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, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 000-23278
 BRAZIL FAST FOOD CORP.
 (Exact Name of Registrant as Specified in Its Charter)
 Delaware
(State or Other Jurisdiction 
of Incorporation or Organization)
    
    13-3688737
(I.R.S. Employer
Identification No.)Rua Voluntários da Pátria, 89, 9o. andar  Botafogo 
CEP 22.270-010, Rio de Janerio, Brazil
(Address of Principal Executive Offices)
    
    N/A
(Zip Code)
 Registrants telephone number, including area code: 55 21 2536-7500
 Securities registered pursuant to Section 12(b) of the Act:
None
 Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value
 o þ
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



PART I
 ITEM 1. BUSINESS
 (a) GENERAL
     (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
  (c) NARRATIVE DESCRIPTION OF BUSINESS
 Restaurants Operations
    2




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Franchised Restaurants
           3




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Franchise Program
       Advertising and Promotions
   4




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Sources of Supply
      5




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Trademarks
  ® ® ® ® ®
 Competition
    Personnel
  (d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
  6




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Availability of Reports and Other Information
  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.
   7




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##### 



We are subject to extensive regulatory requirements applicable to the food service industry.
  Risks Relating to the Economy
 Our business is subject to changes in global and local market conditions.
  Our business may be affected by political and constitutional uncertainty in Brazil.
  8




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##### 



Risks Related to Our Common Stock
 Our common stock has been delisted from The Nasdaq SmallCap Market.
  Risks Related to past due fiscal obligations of VENDEX
 We may be responsible for possible hidden or future liabilities of VENDEX prior to our acquisition
of VENDEX.
  ITEM 1B. UNRESOLVED STAFF COMMENTS
  ITEM 2. PROPERTIES
     9




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ITEM 3. LEGAL PROCEEDINGS
      10




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ITEM 4. [REMOVED AND RESERVED]
 11




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##### 



PART II
 ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
 Market Information
  Common StockThree Months Ended
    
    High
    
    
    LowMarch 31, 2010
    
    
    8.26
    
    
    
    7.40June 30, 2010
    
    
    7.80
    
    
    
    5.75September 30, 2010
    
    
    7.99
    
    
    
    4.67December 31, 2010
    
    
    5.05
    
    
    
    4.20March 31, 2009
    
    
    3.25
    
    
    
    3.25June 30, 2009
    
    
    3.49
    
    
    
    3.20September 30, 2009
    
    
    3.59
    
    
    
    3.31December 31, 2009
    
    
    4.93
    
    
    
    4.90
  Risk Factors  Risks Relating to Brazil
 12




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##### 



Holders
  Dividends
    Equity Compensation Plans
   13




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##### 



ITEM 6. SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
  Year Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006REVENUESNet Revenues from Own-operated Restaurants
    
    R$
    154,591
    
    
    R$
    146,875
    
    
    R$
    90,122
    
    
    R$
    85,904
    
    
    R$
    80,931Net Revenues from Franchisees
    
    
    28,386
    
    
    
    24,647
    
    
    
    22,427
    
    
    
    18,811
    
    
    
    16,385Revenues from Supply Agreements
    
    
    21,104
    
    
    
    10,270
    
    
    
    8,317
    
    
    
    6,673
    
    
    
    6,059Other Income
    
    
    2,198
    
    
    
    3,098
    
    
    
    2,499
    
    
    
    3,056
    
    
    
    2,953TOTAL REVENUES
    
    
    206,279
    
    
    
    184,890
    
    
    
    123,365
    
    
    
    114,444
    
    
    
    106,328OPERATING COST AND EXPENSESStore Costs and Expenses
    
    
    (143,643
    )
    
    
    (135,715
    )
    
    
    (89,729
    )
    
    
    (83,349
    )
    
    
    (74,689
    )Franchise Costs and Expenses
    
    
    (10,718
    )
    
    
    (8,619
    )
    
    
    (6,207
    )
    
    
    (3,623
    )
    
    
    (3,176
    )Marketing Expenses
    
    
    (5,054
    )
    
    
    (4,092
    )
    
    
    (1,053
    )
    
    
    (2,082
    )
    
    
    (4,018
    )Administrative Expenses
    
    
    (28,074
    )
    
    
    (21,298
    )
    
    
    (17,442
    )
    
    
    (13,430
    )
    
    
    (11,333
    )Other Operating Expenses
    
    
    (6,951
    )
    
    
    (4,397
    )
    
    
    (2,876
    )
    
    
    (2,945
    )
    
    
    (4,213
    )Net result of assets sold
    
    
    7,367
    
    
    
    1,225
    
    
    
    (205
    )
    
    
    842
    
    
    
    145Impairment of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (180
    )TOTAL OPERATING COST AND EXPENSES
    
    
    (187,073
    )
    
    
    (172,896
    )
    
    
    (117,512
    )
    
    
    (104,587
    )
    
    
    (97,464
    )OPERATING INCOME
    
    
    19,206
    
    
    
    11,994
    
    
    
    5,853
    
    
    
    9,857
    
    
    
    8,864Interest Expense, net
    
    
    (1,606
    )
    
    
    (4,882
    )
    
    
    (9,677
    )
    
    
    (697
    )
    
    
    (623
    )Foreign
Exchange and Monetary Restatement Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42
    )NET INCOME BEFORE INCOME TAX
    
    
    17,600
    
    
    
    7,112
    
    
    
    (3,824
    )
    
    
    9,160
    
    
    
    8,199Income taxes  deferred
    
    
    (4,057
    )
    
    
    
    
    
    
    311
    
    
    
    4,343
    
    
    
    4,543Income taxes  current
    
    
    (2,278
    )
    
    
    (36
    )
    
    
    (746
    )
    
    
    (46
    )
    
    
    (2,808
    )NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST
    
    
    11,265
    
    
    
    7,076
    
    
    
    (4,259
    )
    
    
    13,457
    
    
    
    9,934Net (income) loss attributable to non-controlling interest
    
    
    384
    
    
    
    (180
    )
    
    
    317
    
    
    
    
    
    
    
    NET INCOME (LOSS) ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.
    
    R$
    11,649
    
    
    R$
    6,896
    
    
    R$
    (3,942
    )
    
    R$
    13,457
    
    
    R$
    9,934NET INCOME PER COMMON SHAREBASIC AND DILUTED
    
    R$
    1.43
    
    
    R$
    0.85
    
    
    R$
    (0.48
    )
    
    R$
    1.65
    
    
    R$
    1.22WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:BASIC AND DILUTED
    
    
    8,137,762
    
    
    
    8,152,505
    
    
    
    8,163,949
    
    
    
    8,169,766
    
    
    
    8,137,291DIVIDEND PAID PER SHARE
    
    R$
    0.44
    
    
    R$
    
    
    
    R$
    0.08
    )
    
    R$
    
    
    
    R$
    Balance Sheet Data (End of Period):WORKING CAPITAL (DEFICIT)
    
    
    (6,385
    )
    
    
    (9,379
    )
    
    
    5,577
    
    
    
    (3,543
    )
    
    
    (4,371
    )TOTAL ASSETS
    
    
    112,561
    
    
    
    100,955
    
    
    
    61,742
    
    
    
    46,843
    
    
    
    38,070ACCUMULATED DEFICIT
    
    
    (24,946
    )
    
    
    (33,021
    )
    
    
    (35,296
    )
    
    
    (48,753
    )
    
    
    (58,687
    )TOTAL SHAREHOLDERS EQUITY (DEFICIT)
    
    
    33,166
    
    
    
    25,105
    
    
    
    23,519
    
    
    
    10,278
    
    
    
    34




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##### 



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Background
  Brazilian Political Environment
     Brazilian Economic Environment
 2




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3




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##### 



Year Ended December 312010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003%
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %GDP 1
    
    
    7.5
    
    
    
    -0.2
    
    
    
    4.5
    
    
    
    5.4
    
    
    
    3.8
    
    
    
    3.2
    
    
    
    5.7
    
    
    
    1.1Inflation 2
    
    
    5.9
    
    
    
    4.1
    
    
    
    6.5
    
    
    
    4.5
    
    
    
    3.1
    
    
    
    5.7
    
    
    
    7.6
    
    
    
    9.3Interest Rates 3
    
    
    9.78
    
    
    
    8.75
    
    
    
    12.75
    
    
    
    11.2
    
    
    
    13.2
    
    
    
    18.1
    
    
    
    17.8
    
    
    
    16.3Exchange
Rates 4
    
    
    4.3
    
    
    
    -25.5
    
    
    
    31.9
    
    
    
    17.2
    
    
    
    8.7
    
    
    
    11.8
    
    
    
    8.1
    
    
    
    18.2
 
 (1)
    
    IBGE for 2003 to 2009  MIF estimates for 2010(2)
    
    IPCA(3)
    
    SELIC(4)
    
    (Devaluation)/Revaluation of the Brazilian currency along the year (31/12 vs. 01/01) against
US$    OUR BUSINESS
   4




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5




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6




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##### 



RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
(Amounts in Brazilian Reais, unless otherwise stated)
  12 Months
    
    
    
    
    
    
    12 Months
    
    
    
    
    
    
    12 MonthsEnded
    
    
    
    
    
    
    Ended
    
    
    
    
    
    
    EndedR$ 000
    
    31-Dec-10
    
    
    %
    
    
    31-Dec-09
    
    
    %
    
    
    31-Dec-08
    
    
    %REVENUESNet Revenues from Own-operated Restaurants
    
    R$
    154,591
    
    
    
    74.9
    %
    
    R$
    146,875
    
    
    
    79.4
    %
    
    R$
    90,122
    
    
    
    73.1
    %Net Revenues from Franchisees
    
    
    28,386
    
    
    
    13.8
    %
    
    
    24,647
    
    
    
    13.3
    %
    
    
    22,427
    
    
    
    18.2
    %Revenues from Supply Agreements
    
    
    21,104
    
    
    
    10.2
    %
    
    
    10,270
    
    
    
    5.6
    %
    
    
    8,317
    
    
    
    6.7
    %Other Income
    
    
    2,198
    
    
    
    1.1
    %
    
    
    3,098
    
    
    
    1.7
    %
    
    
    2,499
    
    
    
    2.0
    %TOTAL REVENUES
    
    
    206,279
    
    
    
    100.0
    %
    
    
    184,890
    
    
    
    100.0
    %
    
    
    123,365
    
    
    
    100.0
    %OPERATING COST AND EXPENSESStore Costs and Expenses
    
    
    (143,643
    )
    
    
    -69.6
    %
    
    
    (135,715
    )
    
    
    -73.4
    %
    
    
    (89,729
    )
    
    
    -72.7
    %Franchise Costs and Expenses
    
    
    (10,718
    )
    
    
    -5.2
    %
    
    
    (8,619
    )
    
    
    -4.7
    %
    
    
    (6,207
    )
    
    
    -5.0
    %Marketing Expenses
    
    
    (5,054
    )
    
    
    -2.5
    %
    
    
    (4,092
    )
    
    
    -2.2
    %
    
    
    (1,053
    )
    
    
    -0.9
    %Administrative Expenses
    
    
    (28,074
    )
    
    
    -13.6
    %
    
    
    (21,298
    )
    
    
    -11.5
    %
    
    
    (17,442
    )
    
    
    -14.1
    %Other Operating Expenses
    
    
    (6,951
    )
    
    
    -3.4
    %
    
    
    (4,397
    )
    
    
    -2.4
    %
    
    
    (2,876
    )
    
    
    -2.3
    %Net result of assets sold
    
    
    7,367
    
    
    
    3.6
    %
    
    
    1,225
    
    
    
    0.7
    %
    
    
    (205
    )
    
    
    -0.2
    %TOTAL OPERATING COST AND EXPENSES
    
    
    (187,073
    )
    
    
    -90.7
    %
    
    
    (172,896
    )
    
    
    -93.5
    %
    
    
    (117,512
    )
    
    
    -95.3
    %OPERATING INCOME
    
    
    19,206
    
    
    
    9.3
    %
    
    
    11,994
    
    
    
    6.5
    %
    
    
    5,853
    
    
    
    4.7
    %Interest Expense, net
    
    
    (1,606
    )
    
    
    -0.8
    %
    
    
    (4,882
    )
    
    
    -2.6
    %
    
    
    (9,677
    )
    
    
    -7.8
    %NET INCOME (LOSS) BEFORE INCOME TAX
    
    
    17,600
    
    
    
    8.5
    %
    
    
    7,112
    
    
    
    3.8
    %
    
    
    (3,824
    )
    
    
    -3.1
    %Income taxes  deferred
    
    
    (4,057
    )
    
    
    -2.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    311
    
    
    
    0.3
    %Income taxes  current
    
    
    (2,278
    )
    
    
    -1.1
    %
    
    
    (36
    )
    
    
    0.0
    %
    
    
    (746
    )
    
    
    -0.6
    %NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST
    
    
    11,265
    
    
    
    
    
    
    
    7,076
    
    
    
    
    
    
    
    (4,259
    )Net (income) loss attributable to non-controlling interest
    
    
    384
    
    
    
    0.2
    %
    
    
    (180
    )
    
    
    
    
    
    
    317
    
    
    
    0.4
    %NET INCOME (LOSS) ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.
    
    
    11,649
    
    
    
    7.5
    %
    
    
    6,896
    
    
    
    4.7
    %
    
    
    (3,942
    )
    
    
    -4.4
    %
  7




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##### 



Net Revenues from Own-Operated Restaurants
   Net revenues from own-operated restaurants12 Months
    
    
    Increase
    
    
    12 Months
    
    
    Increase
    
    
    12 MonthsDecember, 31
    
    
    (Decrease)
    
    

December, 31
    
    
    (Decrease)
    
    

December, 31Brand
    
    2010
    
    
    %
    
    
    2009
    
    
    %
    
    
    2008Bobs
    
    R$
    72,104
    
    
    
    -8.4
    %
    
    R$
    78,686
    
    
    
    4.7
    %
    
    R$
    75,133KFC
    
    
    21,690
    
    
    
    15.0
    %
    
    
    18,868
    
    
    
    77.3
    %
    
    
    10,640IRB  Pizza Hut
    
    
    58,522
    
    
    
    20.0
    %
    
    
    48,764
    
    
    
    (a
    )
    
    
    4,349DOGGIS
    
    
    2,275
    
    
    
    (b
    )
    
    
    557
    
    
    
    (b
    )
    
    
    Consolidated Net Revenues
    
    R$
    154,591
    
    
    
    5.3
    %
    
    R$
    146,875
    
    
    
    63.0
    %
    
    R$
    90,122
 
 (a)
    
    Pizza Hut s 2008 figures are comprised of one month, since its operations started on
December 1, 2008.(b)
    
    Doggi s 2009 figures are comprised of four months, since its operations started on
September 1, 2009.    8




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##### 



Net Franchise Revenues
  12 months ended December, 31R$000
    
    2010
    
    2009
    
    2008Net Franchise Royalty Fees
    
    
    25,282
    
    
    
    22,714
    
    
    
    19,803Initial Fee
    
    
    3,104
    
    
    
    1,933
    
    
    
    2,624Net Franchise Revenues
    
    
    28,386
    
    
    
    24,647
    
    
    
    22.427
 9




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##### 



Revenue from Trade Partners and Other Income
           10




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##### 



Store Costs and Expenses
   R$ 000
    
    12 Months
    
    
    
    
    
    
    12 Months
    
    
    
    
    
    
    12 MonthsEnded
    
    
    
    
    
    
    Ended
    
    
    
    
    
    
    Ended31-Dec-10
    
    
    %
    
    
    31-Dec-09
    
    
    %
    
    
    31-Dec-08STORE RESULTSNet Revenues from Own-operated Restaurants
    
    
    154,591
    
    
    
    100.0
    %
    
    
    146,875
    
    
    
    100.0
    %
    
    
    90,122
    
    
    
    100.0
    %Store Costs and ExpensesFood, Beverage and Packaging
    
    
    (53,075
    )
    
    
    -34.3
    %
    
    
    (51,720
    )
    
    
    -35.2
    %
    
    
    (34,578
    )
    
    
    -38.4
    %Payroll & Related Benefits
    
    
    (34,161
    )
    
    
    -22.1
    %
    
    
    (33,787
    )
    
    
    -23.0
    %
    
    
    (24,939
    )
    
    
    -27.7
    %Restaurant Occupancy
    
    
    (17,680
    )
    
    
    -11.4
    %
    
    
    (15,446
    )
    
    
    -10.5
    %
    
    
    (10,236
    )
    
    
    -11.4
    %Contracted Services
    
    
    (18,534
    )
    
    
    -12.0
    %
    
    
    (16,768
    )
    
    
    -11.4
    %
    
    
    (10,036
    )
    
    
    -11.1
    %Depreciation and Amortization
    
    
    (5,839
    )
    
    
    -3.8
    %
    
    
    (5,138
    )
    
    
    -3.5
    %
    
    
    (2,819
    )
    
    
    -3.1
    %Royalties Charged
    
    
    (4,962
    )
    
    
    -3.2
    %
    
    
    (3,537
    )
    
    
    -2.4
    %
    
    
    (271
    )
    
    
    -0.3
    %Other Store Costs and Expenses
    
    
    (9,392
    )
    
    
    -6.1
    %
    
    
    (9,319
    )
    
    
    -6.3
    %
    
    
    (6,850
    )
    
    
    -7.6
    %Total Store Costs and Expenses
    
    
    (143,643
    )
    
    
    -92.9
    %
    
    
    (135,715
    )
    
    
    -92.4
    %
    
    
    (89,729
    )
    
    
    -99.6
    %STORE OPERATING INCOME
    
    
    10,948
    
    
    
    7.1
    %
    
    
    11,160
    
    
    
    7.6
    %
    
    
    393
    
    
    
    0.4
    %
 11




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##### 



Food, Beverage and Packaging Costs
  Food, Beverage and Packaging (Cost of Food) as a percentage of
Net revenues from own-operated restaurants (Revenues) per brand
 12 Months ended
    
    
    12 Months ended
    
    
    12 Months endedR$000
    

December 31, 2010
    
    

December 31, 2009
    
    

December 31, 2008Brand
    
    Revenues
    
    
    Cost of Food
    
    
    %
    
    
    Revenues
    
    
    Cost of Food
    
    
    %
    
    
    Revenues
    
    
    Cost of Food
    
    
    %Bobs
    
    R$
    72,104
    
    
    
    R$(26,851
    )
    
    
    -37.2
    %
    
    R$
    78,686
    
    
    
    R$(29,272
    )
    
    
    -37.2
    %
    
    R$
    75,133
    
    
    
    R$(29,255
    )
    
    
    -38.9
    %KFC
    
    
    21,690
    
    
    
    (7,975
    )
    
    
    -36.8
    %
    
    
    18,868
    
    
    
    (7,293
    )
    
    
    -38.7
    %
    
    
    10,640
    
    
    
    (4,082
    )
    
    
    -38.4
    %IRB  Pizza Hut
    
    
    58,522
    
    
    
    (17,032
    )
    
    
    -29.1
    %
    
    
    48,764
    
    
    
    (14,808
    )
    
    
    -30.4
    %
    
    
    4,349
    
    
    
    (1,241
    )
    
    
    -28.5
    %DOGGIS
    
    
    2,275
    
    
    
    (1,217
    )
    
    
    -53.5
    %
    
    
    557
    
    
    
    (347
    )
    
    
    -62.3
    %
    
    
    
    
    
    
    
    
    
    
    Consolidated
    
    R$
    154,591
    
    
    
    R$(53,075
    )
    
    
    -34.3
    %
    
    R$
    146,875
    
    
    
    R$(51,720
    )
    
    
    -35.2
    %
    
    R$
    90,122
    
    
    
    R$(34,578
    )
    
    
    -38.4
    %
     12




---



##### 



Payroll & Related Benefits
  Payroll & Related Benefits (Payroll) as a percentage of  Net revenues from own-operated restaurants (Revenues) per brand
 12 Months ended
    
    
    12 Months ended
    
    
    12 Months endedR$000
    

December 31, 2010
    
    

December 31, 2009
    
    

December 31, 2008Brand
    
    Revenues
    
    
    Payroll
    
    
    %
    
    
    Revenues
    
    
    Payroll
    
    
    %
    
    
    Revenues
    
    
    Payroll
    
    
    %Bobs
    
    R$
    72,104
    
    
    R$
    (16,656
    )
    
    
    -23.1
    %
    
    R$
    78,686
    
    
    R$
    (18,523
    )
    
    
    -23.5
    %
    
    R$
    75,133
    
    
    R$
    (20,127
    )
    
    
    -26.8
    %KFC
    
    
    21,690
    
    
    
    (5,465
    )
    
    
    -25.2
    %
    
    
    18,868
    
    
    
    (4,617
    )
    
    
    -24.5
    %
    
    
    10,640
    
    
    
    (3,156
    )
    
    
    -29.7
    %IRB  Pizza Hut
    
    
    58,522
    
    
    
    (11,223
    )
    
    
    -19.2
    %
    
    
    48,764
    
    
    
    (10,442
    )
    
    
    -21.4
    %
    
    
    4,349
    
    
    
    (1,656
    )
    
    
    -38.1
    %DOGGIS
    
    
    2,275
    
    
    
    (817
    )
    
    
    -35.9
    %
    
    
    557
    
    
    
    (205
    )
    
    
    -36.8
    %
    
    
    
    
    
    
    
    
    
    
    Consolidated
    
    R$
    154,591
    
    
    R$
    (34,161
    )
    
    
    -22.1
    %
    
    R$
    146,875
    
    
    R$
    (33,787
    )
    
    
    -23.0
    %
    
    R$
    90,122
    
    
    R$
    (24,939
    )
    
    
    -27.7
    %
   13




---



##### 



Restaurant Occupancy Costs
  Restaurant Occupancy (Occupancy) as a percentage of  Net revenues from own-operated restaurants (Revenues) per brand
 12 Months ended
    
    
    12 Months ended
    
    
    12 Months endedR$000
    

December 31, 2010
    
    

December 31, 2009
    
    

December 31, 2008Brand
    
    Revenues
    
    
    Occupancy
    
    
    %
    
    
    Revenues
    
    
    Occupancy
    
    
    %
    
    
    Revenues
    
    
    Occupancy
    
    
    %Bobs
    
    R$
    72,104
    
    
    R$
    (7,530
    )
    
    
    -10.4
    %
    
    R$
    78,686
    
    
    R$
    (8,560
    )
    
    
    -10.9
    %
    
    R$
    75,133
    
    
    R$
    (8,359
    )
    
    
    -11.1
    %KFC
    
    
    21,690
    
    
    
    (2,981
    )
    
    
    -13.7
    %
    
    
    18,868
    
    
    
    (2,417
    )
    
    
    -12.8
    %
    
    
    10,640
    
    
    
    (1,437
    )
    
    
    -13.5
    %IRB  Pizza Hut
    
    
    58,522
    
    
    
    (6,680
    )
    
    
    -11.4
    %
    
    
    48,764
    
    
    
    (4,377
    )
    
    
    -9.0
    %
    
    
    4,349
    
    
    
    (440
    )
    
    
    -10.1
    %DOGGIS
    
    
    2,275
    
    
    
    (489
    )
    
    
    -21.5
    %
    
    
    557
    
    
    
    (92
    )
    
    
    -16.5
    %
    
    
    
    
    
    
    
    
    
    
    Consolidated
    
    R$
    154,591
    
    
    R$
    (17,680
    )
    
    
    -11.4
    %
    
    R$
    146,875
    
    
    R$
    (15,446
    )
    
    
    -10.5
    %
    
    R$
    90,122
    
    
    R$
    (10,236
    )
    
    
    -11.4
    %
   14




---



##### 



Contracted Services
  Contracted Services (Services) as a percentage of  Net revenues from own-operated restaurants (Revenues) per brand
 12 Months ended
    
    
    12 Months ended
    
    
    12 Months endedR$000
    

December 31, 2010
    
    

December 31, 2009
    
    

December 31, 2008Brand
    
    Revenues
    
    
    Services
    
    
    %
    
    
    Revenues
    
    
    Services
    
    
    %
    
    
    Revenues
    
    
    Services
    
    
    %Bobs
    
    R$
    72,104
    
    
    R$
    (7,866
    )
    
    
    -10.9
    %
    
    R$
    78,686
    
    
    R$
    (9,124
    )
    
    
    -11.6
    %
    
    R$
    75,133
    
    
    R$
    (8,383
    )
    
    
    -11.2
    %KFC
    
    
    21,690
    
    
    
    (3,239
    )
    
    
    -14.9
    %
    
    
    18,868
    
    
    
    (2,393
    )
    
    
    -12.7
    %
    
    
    10,640
    
    
    
    (1,653
    )
    
    
    -15.5
    %IRB  Pizza Hut
    
    
    58,522
    
    
    
    (7,112
    )
    
    
    -12.2
    %
    
    
    48,764
    
    
    
    (5,191
    )
    
    
    -10.6
    %
    
    
    4,349
    
    
    
    
    
    
    
    0.0
    %DOGGIS
    
    
    2,275
    
    
    
    (317
    )
    
    
    -13.9
    %
    
    
    557
    
    
    
    (60
    )
    
    
    -10.8
    %
    
    
    
    
    
    
    
    
    
    
    Consolidated
    
    R$
    154,591
    
    
    R$
    (18,534
    )
    
    
    -12.0
    %
    
    R$
    146,875
    
    
    R$
    (16,768
    )
    
    
    -11.4
    %
    
    R$
    90,122
    
    
    R$
    (10,036
    )
    
    
    -11.1
    %
    Depreciation and Amortization
  15




---



##### 



Royalties Charged
  Royalties as a percentage of  Net revenues from own-operated restaurants (Revenues) per brand
 12 Months ended
    
    
    12 Months ended
    
    
    12 Months endedR$000
    

December 31, 2010
    
    

December 31, 2009
    
    

December 31, 2008Brand
    
    Revenues
    
    
    Royalties
    
    
    %
    
    
    Revenues
    
    
    Royalties
    
    
    %
    
    
    Revenues
    
    
    Royalties
    
    
    %Bobs
    
    R$
    72,104
    
    
    R$
    
    
    
    
    0.0
    %
    
    R$
    78,686
    
    
    R$
    
    
    
    
    0.0
    %
    
    R$
    75,133
    
    
    R$
    
    
    
    
    0.0
    %KFC
    
    
    21,690
    
    
    
    (1,070
    )
    
    
    -4.9
    %
    
    
    18,868
    
    
    
    (555
    )
    
    
    -2.9
    %
    
    
    10,640
    
    
    
    (271
    )
    
    
    -2.5
    %IRB  Pizza Hut
    
    
    58,522
    
    
    
    (3,892
    )
    
    
    -6.7
    %
    
    
    48,764
    
    
    
    (2,982
    )
    
    
    -6.1
    %
    
    
    4,349
    
    
    
    
    
    
    
    0.0
    %DOGGIS
    
    
    2,275
    
    
    
    
    
    
    
    0.0
    %
    
    
    557
    
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    
    
    
    
    Consolidated
    
    R$
    154,591
    
    
    R$
    (4,962
    )
    
    
    -3.2
    %
    
    R$
    146,875
    
    
    R$
    (3,537
    )
    
    
    -2.4
    %
    
    R$
    90,122
    
    
    R$
    (271
    )
    
    
    -0.3
    %
  Other Store Costs and Expenses
   Franchise Costs and Expenses
   R$ 000
    
    12 Months
    
    
    
    
    
    
    12 Months
    
    
    
    
    
    
    12 MonthsEnded
    
    
    
    
    
    
    Ended
    
    
    
    
    
    
    Ended31-Dec-09
    
    
    %
    
    

31-Dec-08
    
    
    %
    
    

31-Dec-07
    
    
    %FRANCHISE RESULTSNet Revenues from Franchisees
    
    
    24,647
    
    
    
    100.0
    %
    
    
    22,427
    
    
    
    100.0
    %
    
    
    18,811
    
    
    
    100.0
    %Franchise Costs and Expenses
    
    
    (8.619
    )
    
    
    -35.0
    %
    
    
    (6,207
    )
    
    
    -27.7
    %
    
    
    (3,623
    )
    
    
    -19.3
    %FRANCHISE OPERATING INCOME
    
    
    16,028
    
    
    
    65.0
    %
    
    
    16,220
    
    
    
    72.3
    %
    
    
    15,188
    
    
    
    80.7
    %
 16




---



##### 



Marketing, General and Administrative and Other Expenses
 Marketing expenses
 Bobs Brand
       17




---



##### 



KFC and Pizza Hut Brands
   Doggis Brand
    18




---



##### 



Administrative Expenses
  Year Ended December 31,R$000
    
    2010
    
    
    2009
    
    
    2008Payroll & Related Benefits
    
    
    12,328
    
    
    
    9,575
    
    
    
    7,628Occupancy expenses
    
    
    1,378
    
    
    
    2,182
    
    
    
    1,940Legal, accounting and
consulting
    
    
    7,948
    
    
    
    4,714
    
    
    
    3,310Maintenance Expenses
    
    
    869
    
    
    
    337
    
    
    
    629IT Expenses
    
    
    1,045
    
    
    
    705
    
    
    
    777Travel and transport expenses
    
    
    940
    
    
    
    1,021
    
    
    
    550Bank Charges
    
    
    460
    
    
    
    410
    
    
    
    227Other Administrative Expenses
    
    
    3,106
    
    
    
    2,354
    
    
    
    2,38128,074
    
    
    
    21,298
    
    
    
    17,442
   19




---



##### 



Other Operating Expenses
   December 31,R$000
    
    2010
    
    
    2009
    
    
    2008Uncollectable receivables
    
    
    939
    
    
    
    502
    
    
    
    851Contingencies expenses
    
    
    4,138
    
    
    
    443
    
    
    
    Depreciation of Headquarters fixed assets
    
    
    609
    
    
    
    805
    
    
    
    682Preoperating and other expenses
    
    
    1,265
    
    
    
    2,647
    
    
    
    1,343R$
    6,951
    
    
    R$
    4,397
    
    
    R$
    2,876
   Impairment of Assets and Net Result of Assets Sold
     20




---



##### 



INTEREST EXPENSES AND INCOME TAX
 Interest Expenses, net
   INCOME TAXES
    21




---



##### 



LIQUIDITY AND CAPITAL RESOURCES
 (Amounts in Brazilian Reais, unless otherwise stated)
 A) Introduction
       22




---



##### 



B) Debt Obligation  financial institutions
  December 31,R$ 000
    
    2010
    
    
    2009Revolving lines of credit (a)
    
    R$
    12,386
    
    
    R$
    11,422Leasing facilities (b)
    
    
    364
    
    
    
    1,373Other loan (c)
    
    
    1,329
    
    
    
    9,63814,079
    
    
    
    22,433Less: current portion
    
    
    (12,972
    )
    
    
    (13,829
    )R$
    1,107
    
    
    R$
    8,604
  R$ 0002011
    
    R$
    12,9722012
    
    
    1,0202013
    
    
    87R$
    14,079
 23




---



##### 



(a)
    
    Part of this debt (R$7.8 million) is due on demand from two Brazilian
financial institutions at interest of approximately 13.5%p.y. Another part (R$4.6
million) is comprised of two loans: one is payable in 12 installments of R$213,000
(ending on December, 2011), plus interest of 16.0%p.y and the other is payable in 25
installments of R$85,000 (ending on January, 2013), plus interest of 16.0%p.y . All
the debts of this category are collateralized against certain officers and
receivables.(b)
    
    The debt is comprised of various lease facilities with private Brazilian
institutions for the funding of store equipment; payable in a range from one to 10
monthly payments at interest ranging from 14.3% p.y. to 23.4% p.y (ending on October,
2011). All the debts of this category are collateralized against the assets leased.(c)
    
    Loan taken out with UBS Pactual relate to the acquisition of the Pizza Hut
business in Brazil. The repayment of this loan is due in 8 monthly installments
(ending on August, 2011), of R$166,000, plus interest of 12.0%p.y. The loan is
guaranteed by some of the Companys properties. During 2010 the Company extinguished
in advance three of the four loans that made up the balance with UBS Pactual in
December 31, 2009. C) Debt Obligation  taxes
     24




---



##### 



D) Other Obligations
   R$000
    
    ContractualFiscal Year
    
    Leases2011
    
    
    16,4692012
    
    
    11,9342013
    
    
    10,5512014
    
    
    9,0992015
    
    
    5,452Thereafter
    
    
    1,388Total
    
    
    54,893
  25




---



##### 



R$000
    
    ContractualFiscal Year
    
    Leases
    
    
    Financial Debt
    
    
    Fiscal Debt
    
    
    Total2011
    
    
    16,469
    
    
    
    12,972
    
    
    
    1,580
    
    
    
    31,0212012
    
    
    11,934
    
    
    
    1,020
    
    
    
    1,580
    
    
    
    14,5342013
    
    
    10,551
    
    
    
    87
    
    
    
    1,580
    
    
    
    12,2182014
    
    
    9,099
    
    
    
    
    
    
    
    1,580
    
    
    
    10,6792015
    
    
    5,452
    
    
    
    
    
    
    
    1,580
    
    
    
    7,032Thereafter
    
    
    1,388
    
    
    
    
    
    
    
    3,739
    
    
    
    5,127Total
    
    
    54,893
    
    
    
    14,079
    
    
    
    11,639
    
    
    
    80,611
  26




---



##### 




    
    the expansion of our franchisee base, which may be expected to generate
additional cash flows from royalties and franchise initial fees without significant
capital expenditure;
    
    the improvement of food preparation methods in all the stores to increase the
chains operating margin, including the acquisition of new store equipment and hiring
of a consultancy firm for the stores personnel training program;
    
    the continuation of motivational programs and menu expansion to meet consumer
needs and wishes;
    
    the improvement and upgrading of our IT system;
    
    negotiations with suppliers to obtain significant agreements in long-term
supply contracts; and
    
    the renegotiation of past due receivables from franchisees.
 27




---



##### 



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   Foreign currency
  Accounts receivable
     28




---



##### 



Long-Lived Assets
   Revenue recognition
 Revenue recognition
     29




---



##### 




    
    Persuasive evidence that an arrangement exists the contract is
signed by the franchisee;
    
    Delivery has occurred or services have been rendered franchisee
sales are the basis of royalty revenues;
    
    The sellers price to the buyer is fixed or determinable the
contract states that royalties are a percentage of the franchisees gross sales;
 (Collectability is
reasonably assured)
 Marketing fund and expenses
 Bobs Brand
     30




---



##### 



KFC and Pizza Hut Brands
   Doggis Brand
   Income taxes
  31




---



##### 



NEW ACCOUNTING STANDARDS
    32




---



##### 



Subsequent
Events.
 Subsequent Events (Topic
855): Amendments to Certain Recognition and Disclosure Requirements.
    33




---



##### 



Intangibles  Goodwill and Other (Topic 350): When to
Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying
Amounts.
  Accounting for Various
Topics. FASB Accounting StandardsCodification
 
    
    Codification Topic 805, Business Combinations(originally issued as
FASB Statement No. 141 (Revised December 2007), Business Combinations); and
    
    Codification Topic 810, Consolidation(originally issued as FASB Statement No. 160,
Noncontrolling Interests in Consolidated Financial Statements).
  Equity (Topic 505):
Accounting for Distributions to Shareholders with Components of Stock and Cash.
 34




---



##### 




    
    A reporting entity should disclose separately the amounts of
significant transfers in and out of Level 1 and Level 2 fair value measurements and
describe the reasons for the transfers; and
    
    In the reconciliation for fair value measurements using significant
unobservable inputs, a reporting entity should present separately information about
purchases, sales, issuances, and settlements.
  
    
    For purposes of reporting fair value measurement for each class of assets and
liabilities, a reporting entity needs to use judgment in determining the appropriate classes
of assets and liabilities; and
    
    A reporting entity should provide disclosures about the valuation techniques and
inputs used to measure fair value for both recurring and nonrecurring fair value
measurements.
  OFF-BALANCE SHEET ARRANGEMENTS
  ITEM7A. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
     ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  35




---



##### 



June 30, 2009:
    
    $
    29,570,515.23December 31, 2009:
    
    $
    41,517,342.30January 31, 2010:
    
    $
    40,670,049.60June 30, 2010 :
    
    $
    49,142,976.60December 31, 2010:
    
    $
    67,868,145.27January 31, 2011:
    
    $
    69,478,001.40
  1.
    
    Our activities are essentially focused on the operation of our restaurants and on the
revenues provided by our franchisees . Concerning the restaurants (both own operated and
operated by franchisees) the main controls of the food service for our clients are
performed by the trained employees that operate the stores and by a computer software
(Snack Control) that registers all transactions, food, currency and tax records. In 2009,
decided to upgrade our information system used at our stores and we started the migration
of Snack Control to another computer software (Degust), a modern software adapted to the
present demands of the industry. The migration was totally completed in 2010. Degust system
is showing a much better performance and allows us to extend our up-grade of controls to
our computerized Enterprise Resource Planning (ERP) used for our accounting books. This
will be a rather long process that can go through 2011. Franchisees are also satisfied with
Degust and this gives us other chances of automate their operation control, targeting a
better process of royalties and marketing contribution collection.2.
    
    Our ERP system (Protheus), a software permanently up-dated by the supplier (TOTVS
Informatics) was not fully used in its large possibilities, in part due to the weak
performance of Snack Control. With the migration to Degust and new hardware, (gradually
acquired for our stores along 2009 to support such new store computer system) the
management decided to invest in a whole revision of the administrative, financial and
fiscal processes. This process revision is still on going and it will be finished along
2011. The new structures of the group and the new management
 36




---



##### 



organization designed and fixed
at the beginning of 2009, forced new and quicker methods for reliably processing our
operations. The management considers that the present processes and control methods are
accurate enough to assure an efficient administration of our operation and the emission of
trusty financial statements. Nevertheless the company must be prepared for expansion. So
the management contracted an independent consulting firm which is specialized in the study
and projections of process techniques. The consultants developed in the last quarter of
2009 the first part of the project that is being finished in the first quarter of 2011.3.
    
    As we informed by the previous reports , we outsourced our accounting and tax
activities to Mazars, an multinational business and process outsourced firm specializes
in local tax requirement , Brazilian GAAP and US GAAP as well . They started our accounting
services in January 2010 but we devoted a whole quarter to assure the migration. Only IRB,
our Pizza Hut subsidiary, has its accounting books prepared by ADDCONT, a Brazilian
accounting firm that was in charge of these services at IRB for several years before our
acquisition.4.
    
    We prepared and strengthened our expansion services that will have an important role in
the development of the franchise operation of KFC and Doggis chains. We improved our
methods for selecting franchisees and for the selection of new points of sales. These
procedures are the basis of our growing revenues in the next years and at the same time
they have a great influence in the control of the franchise operation, with impacts in the
brands image and in the income we will be able to get from this activity.5.
    
    No processes can be performing without a tough training of the people that will use and
manage them. Thant is the reason that we are investing and training all our employees in
terms of
systems and good practices . We will improve and expand our Human Resources Department that
will be in charge of this program.
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING  AND FINANCIAL DISCLOSURE
  ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  37




---



##### 



Managements Report on Internal Control Over Financial Reporting
     38




---



##### 



Changes in Internal Control over Financial Reporting
  ITEM 9B. OTHER INFORMATION
  39




---



##### 



PART III
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  ITEM 11. EXECUTIVE COMPENSATION
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  40




---



##### 



ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
        Exhibit No.
    
    Description3.1
    
    Certificate of Incorporation of the Registrant, as amended(1)3.2
    
    By-laws of the Registrant (2)10.1
    
    Amended and Restated 1992 Stock Option Plan (2)21.1
    
    Subsidiaries of Registrant (3)24.1
    
    Power of Attorney (comprises a portion of the signature page of this
report)31.1*
    
    Certification by Ricardo Figueiredo Bomeny, Chief Executive Officer
and Acting Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.1*
    
    Certification by Ricardo Figueiredo Bomeny, Chief Executive Officer
and Acting Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
 
 *
    
    Filed herewith.(1)
    
    Filed as an exhibit to Registrants Registration Statement on Form S-1 (File No.
333-3754).(2)
    
    Filed as an exhibit to Registrants Registration Statement on Form S-1 (File
No. 33-71368).(3)
    
    Filed as an exhibit to Registrants Annual Report on Form 10-K for the year
ended December 31, 1997 (File No. 0-23278). 41




---



##### 



SIGNATURES
  BRAZIL FAST FOOD CORP.By:
    /s/ Ricardo Figueiredo BomenyRicardo Figueiredo BomenyPresident and Chief Executive Officer (Principal
Executive Officer)By:
    /s/ Ricardo Figueiredo BomenyRicardo Figueiredo BomenyActing Chief Financial Officer (Interim Principal
Financial and Accounting Officer)   /s/ Ricardo Figueiredo Bomeny

Ricardo Figueiredo Bomeny
    
    Date: February 16, 2011Chief Executive Officer and Acting Chief Financial
Officer/s/ Guillermo Hector Pisano

Guillermo Hector Pisano
    
    Date: February 16, 2011Chairman of the Board
 42




---



##### 



/s/ Gustavo Alberto Villela Filho

Gustavo Alberto Villela Filho
    
    Date: February 16, 2011Director/s/Alexandre Nunes

Alexandre Nunes
    
    Date: February 16, 2011Director/s/ Marcos Rocha

Marcos Rocha
    
    Date: February 16, 2011Director/s/ Marcos Gouvêa de Souza

Marcos Gouvêa de Souza
    
    Date: February 16, 2011Director/s/ Lúcio Montanini

Lúcio Montanini
    
    Date: February 16, 2011Director
 43




---



##### 



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-40




---



##### 



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




---



##### 



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(In thousands of Brazilian Reais, except share amounts)
 December 31,2010
    
    
    2009CURRENT ASSETS:Cash and cash equivalents (note 3)
    
    R$
    16,742
    
    
    R$
    13,250Inventories
    
    
    3,454
    
    
    
    3,762Accounts receivable (note 4)
    
    
    15,930
    
    
    
    10,342Prepaid expenses
    
    
    3,776
    
    
    
    3,132Receivables from properties sale (notes 5 and 17.b)
    
    
    3,633
    
    
    
    Other current assets (notes 5 and 17.b)
    
    
    4,249
    
    
    
    3,323TOTAL CURRENT ASSETS
    
    
    47,784
    
    
    
    33,809Property and equipment, net (note 6)
    
    
    29,862
    
    
    
    35,003Deferred charges, net (note 7)
    
    
    5,866
    
    
    
    6,799Deferred tax asset (note 11)
    
    
    11,992
    
    
    
    13,597Goodwill (note 2)
    
    
    799
    
    
    
    799Other receivables and other assets (notes 5 and 17.b)
    
    
    16,258
    
    
    
    10,948TOTAL ASSETS
    
    R$
    112,561
    
    
    R$
    100,955LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Notes payable (note 8)
    
    R$
    12,972
    
    
    R$
    13,829Accounts payable and accrued expenses (note 9)
    
    
    25,848
    
    
    
    16,275Payroll and related accruals
    
    
    6,571
    
    
    
    4,668Taxes
    
    
    4,936
    
    
    
    3,643Current portion of deferred income tax (note 11)
    
    
    1,190
    
    
    
    Current portion of deferred income (note 12b)
    
    
    993
    
    
    
    2,837Current portion of contingencies and reassessed taxes (note 12c)
    
    
    1,580
    
    
    
    1,676Other current liabilities
    
    
    79
    
    
    
    260TOTAL CURRENT LIABILITIES
    
    
    54,169
    
    
    
    43,188Deferred income, less current portion (note 12b)
    
    
    2,702
    
    
    
    4,076Deferred income tax (note 11)
    
    
    1,262
    
    
    
    Notes payable, less current portion (note 8)
    
    
    1,107
    
    
    
    8,604Contingencies and reassessed taxes, less
current portion (note 12c)
    
    
    19,251
    
    
    
    18,803TOTAL LIABILITIES
    
    
    78,491
    
    
    
    74,671EQUITYSHAREHOLDERS EQUITY:Preferred stock, $.01 par value, 5,000 shares authorized; no
shares issued
    
    
    
    
    
    
    Common stock, $.0001 par value, 12,500,000 shares authorized;
8,472,927 shares issued; 8,137,762 shares outstanding for both years
2010 and 2009
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    61,148
    
    
    
    61,148Treasury
Stock (335,165 shares for both years 2010 and 2009)
    
    
    (1,946
    )
    
    
    (1,946
    )Accumulated Deficit
    
    
    (24,946
    )
    
    
    (33,021
    )Accumulated comprehensive loss
    
    
    (1,091
    )
    
    
    (1,077
    )TOTAL SHAREHOLDERS EQUITY
    
    
    33,166
    
    
    
    25,105Non-Controlling Interest
    
    
    904
    
    
    
    1,179TOTAL EQUITY
    
    
    34,070
    
    
    
    26,284TOTAL LIABILITIES AND EQUITY
    
    R$
    112,561
    
    
    R$
    100,955
  F - 3




---



##### 



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED INCOME STATEMENTS
(in thousands of Brazilian Reais, except share amounts)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008REVENUESNet Revenues from Own-operated Restaurants
    
    R$
    154,591
    
    
    R$
    146,875
    
    
    R$
    90,122Net Revenues from Franchisees
    
    
    28,386
    
    
    
    24,647
    
    
    
    22,427Net Revenues from Trade Partners
    
    
    21,104
    
    
    
    10,270
    
    
    
    8,317Other Income
    
    
    2,198
    
    
    
    3,098
    
    
    
    2,499TOTAL REVENUES
    
    
    206,279
    
    
    
    184,890
    
    
    
    123,365OPERATING COST AND EXPENSESStore Costs and Expenses (note 19)
    
    
    (143,643
    )
    
    
    (135,715
    )
    
    
    (89,729
    )Franchise Costs and Expenses (note 19)
    
    
    (10,718
    )
    
    
    (8,619
    )
    
    
    (6,207
    )Marketing Expenses
    
    
    (5,054
    )
    
    
    (4,092
    )
    
    
    (1,053
    )Administrative Expenses (note 14)
    
    
    (28,074
    )
    
    
    (21,298
    )
    
    
    (17,442
    )Other Operating Expenses (note 15)
    
    
    (6,951
    )
    
    
    (4,397
    )
    
    
    (2,876
    )Net result of assets sold and impairment of assets
    
    
    7,367
    
    
    
    1,225
    
    
    
    (205
    )TOTAL OPERATING COST AND EXPENSES
    
    
    (187,073
    )
    
    
    (172,896
    )
    
    
    (117,512
    )OPERATING INCOME
    
    
    19,206
    
    
    
    11,994
    
    
    
    5,853Interest Expense, net (note 16)
    
    
    (1,606
    )
    
    
    (4,882
    )
    
    
    (9,677
    )NET INCOME BEFORE INCOME TAX
    
    
    17,600
    
    
    
    7,112
    
    
    
    (3,824
    )Income taxes  deferred (note 11)
    
    
    (4,057
    )
    
    
    
    
    
    
    311Income taxes  current (note 11)
    
    
    (2,278
    )
    
    
    (36
    )
    
    
    (746
    )NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST
    
    
    11,265
    
    
    
    7,076
    
    
    
    (4,259
    )Net (income) loss attributable to non-controlling interest
    
    
    384
    
    
    
    (180
    )
    
    
    317NET INCOME (LOSS) ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.
    
    R$
    11,649
    
    
    R$
    6,896
    
    
    R$
    (3,942
    )NET INCOME LOSS PER COMMON SHAREBASIC AND DILUTED
    
    R$
    1.43
    
    
    R$
    0.85
    
    
    R$
    (0.48
    )WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING:BASIC AND DILUTED
    
    
    8,137,762
    
    
    
    8,152,505
    
    
    
    8,163,949
  F - 4




---



##### 



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands of Brazilian Reais)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Net Income
(Loss) Attributable to Brazil Fast Food Corp.
    
    R$
    11,649
    
    
    R$
    6,896
    
    
    R$
    (3,942
    )Other comprehensive income (loss):Foreign currency translation
adjustment
    
    
    (14
    )
    
    
    (37
    )
    
    
    74Comprehensive Income (loss) Attributable to Brazil Fast Food Corp.
    
    R$
    11,635
    
    
    R$
    6,859
    
    
    R$
    (3,868
    )
   F - 5




---



##### 



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(In thousands of Brazilian Reais, except share amounts)
 Additional
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Total
    
    
    Non-Common Stock
    
    
    Paid-In
    
    
    Treasury
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Shareholders
    
    
    Controlling
    
    
    TotalShares
    
    
    Par Value
    
    
    Capital
    
    
    Stock
    
    
    Deficit
    
    
    Loss
    
    
    Equity
    
    
    Interest
    
    
    EquityBalance, December 31, 2007
    
    
    8,177,687
    
    
    R$
    1
    
    
    R$
    60,988
    
    
    R$
    (1,060
    )
    
    R$
    (35,296
    )
    
    R$
    (1,114
    )
    
    R$
    23,519
    
    
    R$
    
    
    
    R$
    23,519Exercise of options
    
    
    33,750
    
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    74Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,942
    )
    
    
    
    
    
    
    (3,942
    )
    
    
    (317
    )
    
    
    (4,259
    )Acquisition of Companys own
shares
    
    
    (62,720
    )
    
    
    
    
    
    
    
    
    
    
    (541
    )
    
    
    
    
    
    
    
    
    
    
    (541
    )
    
    
    
    
    
    
    (541
    )Non-Controling interest on IRB
Acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,298
    
    
    
    1,298Paid dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (679
    )
    
    
    
    
    
    
    (679
    )
    
    
    
    
    
    
    (679
    )Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    74
    
    
    
    
    
    
    
    74Balance, December 31, 2008
    
    
    8,148,717
    
    
    R$
    1
    
    
    R$
    61,062
    
    
    R$
    (1,601
    )
    
    R$
    (39,917
    )
    
    R$
    (1,040
    )
    
    R$
    18,505
    
    
    R$
    981
    
    
    R$
    19,486Exercise of options
    
    
    35,000
    
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    86Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,896
    
    
    
    
    
    
    
    6,896
    
    
    
    180
    
    
    
    7,076Acquisition of Companys own
shares
    
    
    (45,955
    )
    
    
    
    
    
    
    
    
    
    
    (345
    )
    
    
    
    
    
    
    
    
    
    
    (345
    )
    
    
    
    
    
    
    (345
    )Non-Controling interest on Doggis
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    (37
    )
    
    
    
    
    
    
    (37
    )Balance, December 31, 2009
    
    
    8,137,762
    
    
    R$
    1
    
    
    R$
    61,148
    
    
    R$
    (1,946
    )
    
    R$
    (33,021
    )
    
    R$
    (1,077
    )
    
    R$
    25,105
    
    
    R$
    1,179
    
    
    R$
    26,284Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,649
    
    
    
    
    
    
    
    11,649
    
    
    
    (384
    )
    
    
    11,265Non-Controling Paid in Capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    109Paid dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,574
    )
    
    
    
    
    
    
    (3,574
    )
    
    
    
    
    
    
    (3,574
    )Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    (14
    )
    
    
    
    
    
    
    (14
    )Balance, December 31, 2010
    
    
    8,137,762
    
    
    R$
    1
    
    
    R$
    61,148
    
    
    R$
    (1,946
    )
    
    R$
    (24,946
    )
    
    R$
    (1,091
    )
    
    R$
    33,166
    
    
    R$
    904
    
    
    R$
    34,070
  F - 6




---



##### 



BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Brazilian Reais)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008CASH FLOW FROM OPERATING ACTIVITIES:NET INCOME (LOSS) ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.
    
    R$
    11,649
    
    
    R$
    6,896
    
    
    R$
    (3,942
    )Adjustments to reconcile net income to cash provided by operating activities:Depreciation and amortization
    
    
    6,466
    
    
    
    5,943
    
    
    
    3,501(Gain) Loss on assets sold and impairment of assets
    
    
    (7,367
    )
    
    
    (1,225
    )
    
    
    205Deferred income tax asset
    
    
    1,605
    
    
    
    
    
    
    
    (4,802
    )Deferred income tax liability
    
    
    2,452Non-controlling interest
    
    
    (384
    )
    
    
    198
    
    
    
    981Changes in assets and liabilities:(Increase) decrease in:Accounts receivable
    
    
    (5,588
    )
    
    
    399
    
    
    
    (2,124
    )Inventories
    
    
    308
    
    
    
    (792
    )
    
    
    308Prepaid expenses and other current assets
    
    
    (1,570
    )
    
    
    (1,394
    )
    
    
    (1,393
    )Other assets
    
    
    (860
    )
    
    
    (3,232
    )
    
    
    (1,871
    )(Decrease) increase in:Accounts payable and accrued expenses
    
    
    9,573
    
    
    
    1,892
    
    
    
    7,777Payroll and related accruals
    
    
    1,903
    
    
    
    103
    
    
    
    1,641Taxes
    
    
    1,293
    
    
    
    1,342
    
    
    
    1,323Other liabilities
    
    
    171
    
    
    
    771
    
    
    
    2,897Deferred income
    
    
    (3,218
    )
    
    
    199
    
    
    
    1,132CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
    
    
    16,433
    
    
    
    11,100
    
    
    
    5,633CASH FLOW FROM INVESTING ACTIVITIES:Additions to property and equipment
    
    
    (5,110
    )
    
    
    (12,605
    )
    
    
    (12,495
    )Investiment in subsidiaries acquired
    
    
    
    
    
    
    
    
    
    
    (4,283
    )Goodwill on acquisition
    
    
    
    
    
    
    
    
    
    
    (2,895
    )Goodwill remeasurement
    
    
    
    
    
    
    2,096
    
    
    
    Proceeds from sale of property, equipment and deferred charges
    
    
    4,002
    
    
    
    1,733
    
    
    
    1,527CASH FLOWS USED IN INVESTING ACTIVITIES
    
    
    (1,108
    )
    
    
    (8,776
    )
    
    
    (18,146
    )CASH FLOW FROM FINANCING ACTIVITIES:Net Borrowings (Repayments) under lines of credit
    
    
    (8,354
    )
    
    
    798
    
    
    
    2,927Acquisition of Companys own shares
    
    
    
    
    
    
    (345
    )
    
    
    13,737Non-contoling paid in capital
    
    
    109
    
    
    
    
    
    
    
    (541
    )Dividend paid
    
    
    (3,574
    )
    
    
    
    
    
    
    (679
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    86
    
    
    
    74CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    (11,819
    )
    
    
    539
    
    
    
    15,518EFFECT OF FOREIGN EXCHANGE RATE
    
    
    (14
    )
    
    
    (37
    )
    
    
    74NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    3,492
    
    
    
    2,826
    
    
    
    3,079CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    13,250
    
    
    
    10,424
    
    
    
    7,345CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    R$
    16,742
    
    
    R$
    13,250
    
    
    R$
    10,424
   F - 7




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##### 



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.On December 2006, the Company established a holding company in Brazil called BFFC do Brasil
Participações Ltda. (BFFC do Brasil, formerly 22N Participações Ltda.), to consolidate all
its business in the country and allow the Company to pursue its multi-brand program, as
discussed below:BOBS TRADEMARKDuring 1996, the Company acquired 100.0% of the capital of Venbo Comercio de Alimentos Ltda.
(Venbo), a Brazilian limited liability company which conducts business under the trade
name Bobs, and owns and operates, both directly and through franchisees, a chain of
hamburger fast food restaurants in Brazil.KFC TRADEMARKDuring the first quarter of 2007, the Company reached an agreement with Yum! Brands, owner
of the KFC brand. By this agreement, BFFC do Brasil, through its subsidiary CFK Comércio de
Alimentos Ltda. (CFK, formerly Clematis Indústria e Comércio de Alimentos e Participações
Ltda.), started to conduct the operations of four directly owned and operated KFC
restaurants in the city of Rio de Janeiro as a Yum! Brands franchisee, and took over the
management, development and expansion of the KFC chain in Brazil. CFK started its activities
on April 1, 2007, and accordingly, the results of its operations are included in this report
since that date.PIZZA HUT TRADEMARKDuring 2008, the Company reached an agreement with Restaurants Connection International Inc
(RCI) to acquire, through its wholly-owned holding subsidiary, BFFC do Brasil, 60% of
Internacional Restaurantes do Brasil (IRB), which operates Pizza Hut restaurants in the
city of São Paulo as a Yum! Brands franchisee. The remaining 40% of IRB is held by another
Brazilian company of which IRBs current CEO is the main stockholder.IRB also operates a coffee concept brand called In Bocca al Lupo Café, which has four
stores in the city of São Paulo.The results of IRBs operations have being included in the consolidated financial statements
since December, 2008.
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DOGGIS TRADEMARKDuring October 2008, the Company reached an agreement with G.E.D. Sociedad Anonima (GED),
one of the fast food leaders in Chile, where it has 150 stores.By this agreement, BFFC do Brasil would establish a Master Franchise to manage, develop and
expand the Doggis hot-dog chain in Brazil through own-operated restaurants and franchisees
and GED would establish a Master Franchise to manage, develop and expand the Bobs hamburger
chain in Chile through own-operated restaurants and franchisees.The Master Franchise established in Brazil was named DGS Comercio de Alimento S.A. (DGS)
and the Master Franchise established in Chile was named BBS S.A. (BBS). BFFC do Brasil has
20% of BBS and GED has 20% of DGS.SUPRILOGIn the second half of 2008, the Company began the operation of Suprilog Logística Ltda.,
which warehouses equipment and spare parts and provides maintenance services for the
Companys own-operated restaurants. It may also be used for some particular re-sale
activities of special products or raw materials used in the stores operations. Suprilogs
financial figures are fully consolidated in the accompanying financial statements.
 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 operations
 The Company primarily operates, directly and through franchisees, point of sales in all
Brazilian states (primarily in Rio de Janeiro and São Paulo). Besides the Brazilian
operations, the
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Company is also present, through Bobs franchisees, in Angola, Africa, and in Chile, South
America. These operations are not material to our overall results. The operation in Brazil
is susceptible to changes in Brazilian economic, political, and social conditions. Brazil
has experienced political, economic and social uncertainty in recent years, including an
economic crisis characterized by exchange rate instability and Real devaluation, increased
inflation, high domestic interest rates, negative economic growth, reduced consumer
purchasing power and high unemployment. Under its current leadership, the Brazilian
government has been pursuing economic stabilization policies, including the encouragement of
foreign trade and investment and an exchange rate policy of free market flotation. Despite
the current improvement of Brazilian economic environment, no assurance can be given that
the Brazilian government will continue to pursue these policies, that these policies will be
successful if pursued or that these policies will not be significantly altered.A decline in the Brazilian economy, political or social problems or a reversal of Brazils
foreign investment policy is likely to have an adverse effect on the Companys results of
operations and financial condition. Additionally, inflation in Brazil may lead to higher
wages and salaries for employees and increase the cost of raw materials, which would
adversely affect the Companys profitability.Risks inherent in foreign operations include nationalization, war, terrorism and other
political risks and risks of increases in foreign taxes or U.S. tax treatment of foreign
taxes paid and the imposition of foreign government royalties and fees.Principles of consolidationThe consolidated financial statements include the accounts of the Company and its (directly
and indirectly) subsidiaries.The wholly-owned subsidiaries of the Company as of December 31, 2009 are BFFC do Brasil,
Venbo, CFK and Suprilog. As discussed at note 1, the Company also own a 60% capital interest
of IRB, 80% of DGS and 20% of BBS.IRBs and DGS accounts are entirely added to the present Consolidated Financial Statements
and figures related to its non-controlling interests are stated both
in the Companys equity
(in the Consolidated Balance Sheets) and in the Consolidated Income Statements.The Companys investment of 20% capital interest in BBS is immaterial. BBS began its
operation in the last quarter of 2009 and the Company during that year accounted its
investments as per the equity method. During 2010 the Company concluded that it has no
ability to influence business decision in BBS. Since BBS is qualified as noncontrolling
subsidiary, the Company discontinued to accrual its share of losses during 2010. Accordingly
investment in BBS is accounted for at cost of acquisition, less the Companys share
of 2009 loss, as per ASC 325-20-35.The Companys consolidated financial statements include the accounts of CFK and IRB
subsequent to each acquisition, respectively April 1, 2007 and December 1, 2008, as well as
DGS since the beginning of its operation (third quarter of 2009).All material intercompany accounts and transactions have been eliminated in consolidation.
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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.For the acquisition of a 60% of IRB to be recorded in the accounting books, in the Companys
management requested assistance in obtaining the fair value of IRBs fixed assets. The
assistance included making a financial assessment using discounted cash flows based on
assumptions defined in conjunction with the Companys management. The main purposes of such
assessment was to measure the fixed assets acquired as per FASB ASC Business CombinationsThe Company allocated the fair value of all IRBs assets and liabilities 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.These assessments were undertaken to comply with the U.S. GAAP and their findings were
analyzed by the Companys management team and by IRBs independent auditors. Their
conclusion was that the amount allocated as goodwill on December 31, 2008, was adequate.In accordance with guidance of the FASB ASC  Goodwill and Other Topic, 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. Companys annual goodwill
impairment test derived no adjustment to its operating results.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. Revenues 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 statement of operations
as they occur.Cash and cash equivalentsThe Company considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.Accounts receivableAccounts receivable consist primarily of receivables from food sales, franchise royalties
and assets sold to franchisees.Currently the Company has approximately 230 franchisees that
operate approximately 712
points of sales. A few of them may undergo financial difficulties in the course of their
business and may therefore fail to pay their monthly royalty fees.
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If a franchisee fails to pay its invoices for more than six months in a row, one of the
following procedures is adopted: either (i) the franchisees accounts receivable are written off if
the individual invoices are below R$5,000; or (ii) the Company records an allowance for doubtful
accounts with a corresponding reduction in net revenues from franchisees, if the individual
invoices are over R$5,000.In addition, the Company records a provision for doubtful receivables to allow for any amounts
that may be unrecoverable based upon an analysis of the Companys prior collection experience,
customer creditworthiness and current economic trends. After all attempts to collect a receivable
have failed, the receivable is written off against the allowance.Despite writing-off those receivables on the accounting books or recording an allowance for
doubtful accounts, the finance department keeps records of all uncollected receivables from
franchisees for purposes of commercial negotiations.When a franchisee has past due accounts due to unpaid royalty fees, the Company may reassess
such debts with the franchisee and reschedule them in installments. The Company may also
intermediate the sale of the franchise business to another franchisee (new or owner of another
franchised store) and reschedule such accounts receivable as part of the purchase price. When
either kind of agreement is reached and collectability of the past due amounts is reasonably
assured, the Company records these amounts as Franchisees  renegotiated past due accounts.InventoriesInventories, primarily consisting of food, beverages and supplies, are stated at the lower
of cost or replacement value. Cost of inventories is determined principally on the average
cost method.Property and equipmentProperty and equipment are stated at cost, less accumulated depreciation. Depreciation on
property and equipment is provided using the straight-line method over the following
estimated useful lives of the related assets:
 YearsBuildings and building improvements
    
    
    50Leasehold improvements
    
    
    4-10Machinery and equipment
    
    
    10-15Furniture and fixtures
    
    
    10-15Software
    
    
    3 - 5Vehicles
    
    
    5
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Deferred chargesDeferred charges, which relate to leasehold premiums paid in advance for rented outlet
premises are stated at cost, less accumulated amortization. Leasehold premiums related to
unprofitable stores are written off.The amortization periods, which range from 5 to 20 years, are the terms of managements
estimate of the related rental contracts including renewal options, which are solely at the
discretion of the Company.Preopening costsLabor costs and the costs of hiring and training personnel and certain other costs relating
to the opening of new restaurants are expensed as incurred.Revenue recognitionRestaurant sales revenue is recognized when purchase in the store is effected.Initial franchise fee revenue is recognized when all material services and conditions
relating to the franchise have been substantially performed or satisfied which normally
occurs when the restaurant is opened. Monthly royalty fees equivalent to a percentage of the
franchisees gross sales are recognized in the month when they are earned.The Company settles agreements with beverage and food suppliers and for each product, the
Company negotiates a monthly performance bonus which will depend on the product sales volume
to its chains (including both own-operated and franchise operated). The performance bonus,
or vendor bonuses, can be paid monthly or in advance (estimated), depending on the agreement
terms negotiated with each supplier. When received in cash, the performance bonus is
recognized as a credit in the Companys income statement ( under revenues from trade
partners). Such revenue is recorded when cash from vendors is received, since there is a
great difficulty in estimating the receivable amount and significant doubts about its
collectability exists until the vendor agrees with the exact bonus amounts.When a vendor bonus is received in advance in cash, it is recorded as an entry in the
Banks account with a corresponding credit in deferred income and is recognized on a
straight line basis over the term of the related supply agreement on a monthly basis. When a
vendor bonus is received in products it is recognized as a reduction to store costs and
expenses.Performance bonuses are normally received in cash and rarely in products. There were no
performance bonus received in products during 2010, 2009 and 2008.Income obtained by lease of any of the Companys properties, by administration fees on
marketing fund and nonrecurring gains are recognized as other income when earned and deemed
realizable.The relationship between the Company and each of its franchisees is legally bound by a
formal contract, where each franchisee agrees to pay monthly royalty fees equivalent to a
percentage of its gross sales. The formal contract and the franchisees sales (as a
consequence of their business) address three of four requirements for revenue recognition as
per Staff Accounting Bulletin No 104 (SAB 104), issued by the Security and Exchange
Commission:
 
    
    Persuasive evidence that an arrangement exists the contract is
signed by the franchisee;
    
    Delivery has occurred or services have been rendered franchisee
sales are the basis of royalty revenues;
    
    The sellers price to the buyer is fixed or determinable the
contract states that royalties are a percentage of the franchisees gross sales;
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The Company also address SAB104s fourth requirement for revenue recognition (Collectability
is reasonably assured)when recording its revenues. If a franchisee fails to pay its
invoices for more than six months in a row, the Company does not stop invoicing the
contracted amounts. However, in such cases the Company offsets any additional invoiced
amounts with a corresponding full allowance for doubtful accounts.For purposes of internal and tax reporting, the Companys subsidiaries record their revenues
gross of taxes on sales, since in Brazil these taxes are included both in sales prices and
in royalty fees. In addition, because of specific tax rules in Brazil, local companies are
required to account for sales, even when they are canceled, by recording a separate caption
in the general ledger to offset the original sales amount recorded. However, for external
financial reporting purposes, the company states its revenues net of taxes and net of
canceled sales (when costumer gives up his order, after it has been printed at the cashier).
The following tables set forth gross sales, sales deductions and reported revenues:
 R$ 000
    
    Twelve Months ended 31 December,2010
    
    
    2009
    
    
    2008Gross Revenues  Own Operated Restaurants
    
    
    172,866
    
    
    
    164,402
    
    
    
    99,748(-) Tax on revenues
    
    
    (17,920
    )
    
    
    (17,248
    )
    
    
    (9,279
    )(-) Canceled Sales
    
    
    (355
    )
    
    
    (279
    )
    
    
    (347
    )Net Revenues  Own Operated Restaurants
    
    
    154,591
    
    
    
    146,875
    
    
    
    90,122
 R$ 000
    
    Twelve Months ended 31 December,2010
    
    
    2009
    
    
    2008Gross Revenues from Franchisees
    
    
    32,869
    
    
    
    28,632
    
    
    
    25,982(-) Tax on revenues
    
    
    (4,483
    )
    
    
    (3,985
    )
    
    
    (3,555
    )Net Revenues from Franchisees
    
    
    28,386
    
    
    
    24,647
    
    
    
    22,427
 R$ 000
    
    Twelve Months ended 31 December,2010
    
    
    2008
    
    
    2009Gross Revenues from Trade Partners
    
    
    22,505
    
    
    
    11,062
    
    
    
    9,117(-) Tax on revenues
    
    
    (1,401
    )
    
    
    (792
    )
    
    
    (800
    )Net Revenues fromTrade Partners
    
    
    21,104
    
    
    
    10,270
    
    
    
    8,317
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Marketing expense, Marketing fund and advertising expenses
 Bobs Brand
 According to our franchise agreements, the Bobs marketing fund to cover advertising and
promotion costs comprises the financial contributions paid by the franchisees and also the
contributions due by the Company. The funds resources are administrated by the Company and
must be used in the common interest of the Bobs chain to increase its restaurant sales
through the best efforts of the marketing department.The marketing contribution from franchisees, are recorded on an accrual basis in assets as
accounts receivables with a cross entry in liabilities as the marketing fund. The
contributions due by Venbo are recorded on an accrual basis as marketing expenses and in a
cross entry in liabilities as the marketing fund.In general, Bobs franchisees contribute 4.0% of their monthly gross sales to the Bobs
marketing fund, and since 2006 the Company has also contributed 4.0% of its own-operated
restaurants monthly gross sales (sales derived from special events are not subject to this
contribution). These contributions can be deducted from the Companys marketing department
expenses, if previously agreed with the franchisees. However, the total marketing
investments may be greater than 4.0% of combined sales if any supplier makes an additional
contribution (joint marketing programs) or if the Company uses more of its own cash on
marketing, advertising and promotions.The Company invests the Bobs marketing fund primarily in nationwide advertising programs
(commercials or sponsorship on TV, radio and billboards). The Companys franchisees may also
invest directly in advertising and promotions for their own stores, upon previous consent
from the Company, which freely decides whether the cost of such advertisements or promotions
can be deducted from the marketing contribution owed.The monies in the Bobs marketing fund do not have to be invested during the same month or
year they are received in, but they must be used in subsequent periods.Periodically, the Company meets with the Bobs Franchisee Council to divulge the marketing
fund accounts through a report similar to a cash flow statement. This statement discloses
the marketing contributions received and the marketing expenses, both on a cash basis. To
provide absolute transparency and comply with a request by the Companys franchisees, all
the accounts included in the marketing fund are reviewed by independent auditors.The balance of any resources from the marketing fund that are not invested is recorded as
accrued accounts payable in the balance sheet. This balance represents contributions made by
Venbo and franchisees that have not yet been used in campaigns. These balances are, as
agreed with the franchisees chain, a Venbo obligation as of that date.Advertising and promotions expenses from the marketing fund are recognized as incurred.The marketing fund expenses on advertising and promotions are recognized as incurred. Total
marketing investments financed by the marketing fund amounted R$19.9 million, R$19.3 million
and R$20.3 million for the years ended December 31, 2010, 2009 and 2008, respectively.
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KFC and Pizza Hut Brands
 The Company contributes each month with 0.5% of KFCs and Pizza Huts monthly net sales to a
marketing fund managed by YUM! Brands  Brazil. In addition, the Company is also committed
to invest 5.0% of KFCs and Pizza Huts monthly net sales in local marketing and
advertising.The advertising and promotions expenses for KFC and Pizza Hut are recognized as incurred.The marketing expenses on KFC and Pizza Hut advertising and promotions are recognized as
incurred and amounted R$4.7 million, R$3.6 million and R$3.4 million for the years ended
December 31, 2010, 2009 and 2008, respectively.
 Doggis Brand
 The Company invests at least 4% of Doggiss restaurant sales in local marketing. There is no
contribution to a marketing fund.The advertising and promotions expenses for Doggis are recognized as incurred.Local marketing expenses on Doggis advertising and promotions are recognized as incurred and
amounted R$0.3 million and R$0.2 million, for the years ended December 31, 2010 and 2009,
respectively.
 Stock options
 Since January, 2006, the Company adopted the guidance of FASB ASC on Share-Based
Payment, using the modified-prospective transition method. Under this transition method,
compensation cost beginning in 2006 includes the portion vesting in the period for (1) all
share-based payments granted prior to, but not vested as of January 1, 2006, based on the
grant date fair value estimated in accordance with the original guidance on Share-Based
Payment and (2) all share-based payments granted subsequent to January 1, 2006, based on the
grant date fair value estimated in accordance with the provisions of most recent guidance.
Results for prior periods have not been restated.During 2005, the Companys Board of Directors and a majority of the shareholders of the
Company decided that Board compensation would be paid in cash and that no more stock options
would be granted. Accordingly, during 2010, 2009 and 2008, no options were granted.Compensation expense related to share-based awards is generally amortized on a straight-line
basis over the vesting period other income (expenses) in the consolidated statement of
results. In the beginning of 2009 the last 35,000 outstanding options were exercised and no
share-based compensation was charged to Companys results. In 2008, results included
share-based compensation expense of R$5.Income taxesThe Company accounts for income tax in accordance with guidance provided by the FASC ASC on
Accounting for Income Tax. Under the asset and liability method set out in this guidance,
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deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the carrying amounts of existing assets and liabilities
on the financial statements and their respective tax basis and operating loss
carry-forwards. Deferred tax assets and liabilities are measured using the enacted tax rates
expected to apply to taxable income in the years in which the temporary differences are
expected to be recovered or settled.Under the above-referred guidance, the effect of a change in tax rates or deferred tax
assets and liabilities is recognized in income in the period that includes the enactment
date.The effect of income tax positions are recorded only if those positions are more likely
than not of being sustained. Recognized income tax positions are measured at the largest
amount that is greater than 50% likely of being realized. Changes in recognition or
measurement are reflected in the period in which the change in judgment occurs. Although we
do not currently have any material charges related to interest and penalties, such costs, if
incurred, are reported within the provision for income taxes.Long-lived and intangibles assetsThe Company adopted guidance on the impairment or disposal of long-lived assets in the
Property Plant and Equipment Topic of the FASB ASC, which requires that long-lived assets
being disposed of be measured at either the carrying amount or the fair value less cost to
sell, whichever is lower, 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 group 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, 2010 no adjustments were required
according to those tests.Net income (loss) per common shareThe Company applies adopted guidance on Earnings per Share Topic of the FASB
ASC, in the calculation of earnings per share. Under this standard, Basic EPS is
computed based on weighted average shares outstanding and excludes any potential dilution;
Diluted EPS reflects potential dilution from the exercise or conversion of securities into
common stock or from other contracts to issue common stock. There were no common share
equivalents outstanding as of December 31, 2010, 2009 and 2008 that would have had a
dilutive effect on earnings for those respective years.ReclassificationsThe Consolidated financial statements for the years ended December 31, 2009 and 2008 have
been restated to conform with the current year presentation.
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Recently issued accounting standardsDerivatives and Hedging  We adopted the amendment to FASB ASC Derivatives and Hedging on
January 1, 2009. This amendment expands the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative instruments
and related hedged items are accounted for under FASB ASC Derivatives and Hedging, and (c)
how derivative instruments and related hedged items affect an entitys financial position,
financial performance, and cash flows. The adoption of this accounting standard on January
1, 2009 did not impact our consolidated financial position, results of operations or cash
flows.The FASB issued Accounting Standards Update (ASU) No. 2010-11, Derivatives and Hedging(Topic
815): Scope Exception Related to Embedded Credit Derivatives. The FASB believes this ASU
clarifies the type of embedded credit derivative that is exempt from embedded derivative
bifurcation requirements. Specifically, only one form of embedded credit derivative
qualifies for the exemption  one that is related only to the subordination of one
financial instrument to another. As a result, entities that have contracts containing an
embedded credit derivative feature in a form other than such subordination may need to
separately account for the embedded credit derivative feature.The amendments in the ASU are effective for each reporting entity at the beginning of its
first fiscal quarter beginning after June 15, 2010. The adoption of this accounting standard
did not impact our consolidated financial position, results of operations or cash flows.Interim Disclosures  Fair Value of Financial Instruments. We adopted the amendment to FASB
ASC Interim Disclosures about Fair Value of Financial Instruments in the second quarter of
2009. This amendment requires the existing disclosure requirements related to the fair value
of financial instruments to be extended to interim periods that were previously only
required in annual financial statements. The adoption of this accounting standard in the
second quarter of 2009 did not impact our consolidated financial position, results of
operations or cash flows.
 The FASB has issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic
820): Improving Disclosures about Fair Value Measurements. This ASU requires some new
disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in
Codification Subtopic 820-10. The FASBs objective is to improve these disclosures and, thus, increase
the transparency in financial reporting. Specifically, ASU 2010-06 amends Codification Subtopic 820-10 to now
require:
 
    
    A reporting entity should disclose separately the amounts of
significant transfers in and out of Level 1 and Level 2 fair value measurements and
describe the reasons for the transfers; and
    
    In the reconciliation for fair value measurements using significant
unobservable inputs, a reporting entity should present separately information about
purchases, sales, issuances, and settlements.
 In addition, ASU 2010-06 clarifies the requirements of the following existing disclosures:
 
    
    For purposes of reporting fair value measurement for each class of assets and
liabilities, a reporting entity needs to use judgment in determining the appropriate
classes of assets and liabilities; and
    
    A reporting entity should provide disclosures about the valuation techniques and
inputs
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used to measure fair value for both recurring and nonrecurring fair value measurements.
 ASU 2010-06 is effective for interim and annual reporting periods beginning after December
15, 2009,except for the disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures are effective for
fiscal years beginning after December 15, 2010, and for interim periods within those fiscal
years. Early application is permitted.Subsequent Events. We adopted FASB ASC Subsequent Events in the second quarter of 2009.
This accounting standard establishes the accounting for and disclosure of events that occur
after the balance sheet date but before financial statements are issued or are available to
be issued. It requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date; that is, whether that date represents the
date the financial statements were issued or were available to be issued. In line with the
requirements of this accounting standard for public entities, we evaluate subsequent events
through the date the financial statements are issued. FASB ASC Subsequent Events should
not result in significant changes in the subsequent events that an entity reports in its
financial statements, either through recognition or disclosure. The adoption of this
accounting standard in the second quarter of 2009 did not impact on our consolidated
financial position, results of operations or cash flows. The FASB has issued Accounting
Standards Update (ASU) No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements.The amendments in the ASU remove the requirement
for an SEC filer to disclose a date through which subsequent events have been evaluated in
both issued and revised financial statements. Revised financial statements include financial
statements revised as a result of either correction of an error or retrospective application
of U.S. GAAP. The FASB also clarified that if the financial statements have been revised,
then an entity that is not an SEC filershould disclose both the date that the financial statements were issued or available to be
issued and the date the revised financial statements were issued or available to be issued.
The FASB believes these amendments remove potential conflicts with the SECs literature. In
addition, the amendments in the ASU requires an entity that is a conduit bond obligor for
conduit debt securities that are traded in a public market to evaluate subsequent events
through the date of issuance of its financial statements and must disclose such date. All of
the amendments in the ASU were effective upon issuance (February 24, 2010) except for the
use of the issued date for conduit debt obligors. That amendment is effective for interim or
annual periods ending after June 15, 2010. As a result of this amendment, we did not disclose the date through
which we evaluated subsequent events in this report on Form 10-K.FASB Accounting Standards Codification  In June 2009, the FASB issued FASB ASC The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles. The FASB Accounting Standards Codification has become the source of
authoritative accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in accordance with GAAP. All existing
accounting standard documents are superseded by the FASB ASC and any accounting literature
not included in the FASB ASC will not be authoritative. However, rules and interpretive
releases of the SEC issued under the authority of federal securities laws will continue to
be sources of authoritative GAAP for SEC registrants. This accounting standard is effective
for interim and annual reporting periods ending after September 15, 2009. Therefore,
beginning with our third quarter 2009 report on Form 10-Q, all references made to GAAP in
our consolidated financial
 F - 19




---



##### 



statements now reference the new FASB ASC. This accounting standard does not change or alter
the existing GAAP and does not therefore impact on our consolidated financial position,
results of operations or cash flows.In June 2009, the FASB issued changes to the guidelines for the consolidation of variable
interest entities. These new guidelines determine when an entity that is insufficiently
capitalized or not controlled through voting interests should be consolidated. According to
this recent accounting pronouncement, the company has to determine whether it should provide
consolidated reporting of an entity based upon the entitys purpose and design and the
parent companys ability to direct the entitys actions. The guidance was adopted during the
2010 fiscal year and did not impact our consolidated financial position, results of
operations or cash flows.In January 2010, the FASB issued amendments to the existing fair value measurements and
disclosures guidance, which require new disclosures and clarify existing disclosure
requirements. The purpose of these amendments is to provide a greater level of disaggregated
information as well as more disclosure around valuation techniques and inputs to fair value
measurements. The guidance was adopted during 2010 fiscal year and did not impact our
consolidated financial position, results of operations or cash flows.The FASB has issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of
Supplementary Pro Forma Information for Business Combinations. This ASU reflects the
decision reached in EITF Issue No. 10-G. The amendments in this ASU affect any public entity
as defined by Topic 805, Business Combinations, that enters into business combinations that
are material on an individual or aggregate basis. The amendments in this ASU specify that
if a public entity presents comparative financial statements, the entity should disclose
revenue and earnings of the combined entity as though the business combination(s)that
occurred during the current year had occurred as of the beginning of the comparable prior
annual reporting period only. The amendments also expand the supplemental pro forma
disclosures to include a description of the nature and amount of material, nonrecurring pro
forma adjustments directly attributable to the business combination included in the reported
pro forma revenue and earnings.The amendments are effective prospectively for 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, 2010. Early adoption is permitted. The guidance was adopted during
2010 fiscal year and did not impact our consolidated financial position, results of
operations or cash flows.The FASB has issued ASU No. 2010-28, Intangibles  Goodwill and Other (Topic 350): When to
Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative
Carrying Amounts.This ASU reflects the decision reached in EITF Issue No. 10-A. The
amendments in this ASU modify Step 1 of the goodwill impairment test for reporting units
with zero or negative carrying amounts. For those reporting units, an entity is required to
perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill
impairment exists. In determining whether it is more likely than not that a goodwill
impairment exists, an entity should consider whether there are any adverse qualitative
factors indicating that an impairment may exist. The qualitative factors are consistent with
the existing guidance and examples, which require that goodwill of a reporting unit be
tested for impairment between annual tests if an event occurs or circumstances change that
would more likely than not reduce the fair value of a reporting unit below its carrying
amount. For public entities, the amendments in this ASU are effective for fiscal years, and
interim periods within those years, beginning after December 15, 2010. Early adoption is not
permitted.The Company does not expect that the adoption of this guidance during 2011 fiscal year will
materially impact its consolidated financial position, results of operations or cash flows.The FASB has issued FASB Accounting Standards Update (ASU) No. 2010-22, Accounting for Various
Topics.ASU 2010-22 amends various SEC paragraphs in the FASB Accounting StandardsCodificationTM
(Codification) based on external comments received and the issuance of Staff Accounting Bulletin
(SAB) No. 112 , which amends or rescinds portions of certain SAB topics. Specifically, SAB 112 was
issued to bring existing SEC guidance into conformity with:
 


    
    Codification Topic 805, Business Combinations(originally issued as
FASB Statement No. 141 (Revised December 2007), Business Combinations); and
    
    Codification Topic 810, Consolidation(originally
issued as FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements).
 Such Update was adopted during 2010 fiscal year and did not impact our consolidated financial
position, results of operations or cash flows.The FASB has issued Accounting Standard Update (ASU) No. 2010-01, Equity (Topic 505):
Accounting for Distributions to Shareholders with Components of Stock and Cash.The amendments to
the Codification in this ASU clarify that the stock portion of a distribution to shareholders that
allows them to elect to receive cash or stock with a potential limitation on the total amount of
cash that all shareholders can elect to receive in the aggregate is considered a share issuance
that is reflected in earnings per share prospectively and is not a stock dividend. This ASU
codifies the consensus reached in EITF Issue No. 09-E, Accounting for Stock Dividends, Including
Distributions to Shareholders with Components of Stock and Cash. ASU 2010-01 is effective for
interim and annual periods ending on or after December 15, 2009, and should be applied on a
retrospective basis. Such Update was adopted during 2010 fiscal year and did not impact our
consolidated financial position, results of operations or cash flows.
 F - 20




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##### 



The FASB issued Accounting Standards Update (ASU) No. 2010-11, Derivatives and Hedging(Topic
815): Scope Exception Related to Embedded Credit Derivatives. The FASB believes this ASU clarifies
the type of embedded credit derivative that is exempt from embedded derivative bifurcation
requirements. Specifically, only one form of embedded credit derivative qualifies for the exemption
 one that is related only to the subordination of one financial instrument to another. As a
result, entities that have contracts containing an embedded credit derivative feature in a form
other than such subordination may need to separately account for the embedded credit derivative
feature.The amendments in the ASU are effective for each reporting entity at the beginning of its
first fiscal quarter beginning after June 15, 2010. The adoption of this accounting standard did
not impact our consolidated financial position, results of operations or cash flows.The FASB has issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic
820): Improving Disclosures about Fair Value Measurements. This ASU requires some new disclosures
and clarifies some existing disclosure requirements about fair value measurement as set forth in
Codification Subtopic 820-10. The FASBs objective is to improve these disclosures and, thus,
increase the transparency in financial reporting. Specifically, ASU 2010-06 amends Codification
Subtopic 820-10 to now require:
 
    
    A reporting entity should disclose separately the amounts of
significant transfers in and out of Level 1 and Level 2 fair value measurements and
describe the reasons for the transfers; and
    
    In the reconciliation for fair value measurements using significant
unobservable inputs, a reporting entity should present separately information about
purchases, sales, issuances, and settlements.
 In addition, ASU 2010-06 clarifies the requirements of the following existing disclosures:
 
    
    For purposes of reporting fair value measurement for each class of assets and
liabilities, a reporting entity needs to use judgment in determining the appropriate
classes of assets and liabilities; and
    
    A reporting entity should provide disclosures about the valuation techniques and
inputs used to measure fair value for both recurring and nonrecurring fair value
measurements.
 ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15,
2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal
years beginning after December 15, 2010, and for interim periods within those fiscal years. Early
application is permitted. The Company does not expect that the adoption of this guidance during
2011 fiscal year will materially impact its consolidated financial position, results of operations
or cash flows.
 3
    
    CASH AND CASH EQUIVALENTSCash and cash equivalent consists of the following:
 December 31,R$000
    
    2010
    
    
    2009Cash at point of sales
    
    R$
    890
    
    
    R$
    1,435Cash with money collectors
    
    
    359
    
    
    
    561Bank accounts
    
    
    2,907
    
    
    
    2,028Investments funds (a)
    
    
    12,586
    
    
    
    9,226R$
    16,742
    
    
    R$
    13,250
 Bank account figures are comprised of the amount of R$58,000 (R$298,000 in 2009) which
is deposited in a financial institution located in the U.S.A. and the remaining balance in
financial institutions located in Brazil.
 
 (a)
    
    The Company invests its temporary overflow of cash in financial funds linked, in
their majority, to fixed-income securities, with original maturities of less than three
months. F - 21




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##### 



4
    
    ACCOUNTS RECEIVABLEAccounts Receivables consists of the following:
 December 31,R$000
    
    2010
    
    
    2009Clients  food sales
    
    R$
    8,285
    
    
    R$
    6,199Clients  other
    
    
    
    
    
    
    102Franchisees  current accounts
    
    
    7,070
    
    
    
    4,385Franchisees  renegotiated past due accounts
    
    
    1,847
    
    
    
    1,498Franchisees  receivable from
sales of assets
    
    
    566
    
    
    
    419Allowance for doubtful accounts
    
    
    (1,838
    )
    
    
    (2,261
    )R$
    15,930
    
    
    R$
    10,342
 Clients  food sales is comprised of receivables from the sale of products at the Companys
own-operated restaurants, basically from credit card operators. The receivable balance in
the Clients  food sales account is based on the actual realized value, mainly from
credit card companies. As the likelihood of doubtful debts is small, no provision for losses
is made.Franchisees  current accounts is comprised of accrued royalties and marketing fund
contributions, receivable from franchisees, whose receipt follows a predictable flow as the
payment dates stipulated in the contracts are reached.Franchisees  renegotiated past due accounts is comprised of accrued royalties and
marketing fund contributions, receivable from contracts that have been renegotiated with
franchisees that were previously in arrears. Basically, these renegotiations extend the
period over which the debt is to be repaid, and include interest rate and inflation
adjustments. These renegotiated past due accounts receivable are recorded only when their
collectability is deemed reasonably assured.Franchisees  receivables from sales of assets is comprised, particularly of the sale of
machinery and equipment used in fast food operations. It can also include the sale of the
business from one franchisee previously in arrears to a new franchisee approved by the
Company in order to extinguish its debt with the Company. In this case, the receivable is
transferred to the new franchisee.The Companys management records an allowance for doubtful accounts for receivables from
franchisees, based on the following criteria:According to US GAAP, the assessment of the balances to be included in accounts receivable
should always be based on their expected net realizable value. This assessment should take
into account the characteristics of the receivable itself, i.e. its capacity to generate
future benefits for the Company.
 F - 22




---



##### 



The Companys management makes periodic, itemized analyses of the provision for doubtful
accounts, by reviewing all accounts that are overdue for more than 180 days. Based on this,
a provision is made based on managements best estimate of what is needed to cover potential
losses in the realization of the overdue receivables. This analysis is based on the
following criteria:
 (a)
    
    significant financial difficulty on the part of
the debtor;(b)
    
    breaking of the terms of the contract, or late
or non-payment of interest or principle;(c)
    
    likelihood that the debtor will file for
bankruptcy or another financial renegotiation; or(d)
    
    adverse alterations to the payment status of
the debtors (e.g. increasing number of late payments or increasing
number of credit card debtors who have reached their credit limit and
are only making the minimum monthly payment);
 Accounts receivable increase from 2009 to 2010 is attributable to (i) higher sales at
Company  ́s own restaurants; (ii) method of payment migration from cash to credit cards; and
(iii) increase of number of franchisees deriving a greater amount of monthly royalty fees.
 Allowance for doubtful account is mostly related to Franchisee  Current Accounts and
its rollfoward is presented below:Schedule of activity  Allowance for doubtful accounts
 2010
    
    
    2009Balance January 1,
    
    
    R$(2,261
    )
    
    
    R$(1,214
    )Increase in allowance for doubtful accounts during the year
    
    
    (939
    )
    
    
    (502
    )Write-off during the year
    
    
    1,362
    
    
    
    502Reclassifications
    
    
    
    
    
    
    (1,047
    ) *Balance December 31,
    
    
    (1,838
    )
    
    
    (2,261
    )
 
 *
    
    refers to Companys accounts receivable that were netted against its provision for
doubtful account and has been reclassified so that the relation between December 31, 2010
and 2009 is more appropriate. 5
    
    OTHER CURRENT ASSETS, OTHER RECEIVABLES AND OTHER ASSETSOther assets consist of the following:
 F - 23




---



##### 



R$000
    
    December 31,Other current assets:
    
    2010
    
    
    2009Witholding taxes
    
    R$
    655
    
    
    R$
    600Receivables from FBD (a)
    
    
    601
    
    
    
    491Franchise receivable other than royalties (b)
    
    
    1,589
    
    
    
    1,223Other current receivables
    
    
    1,404
    
    
    
    1,009R$
    4,249
    
    
    R$
    3,323
 R$000
    
    December 31,Other receivables and other assets:
    
    2010
    
    
    2009Receivables from franchisees  assets sold (c)
    
    R$
    660
    
    
    R$
    700Judicial deposits (d)
    
    
    9,515
    
    
    
    10,134Properties for sale (e)
    
    
    1,361
    
    
    
    Receivable from properties sale, less current portion (e)
    
    
    4,450
    
    
    
    Investiment in BBS (Bobs  Chile) (f)
    
    
    124
    
    
    
    15Other receivables
    
    
    148
    
    
    
    99R$
    16,258
    
    
    R$
    10,948
 
 (a)
    
    Luft Food Service, former FBD is a centralized warehouse operated by a
non-affiliated company that provides storage, transportation and delivery of goods and other
materials, like appliances, packaging, cleaning material and uniforms, to all own-operated
or franchised restaurants of the Companys chains. The Company has centralized purchasing agreements, but all purchase are ordered by and
delivered to each restaurant. Occasionally, the Company can sell, through its subsidiaries,
to Luft Food Service products that need to be imported directly by the Company and sold to
all restaurants of the Companys chains. In 2010 and 2009, the Company had receivables from
Luft Food Service, related to those transactions, in the amount of R$601 thousand and R$491
thousand, respectively.
 (b)
    
    Other components of the balance refer to receivables from franchises (which include,
rent of properties receivables related to the sale of the Companys own-operated restaurants
assets, e.g. inventories and uniforms) and other current receivables (which include
receivables related to reimbursement of expenses incurred by the Company in the franchisee
benefit, e.g. during training and delivery operations, and pre-sale of products in events
where the Company participates).
 (c)
    
    Long term portion of receivables derived from selling of restaurants (fixed assets) to
franchisees; and
 (d)
    
    Deposits required by Brazilian court in connection to some legal disputes, also discussed
at note 12.c;
 (e)
    
    Company sold its real state properties as discussed at note 17.b. A portion of the sale
was not formalized until December 31, 2010 and the Company recorded the related amount (cost
of acquisition, net of accumulated depreciation) as property for sale (R$1,361,000). The
amount of R$4,450,000 represents the long term portion of receivables from the property sale
which was completed until December 31, 2010. The balance sheet also states the current
portion of these receivables in the amount of R$3,633,000.
 F - 24




---



##### 



(f)
    
    Refers to the Companys investment of 20% capital interest in BBS, a noncontrolling
subsidiary (see note 2).
 6
    
    PROPERTY AND EQUIPMENT, NETProperty and equipment consists of the following:
 December 31,R$000
    
    2010
    
    
    2009Land
    
    R$
    
    
    
    R$
    2,322Buildings and building improvements
    
    
    
    
    
    
    4,831Leasehold improvements
    
    
    22,111
    
    
    
    18,785Machinery, equipment and software
    
    
    32,636
    
    
    
    29,177Furniture and fixtures
    
    
    6,992
    
    
    
    6,147Assets under capitalized leases
    
    
    
    
    
    
    1,949Vehicles
    
    
    257
    
    
    
    409Work in progress
    
    
    675
    
    
    
    67462,671
    
    
    
    64,294Less: Accumulated depreciation and
amortization
    
    
    (32,809
    )
    
    
    (29,291
    )R$
    29,862
    
    
    R$
    35,003
 As discussed in note 17. b) the Company sold its properties during 2010 resulting in
non-recurring gain of approximately R$5.4 million..
 Also, during 2010, the Company sold the operating fixed assets of two Bobs and one KFCs
stores to franchisees, resulting in another non-recurring gain of approximately R$1.2
million.
 7
    
    DEFERRED CHARGES, NETDeferred charges consist of the following:
 December 31,R$000
    
    2010
    
    
    2009Leasehold premiums
    
    R$
    13,008
    
    
    R$
    13,120Franchise Charges
    
    
    1,337
    
    
    
    1,218Less: Accumulated amortization
    
    
    (8,479
    )
    
    
    (7,539
    )R$
    5,866
    
    
    R$
    6,799
 F - 25




---



##### 



8
    
    NOTES PAYABLENotes payable consists of the following:
 December 31,R$000
    
    2010
    
    
    2009Revolving lines of credit (a)
    
    R$
    12,386
    
    
    R$
    11,422Leasing facilities (b)
    
    
    364
    
    
    
    1,373Other loan (c)
    
    
    1,329
    
    
    
    9,63814,079
    
    
    
    22,433Less: current portion
    
    
    (12,972
    )
    
    
    (13,829
    )R$
    1,107
    
    
    R$
    8,604
 At December 31, 2010, future maturities of notes payable are as follows:
 R$0002011
    
    
    
    
    
    R$
    12,9722012
    
    
    
    
    
    
    1,0202013
    
    
    
    
    
    
    87R$
    14,079
 F - 26




---



##### 



a)
    
    Part of this debt (R$7.8 million) is due on demand from two Brazilian
financial institutions at interest of approximately 13.5%p.y. Another part (R$4.6
million) is comprised of two loans: one is payable in 12 installments of R$213,000
(ending on December, 2011), plus interest of 16.0%p.y and the other is payable in 25
installments of R$85,000 (ending on January, 2013), plus interest of 16.0%p.y . All
the debts of this category are collateralized against Companys major shareholders
and receivables.
 (b)
    
    The debt is comprised of various lease facilities with private Brazilian
institutions for the funding of store equipment; payable in a range from one to 10
monthly payments at interest ranging from 14.3% p.y. to 23.4% p.y (ending on
October, 2011). All the debts of this category are collateralized against the assets
leased.
 (c)
    
    Loan taken out with UBS Pactual relate to the acquisition of the Pizza Hut
business in Brazil (note 1). The repayment of this loan is due in 8 monthly
installments (ending on August, 2011), of R$166,000, plus interest of 12.0%p.y. The
loan is guaranteed by Companys major shareholders. (see note 17.b). During 2010 the
Company extinguished in advance three of the four loans that made up the balance
with UBS Pactual in December 31,2009.
 The carrying amount of notes payable approximates fair value at December 31, 2010 because
they are at market interest rates.
 9     ACCOUNTS PAYABLE AND ACCRUED EXPENSES
 Accounts payable and accrued expenses consist of the following:
 December 31,R$000
    
    2010
    
    
    2009Suppliers
    
    R$
    11,065
    
    
    R$
    10,751Rent payable
    
    
    2,053
    
    
    
    1,657Consulting fees
    
    
    878
    
    
    
    596Accrued utilities
    
    
    998
    
    
    
    805Accrued maintenance
    
    
    1,034
    
    
    
    267Accrued advertising
    
    
    254
    
    
    
    158Marketing fund
    
    
    7,802
    
    
    
    1,010Royalty payable
    
    
    738
    
    
    
    444Other accrued liabilities
    
    
    1,026
    
    
    
    587R$
    25,848
    
    
    R$
    16,275
 As mentioned at note 2, the balances presented in the caption Marketing Fund represent
contributions made by Venbo and by the Bobs brand franchisees, but not used in campaigns
yet.
 The increase of market fund balance from 2009 to 2010 is attributable to a strategy accorded
with the Franchisee Council through which the Company reserved a great amount of the fund
during the last quarter of 2010 to cover deep marketing actions at the end of 2010. Those
actions were compatible to the current competitive scenario and included unprecedented level
of broadcasting
 F - 27




---



##### 



the Companys brands through television, radio and outdoors. The payment of
those investments was negotiated to take place during the first quarter of 2011.
 10
    
    CASH FLOW INFORMATIONSupplemental Disclosure of Cash Flow Information:
 December 31,R$000
    
    2010
    
    
    2009
    
    
    2008Interest paid
    
    R$
    1,684
    
    
    R$
    4,836
    
    
    R$
    1,644Income taxes paid
    
    R$
    2,260
    
    
    R$
    103
    
    
    R$
    270
 11
    
    INCOME TAXES
 Tax loss carryforwards through December 31, 2009 relating to income tax were
R$59.7 million and to social contribution tax were R$60.5 million, comprised mainly of
fiscal results at Venbo, CFK, IRB and DGS. Social contribution tax is a Brazilian tax levied
on taxable income and is by its nature comparable to corporate income tax.
 The accumulated tax loss position can be offset against future taxable income. Brazilian
tax legislation restricts the offset of accumulated tax losses to 30.0% of taxable profits
on an annual basis. These losses can be used indefinitely and are not impacted by a change
in ownership of the Company.
 The following is a reconciliation of the amount of reported income tax benefit and the
amount computed by applying the combined statutory tax rate of 34.0% to the loss before
income taxes:
 December 31,R$000
    
    2010
    
    
    2009
    
    
    2008Tax (expense) income at the combined statutory rate
    
    R$
    (5,984
    )
    
    R$
    (2,418
    )
    
    R$
    1,300Current
income tax offset by accumulated tax loss credits
    
    
    711
    
    
    
    
    
    
    
    2,425Credits derived from equity restructuring
    
    
    2,424
    
    
    
    2,424
    
    
    
    2,424Combined statutory rate applied to differences
between taxable results in Brazil and reported results
    
    
    (3,486
    )
    
    
    (42
    )
    
    
    (6,584
    )Income tax (expense) income as reported in the
accompanying
consolidated statement of operations
    
    R$
    (6,335
    )
    
    R$
    (36
    )
    
    R$
    (435
    )
 Differences between taxable results in Brazil and reported results are primarily due to
accrued expenses that are only deductible when paid, such as contingencies. Differences
between Brazilian GAAP and U.S. GAAP also result on reconcile of reported income tax.
 F - 28




---



##### 



The following summarizes the composition of deferred tax assets and liabilities and the
related valuation allowance at December 31, 2010 and 2009, 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
    
    2010
    
    
    2009Deferred tax assets:Tax loss carry forward
    
    R$
    20,369
    
    
    R$
    20,738Net temporary differences
    
    
    2,301
    
    
    
    784Total deferred tax assets
    
    
    22,670
    
    
    
    21,522Valuation allowance
    
    
    (10,678
    )
    
    
    (7,925
    )Net deferred tax asset
    
    R$
    11,992
    
    
    R$
    13,597Deferred tax liabilities:Gain on sale of assets
    
    R$
    2,452
    
    
    R$
    Total deferred tax liabilities
    
    
    2,452
    
    
    
    Less: current portion
    
    
    (1,190
    )
    
    
    1,262
    
    
    
    
 Companys forecasts indicate that future operating results will provide taxable income
at Venbo and IRB, therefore the company expects to realize a great portion of its deferred
tax assets. 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 portion of CFK, DGS, Venbo
and IRBs tax losses which is greater than the respective projected taxable income.
The increase of valuation allowance form 2009 to 2010 is mainly due to taxable loss during
2010 for CFK and DGS and to adjustment regarding the tax loss at IRB and its projected taxable
income.Deferred tax liabilities are related to income tax on sale of assets, which, according to tax
rules in Brazil, are due only when proceeds from those sales are received.Significant judgment is required in determining income tax provisions and in evaluating tax
positions. We establish additional provisions for income taxes when, despite the belief that tax
positions are fully supportable, there remain certain positions that do not meet the minimum
probability threshold, as defined by the authoritative guidance for uncertainty in income taxes,
which is a tax position that is more likely than not to be sustained upon examination by the
applicable taxing authority. In the normal course of business, the Company and its subsidiaries are
examined by various Federal, State and foreign tax authorities. We regularly assess the potential
outcomes of these examinations and any future examinations for the current or prior years in
determining the adequacy of our provision for income taxes. We continually assess the likelihood
and amount of potential adjustments and adjust the income tax provision, the current tax liability
and deferred taxes in the period in which the facts that give rise to a revision become known.
 F - 29




---



##### 



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, 2010 are as follows:
 R$000Fiscal Year
    
    Contractual Leases2011
    
    
    16,4692012
    
    
    11,9342013
    
    
    10,5512014
    
    
    9,0992015
    
    
    5,452Thereafter
    
    
    1,388Total
    
    
    54,893
 Rent expense was R$16.3 million, R$15.1 million, and R$14.5 million for the years ended
December 31, 2010, 2009, and 2008, 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 supply agreements with some of its food and beverage providers, under which
the Company receives performance bonus in cash. Amounts received in advance 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.
 As of December 31, 2010 the company had the amount of R$0.9 million (R$2.8 million in 2009)
recorded as Current portion of Deferred Income and R$2.7 million (R$4.1 million in 2009) as
long term Deferred Income as in its balance sheet, related to such commitments.
 F - 30




---



##### 



c) Reassessed taxes and Contingencies
  December 31,2010
    
    
    2009Long

    
    
    
    
    
    

    
    

    
    LongTotal
    
    
    Current
    
    
    Term
    
    
    Total
    
    
    Current
    
    
    TermR$000
    
    Liability
    
    
    Liability
    
    
    Liability
    
    
    Liability
    
    
    Liability
    
    
    LiabilityReassessed taxesFederal taxes
    
    
    11,639
    
    
    
    1,580
    
    
    
    10,059
    
    
    
    13,011
    
    
    
    1,676
    
    
    
    11,335ContingenciesISS tax litigation
    
    
    6,616
    
    
    
    
    
    
    
    6,616
    
    
    
    5,123
    
    
    
    
    
    
    
    5,123Labor litigation
    
    
    1,885
    
    
    
    
    
    
    
    1,885
    
    
    
    2,137
    
    
    
    
    
    
    
    2,137Property
leasing litigation and other litigation
    
    
    691
    
    
    
    
    
    
    
    691
    
    
    
    208
    
    
    
    
    
    
    
    208TOTAL
    
    
    20,831
    
    
    
    1,580
    
    
    
    19,251
    
    
    
    20,479
    
    
    
    1,676
    
    
    
    18,803
 Reassessed taxes
    F - 31




---



##### 



Contingencies
 
     
   F - 32




---



##### 




  Other contingencies
  
    
    The Company purchased Venbo Comércio de Alimentos Ltda. (Venbo) from VENDEX in
1996. The Acquisition Purchase Agreement states that Venbos former owner (VENDEX)
would be responsible for off-balance liabilities derived from Venbos transactions prior
to the acquisition, limited to certain conditions. From 1997 to date, the Company has
received several communications from the Brazilian fiscal authorities related to the
period prior to the acquisition and has accordingly forwarded these to VENDEX and its
attorneys.In 2005, Venbo was summoned by the fiscal authority of the State of Rio de Janeiro to pay
a debt of approximately R$97,000 from the period prior to 1996. In order to have the right
to appeal it was obliged to pledge one of its properties as collateral. VENDEX took over
the defense of the case but did not offer another asset as collateral because of its weak
current financial condition.The VENDEX attorneys are taking on the defense of all claims against Venbo. During the
third quarter of 2007, the single relevant claim was judged favorable to VENDEX. All the
other claims are immaterial; however, we cannot predict whether any other claim will be
made that might be material.
    
    A franchisee of the Companys became a permanent debtor of royalties and
marketing contributions, and the Company, after failing in its attempts to improve his
business, finally decided to terminate his franchise contract and close down his stores.
After going to court, the Company managed to receive the past due amounts from the
franchisee and to terminate the original franchise agreement.This same franchisee alleged in court that the Company had offered him a store to operate
at a guaranteed profit, but that instead he had recorded operating losses. He put in a
claim for indemnity of R$5.5 million. The court judged the claim in favor of the
franchisee, but reduced the indemnity to R$1.2 million. The Companys legal advisors
understood his argument as contradicting franchise laws and the Companys usual business
practices and appealed against the ruling. In the appeal, the court again came down in
favor of the franchisee, but again reduced the compensation, this time to R$450,000. The
Company has again appealed against the ruling, but cannot predict the outcome.
    
    The owner of a property where the Company held a lease contract for operating one
of its stores (closed in 2002) claimed unpaid monetary restatement on rent for a period
of two and a half years, totaling R$1.0 million. The Company has reached an agreement to
reduce the claim and paid R$700 thousand. The Company is not safeguarded against
receiving other lease claims of similarly high amounts.
    
    Concerning inquires from the Brazilian Government General Attorneys Office, the
Company has the following issues:
 a)
    
    obligation to hire handicapped personnel until they make up a minimum of 5%
of the total workforce. Although the Company has managed to hire and train some
handicapped staff, it
 F - 33




---



##### 



is hard to attain the 5% level given the conditions in the
stores and the limited labor supply. The Company is trying to reach an agreement with
the General Attorneys Office, but there is no guarantee that it will be successful
and avoid paying fines.b)
    
    questions related to the total taxes paid by Venbo during the Pan American and
Para Pan American Games. Although the Company has proved that the taxes were
collected according to a special tax regime offered by Rio de Janeiro state, we
cannot predict the final outcome.
 
    
    In February 2010, the Brazilian Federal Tax Authorities questioned the procedures that
the Company has used in recent years to recover the IPI (a tax on manufactured goods)
included in the cost of packaging products bought from different suppliers. The
authorities agree that the Company has the right to this tax credit but understand that
it should claim it back from the suppliers and not from the government. The Company has
already filed its defense but there is no guarantee that it will be successful in
avoiding paying around R$1.2 million to the government and charging the suppliers for a
reimbursement.
  13
    
    SHAREHOLDERS EQUITY
 Preferred stock
 The Board of Directors of the Company is empowered, without shareholder approval, to issue
up to 5,000 shares of 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 Stock
 The table below states issued, treasury and outstanding shares of common stock:
 December 31,2010 and 2009Issued shares
    
    
    8,472,927Less: Treasury stock
    
    
    (335,165
    )Outstanding shares
    
    
    8,137,762
 Stock repurchase plan
 In the last quarter of 2004, the Companys Board of Directors approved a stock repurchase
plan involving the repurchase of as many as 200,000 shares of its own common stock. The
plans goal is to optimize the cash generated in the United States, and the repurchase limit
was increased by 200,000 shares on October 18, 2006.
 F - 34




---



##### 



During 2009, the Company repurchased a total amount of 45,955 shares (62,720 in 2008), under
the referred stock repurchase plan. During 2010 the company repurchased any shared.
 Up to December 31, 2010, the Company repurchased a total of 335,165 shares and the
accumulated stock purchases totaled R$1.9 million. Those transactions are accounted for as a
deduction of paid-in capital in the Shareholders Equity section of the accompanying balance
sheets.
 Stock option plan
 The Companys Stock Option Plan terminated on September 17, 2002, ten years from the date of
its adoption by the Board of Directors.
 During 2005, the Companys Board of Directors and a majority of its shareholders decided
that the Board would pay out compensation in cash and that no more stock options would be
granted.
 During 2009, options to purchase an aggregate of 35,000 (33,750 in 2008) shares of common
stock were exercised, having an aggregate purchase price of $37,100 ($25,175 in 2008)
equivalent to R$85,000 (R$74,000 in December 31, 2008).
 Intrinsic value for stock options is defined as the difference between the current market
value and the exercise price. The total intrinsic value of stock options exercised during
the period of 2009 was approximately $94,150 (approximately $150,075 in 2008). The total
intrinsic value of options exercisable at December 31, 2008 was approximately US$104,650.
There were no options exercisable at December 31, 2009 and 2010.
 After those options which were exercised during 2009, the Company has no further exercisable
options, under the Companys Stock Option Plan.
 During 2010 there was no option activity. Option activity for the years ended December 31,
2009 and 2008 is summarized as follows:
 2009
    
    
    2008Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOptions outstanding at beginning of year
    
    
    35,000
    
    
    $
    1.06
    
    
    
    68,750
    
    
    $
    1.22Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (35,000
    )
    
    
    1.06
    
    
    
    (33,750
    )
    
    
    1.39Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options outstanding at December 31,
    
    
    
    
    
    $
    
    
    
    
    35,000
    
    
    $
    1.06Options exercisable at December 31,
    
    
    
    
    
    $
    
    
    
    
    35,000
    
    
    $
    1.06
 F - 35




---



##### 



Dividend payable
 The Company has had a policy of retaining future earnings for the development of its
business. In 2006, the Company followed a restructuring strategy and consolidated all its
businesses in Brazil through a holding company subsidiary. In subsequent years, the Company
invested in new concepts, new brands and new activities and became a multi-brand
organization, highly recognized in Brazil. In 2008, by virtue of the Company successful
reorganization, its Board of Directors decided to distribute cash dividends to its
shareholders in the amount of $0,05 per share (total of R$679,000).
 In 2009 there were no dividends paid to shareholders.
 The Companys dividend policy is subject to the discretion of the Board of Directors and
depend upon a number of factors, including future earnings, financial condition, cash
requirements, and general business conditions. Each year, the Board of Directors discusses
the Companys profits distribution while considering its investment programs.
 In 2010, due to its increased operational margins, the Companys Board of Directors met and
declared dividend in the amount of $0.25 per share. Accordingly, a total of R$3,574,000 was
paid on July 31, 2010. The amount distributed was determined based on accumulated profits
from the Companys last dividend distribution
 In order to fund the dividend distribution, BFFC Corporation obtained an intercompany loan
with one of its subsidiaries and this transaction was subject to income tax charges, which
were mostly offset by its income tax credits.
 14
    
    ADMINISTRATIVE EXPENSES
 Administrative Expenses consist of the following:
 Year Ended December 31,R$000
    
    2010
    
    
    2009
    
    
    2008Payroll & Related Benefits
    
    
    12,328
    
    
    
    9,575
    
    
    
    7,628Occupancy expenses
    
    
    1,378
    
    
    
    2,182
    
    
    
    1,940Legal, accounting and
consulting
    
    
    7,948
    
    
    
    4,714
    
    
    
    3,310Maintenance Expenses
    
    
    869
    
    
    
    337
    
    
    
    629IT Expenses
    
    
    1,045
    
    
    
    705
    
    
    
    777Travel and transport expenses
    
    
    940
    
    
    
    1,021
    
    
    
    550Bank Charges
    
    
    460
    
    
    
    410
    
    
    
    227Other Administrative Expenses
    
    
    3,106
    
    
    
    2,354
    
    
    
    2,38128,074
    
    
    
    21,298
    
    
    
    17,442
 F - 36




---



##### 



15
    
    OTHER OPERATING EXPENSES
 Other expenses consist of the following:
 December 31,R$000
    
    2010
    
    
    2009
    
    
    2008Uncollectable receivables
    
    
    939
    
    
    
    502
    
    
    
    851Contingencies expenses
    
    
    4,138
    
    
    
    443
    
    
    
    Depreciation of Headquarters fixed assets
    
    
    609
    
    
    
    805
    
    
    
    682Preoperating and other expenses
    
    
    1,265
    
    
    
    2,647
    
    
    
    1,343R$
    6,951
    
    
    R$
    4,397
    
    
    R$
    2,876
   F - 37




---



##### 



16 INTEREST EXPENSE, NET
  December 31,R$000
    
    2010
    
    
    2009
    
    
    2008Interest income
    
    
    1,951
    
    
    
    1,424
    
    
    
    1,896Interest expenses
    
    
    (3,558
    )
    
    
    (6,306
    )
    
    
    (11,573
    )R$
    (1,606
    )
    
    R$
    (4,882
    )
    
    R$
    (9,677
    )
   17 TRANSACTIONS WITH RELATED PARTIES
       F - 38




---



##### 



18 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
  2010First
    
    
    Second
    
    
    Third
    
    
    FourthR$000
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterNet Restaurant Sales
    
    
    38,277
    
    
    
    35,173
    
    
    
    38,938
    
    
    
    42,203Net Franchise Revenues
    
    
    6,594
    
    
    
    6,054
    
    
    
    7,100
    
    
    
    8,638Operating income
    
    
    2,287
    
    
    
    1,383
    
    
    
    9,460
    
    
    
    6,076Net income  before
non-controlling interest
    
    
    1,880
    
    
    
    254
    
    
    
    5,282
    
    
    
    4,233Basic and diluted income per share
    
    
    0.23
    
    
    
    0.03
    
    
    
    0.65
    
    
    
    0.52Weighted average common shares
outstanding
    
    
    8,137,762
    
    
    
    8,137,762
    
    
    
    8,137,762
    
    
    
    8,138,321
 R$000
    
    2009Net Restaurant Sales
    
    
    34,974
    
    
    
    33,356
    
    
    
    36,986
    
    
    
    41,559Net Franchise Revenues
    
    
    6,092
    
    
    
    4,936
    
    
    
    6,120
    
    
    
    7,499Operating income
    
    
    1,832
    
    
    
    1,670
    
    
    
    3,299
    
    
    
    5,193Net income  before
non-controlling interest
    
    
    1,123
    
    
    
    350
    
    
    
    2,151
    
    
    
    3,272Basic and diluted income per share
    
    
    0.14
    
    
    
    0.04
    
    
    
    0.26
    
    
    
    0.41Weighted average common shares
outstanding
    
    
    8,172,166
    
    
    
    8,157,902
    
    
    
    8,142,061
    
    
    
    8,138,321
 F - 39




---



##### 



19 SEGMENT INFORMATION
        Results from own-stores operationsYear Ended December 31,R$000
    
    2010
    
    
    2009
    
    
    2008Revenues
    
    R$
    154,591
    
    
    R$
    146,875
    
    
    R$
    90,122Food, Beverage and Packaging
    
    
    (53,075
    )
    
    
    (51,720
    )
    
    
    (34,578
    )Payroll & Related Benefits
    
    
    (34,161
    )
    
    
    (33,787
    )
    
    
    (24,939
    )Restaurant Occupancy
    
    
    (17,680
    )
    
    
    (15,446
    )
    
    
    (10,236
    )Contracted Services
    
    
    (18,534
    )
    
    
    (16,768
    )
    
    
    (10,036
    )Depreciation and Amortization
    
    
    (5,839
    )
    
    
    (5,138
    )
    
    
    (2,819
    )Royalties charged
    
    
    (4,962
    )
    
    
    (3,537
    )
    
    
    (271
    )Other Store Costs and Expenses
    
    
    (9,392
    )
    
    
    (9,319
    )
    
    
    (6,850
    )Total Own-stores cost and expenses
    
    
    (143,643
    )
    
    
    (135,715
    )
    
    
    (89,729
    )Operating margin
    
    R$
    10,948
    
    
    R$
    11,160
    
    
    R$
    393
 F - 40




---



##### 



Results from franchise operationsYear Ended December 31,R$000
    
    2010
    
    
    2009
    
    
    2008Revenues
    
    R$
    28,386
    
    
    R$
    24,647
    
    
    R$
    22,427Payroll & Related Benefits
    
    
    (6,696
    )
    
    
    (5,393
    )
    
    
    (3,110
    )Occupancy expenses
    
    
    (796
    )
    
    
    (709
    )
    
    
    (671
    )Travel expenses
    
    
    (1,137
    )
    
    
    (784
    )
    
    
    (758
    )Contracted Services
    
    
    (775
    )
    
    
    (715
    )
    
    
    (665
    )Other franchise cost and expenses
    
    
    (1,314
    )
    
    
    (1,018
    )
    
    
    (1,003
    )Total franchise cost and expenses
    
    
    (10,718
    )
    
    
    (8,619
    )
    
    
    (6,207
    )Operating margin
    
    R$
    17,668
    
    
    R$
    16,028
    
    
    R$
    16,220
     F - 42




---



##### 



Results from Bobs brand operations
    
    
    Results from KFCs brand operationsYear Ended December 31,
    
    
    Year Ended December 31,R$000
    
    2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009
    
    
    2008Revenues
    
    R$
    72,104
    
    
    R$
    78,686
    
    
    R$
    75,133
    
    
    R$
    21,690
    
    
    R$
    18,868
    
    
    R$
    10,640Food, Beverage and Packaging
    
    
    (26,851
    )
    
    
    (29,272
    )
    
    
    (29,255
    )
    
    
    (7,975
    )
    
    
    (7,293
    )
    
    
    (4,082
    )Payroll & Related Benefits
    
    
    (16,656
    )
    
    
    (18,523
    )
    
    
    (20,127
    )
    
    
    (5,465
    )
    
    
    (4,617
    )
    
    
    (3,156
    )Occupancy expenses
    
    
    (7,530
    )
    
    
    (8,560
    )
    
    
    (8,359
    )
    
    
    (2,981
    )
    
    
    (2,417
    )
    
    
    (1,437
    )Contracted Services
    
    
    (7,866
    )
    
    
    (9,124
    )
    
    
    (8,383
    )
    
    
    (3,239
    )
    
    
    (2,393
    )
    
    
    (1,653
    )Depreciation and Amortization
    
    
    (2,507
    )
    
    
    (2,569
    )
    
    
    (2,611
    )
    
    
    (1,049
    )
    
    
    (879
    )
    
    
    (95
    )Royalties charged
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,070
    )
    
    
    (555
    )
    
    
    (189
    )Other Store Costs and Expenses
    
    
    (5,513
    )
    
    
    (5,800
    )
    
    
    (6,356
    )
    
    
    (1,225
    )
    
    
    (676
    )
    
    
    (305
    )Total Own-stores cost and
expenses
    
    
    (66,923
    )
    
    
    (73,848
    )
    
    
    (75,091
    )
    
    
    (23,004
    )
    
    
    (18,830
    )
    
    
    (10,917
    )Operating margin
    
    R$
    5,181
    
    
    R$
    4,838
    
    
    R$
    42
    
    
    R$
    (1,314
    )
    
    R$
    38
    
    
    R$
    (277
    )
 Results fromResults from Pizza Huts brand operations
    
    
    Doggis brand operationsYear Ended December 31,
    
    
    Year Ended December 31,R$000
    
    2010
    
    
    2009
    
    
    2008 **
    
    
    2010
    
    
    2009 ***Revenues
    
    R$
    58,522
    
    
    R$
    48,764
    
    
    R$
    4,349
    
    
    R$
    2,275
    
    
    R$
    557Food, Beverage and Packaging
    
    
    (17,032
    )
    
    
    (14,808
    )
    
    
    (1,241
    )
    
    
    (1,217
    )
    
    
    (347
    )Payroll & Related Benefits
    
    
    (11,223
    )
    
    
    (10,442
    )
    
    
    (1,656
    )
    
    
    (817
    )
    
    
    (205
    )Occupancy expenses
    
    
    (6,680
    )
    
    
    (4,377
    )
    
    
    (440
    )
    
    
    (489
    )
    
    
    (92
    )Contracted Services
    
    
    (7,112
    )
    
    
    (5,191
    )
    
    
    
    
    
    
    (317
    )
    
    
    (60
    )Depreciation and Amortization
    
    
    (2,055
    )
    
    
    (1,658
    )
    
    
    (113
    )
    
    
    (228
    )
    
    
    (32
    )Royalties charged
    
    
    (3,892
    )
    
    
    (2,982
    )
    
    
    
    
    
    
    
    
    
    
    Other Store Costs and Expenses
    
    
    (2,496
    )
    
    
    (2,798
    )
    
    
    (271
    )
    
    
    (158
    )
    
    
    (45
    )Total Own-stores cost and
expenses
    
    
    (50,490
    )
    
    
    (42,256
    )
    
    
    (3,721
    )
    
    
    (3,226
    )
    
    
    (781
    )Operating margin
    
    R$
    8,032
    
    
    R$
    6,508
    
    
    R$
    628
    
    

    R$
    (951)
    
    
    R$
    (224)
 
 *
    
    Pizza Huts 2008 figures are comprised of one month, since its operations started on
December 1, 2008.**
    
    Doggis 2009 figures are comprised of four months, since its operations started on September 1,
2009. F - 43




---



##### 



Year ended December 31,R$000
    
    2010
    
    
    2009
    
    
    2008Bobs Operating Income
    
    R$
    5,181
    
    
    R$
    4,838
    
    
    R$
    42KFCs Operating Income (Loss)
    
    
    (1,314
    )
    
    
    38
    
    
    
    (277
    )Pizza Huts Operating Income
    
    
    8,032
    
    
    
    6,508
    
    
    
    628Doggis Operating Loss
    
    
    (951
    )
    
    
    (224
    )
    
    
    Total Operating Income
    
    
    10,948
    
    
    
    11,160
    
    
    
    393Income from franchise operations
    
    
    17,668
    
    
    
    16,028
    
    
    
    16,220Unallocated Marketing Expenses
    
    
    (5,054
    )
    
    
    (4,092
    )
    
    
    (1,053
    )Unallocated Administrative Expenses
    
    
    (28,074
    )
    
    
    (21,298
    )
    
    
    (17,442
    )Unallocated Other Operating Expenses
    
    
    (6,951
    )
    
    
    (4,397
    )
    
    
    (2,876
    )Unallocated Net Revenues from Trade Partners
    
    
    21,104
    
    
    
    10,270
    
    
    
    8,317Unallocated Other income
    
    
    2,198
    
    
    
    3,098
    
    
    
    2,499Unallocated Net result of assets sold and
impairment of assets
    
    
    7,367
    
    
    
    1,225
    
    
    
    (205
    )Unallocated Interest Expenses
    
    
    (1,606
    )
    
    
    (4,882
    )
    
    
    (9,677
    )Total Unallocated Expenses
    
    
    (11,016
    )
    
    
    (20,076
    )
    
    
    (20,437
    )NET INCOME (LOSS) BEFORE INCOME TAX
    
    
    17,600
    
    
    
    7,112
    
    
    
    (3,824
    )
 F - 44




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##### 



EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    Certificate of Incorporation of the Registrant, as amended(1)3.2
    
    By-laws of the Registrant (2)10.1
    
    Amended and Restated 1992 Stock Option Plan (2)21.1
    
    Subsidiaries of Registrant (3)24.1
    
    Power of Attorney (comprises a portion of the signature page of this
report)31.1
    *
    Certification by Ricardo Figueiredo Bomeny, Chief Executive Officer
and Acting Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.1
    *
    Certification by Ricardo Figueiredo Bomeny, Chief Executive Officer
and Acting Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
 
 *
    
    Filed herewith.(1)
    
    Filed as an exhibit to Registrants Registration Statement on Form S-1 (File No.
333-3754).(2)
    
    Filed as an exhibit to Registrants Registration Statement on Form S-1 (File
No. 33-71368).(3)
    
    Filed as an exhibit to Registrants Annual Report on Form 10-K for the year
ended December 31, 1997 (File No. 0-23278). 44