations
    
    
    brand operationsYear Ended December 31,
    
    
    Year Ended December 31,R$ 000
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007*Revenues
    
    R$
    75,133
    
    
    R$
    80,111
    
    
    R$
    10,640
    
    
    R$
    5,793Food, Beverage and Packaging
    
    
    (29,255
    )
    
    
    (29,502
    )
    
    
    (4,082
    )
    
    
    (1,832
    )Payroll & Related Benefits
    
    
    (20,127
    )
    
    
    (21,096
    )
    
    
    (3,156
    )
    
    
    (1,711
    )Occupancy expenses
    
    
    (8,359
    )
    
    
    (9,209
    )
    
    
    (1,437
    )
    
    
    (898
    )Contracted Services
    
    
    (8,383
    )
    
    
    (10,913
    )
    
    
    (1,653
    )
    
    
    (768
    )Depreciation and Amortization
    
    
    (2,611
    )
    
    
    (2,410
    )
    
    
    (95
    )
    
    
    (6
    )Other Store Costs and Expenses
    
    
    (6,356
    )
    
    
    (4,872
    )
    
    
    (494
    )
    
    
    (132
    )Total Own-stores cost and expenses
    
    
    (75,091
    )
    
    
    (78,002
    )
    
    
    (10,917
    )
    
    
    (5,347
    )Operating margin
    
    R$
    42
    
    
    R$
    2,109
    
    
    R$
    (277
    )
    
    R$
    446
 
 *
    
    KFCs 2007 figures are comprised of nine months, since its operations started on April 1, 2007. R$  R$
 F - 37




---



##### Table of Contents



F - 38




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit Index
    
    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)10.2
    
    Capitalization and Administrative Restructuring Intentions Protocol
dated May 15, 2002 by and among Brazil Fast Food Corp., Gustavo Figueredo Bomeny,
CCC Emprendimentos e Participacoes Ltda., BigBurger Ltda., Jose Ricardo Bousquet
Bomeny, Omar Carneiro da Cunha, Seaview Venture Group, Peter van Voorst Vader and
Shampi Investments A.E.C. (3)21.1
    
    Subsidiaries of Registrant (4)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 Current Report on Form 8-K, dated April 1,
2002.(4)
    
    Filed as an exhibit to Registrants Annual Report on Form 10-K for the year
ended December 31, 1997 (File No. 0-23278). 70