S-1 1 bk-s1.htm

As filed with the Securities and Exchange Commission on February 16, 2006

Registration No. 333-________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

BURGER KING HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	5812	75-3095469
(State or Other Jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
Incorporation or Organization)	Classification Code Number)	Identification Number)

5505 Blue Lagoon Drive

Miami, Florida 33126

(305) 378-3000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

ANNE CHWAT

General Counsel

Burger King Holdings, Inc.

5505 Blue Lagoon Drive

Miami, Florida 33126

(305) 378-3000

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)



	*Copies to:*
JEFFREY SMALL DEANNA KIRKPATRICK Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 (212) 450-4000		WILLIAM F. GORIN Cleary Gottlieb Steen & Hamilton LLP One Liberty Plaza New York, NY 10006 (212) 225-2000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Title of Each Class of Securities To Be Registered	Proposed Maximum Aggregate Offering Price (1)	Amount of Registration Fee
Common Stock, par value $0.01 per share	$400,000,000	$42,800

(1)	Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion. Dated , 2006 .

Shares

Burger King Holdings, Inc.

Common Stock

This is an initial public offering of shares of common stock of Burger King Holdings, Inc. We are offering shares of common stock to be sold in this offering. The selling stockholders named in this prospectus are offering an additional shares. We will not receive any of the proceeds from the sale of the shares by the selling stockholders.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price will be between $ and $ per share.

We intend to list our common stock on the New York Stock Exchange under the symbol “BKC.”

See “Risk Factors” beginning on page 10 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

	Price to Public	Underwriting Discounts and Commissions	Proceeds to Us	Proceeds to the Selling Stockholders

Per Share	$	$	$	$
Total	$	$	$	$

To the extent that the underwriters sell more than shares of common stock, the underwriters have an option to purchase up to an additional shares of common stock from us and an additional shares of common stock from the selling stockholders at the initial public offering price less the underwriting discount.

The underwriters expect to deliver the shares against payment in New York, New York on , 2006.

JPMorgan
	Citigroup
		Goldman, Sachs &	Co.
			Morgan Stanley

Prospectus dated , 2006

TABLE OF CONTENTS

		Page

Prospectus Summary		1
Risk Factors		10
Special Note Regarding Forward-Looking Statements		24
Use of Proceeds		26
Dividend Policy		26
Capitalization		27
Dilution		28
Selected Consolidated Financial and Other Data		30
Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
Business		58
Management		76
Principal and Selling Stockholders		86
Certain Relationships and Related Transactions		89
Description of Capital Stock		91
Description of Our Credit Facility		93
Material United States Federal Tax Consequences for Non-United States Holders of Common Stock		95
Shares Eligible for Future Sale		97
Underwriting		99
Legal Matters		104
Experts		104
Where You Can Find More Information		104
Index to Consolidated Financial Statements		F-1

In this prospectus, we rely on and refer to information regarding the restaurant industry, the quick service restaurant segment and the fast food hamburger restaurant category that has been prepared by industry research firms, including NPD Group, Inc. (which prepares and disseminates the Consumer Report of Eating Share Trends, or CREST) and Research International (which provides us with proprietary National Adult Tracking data) or compiled from market research reports, research analyst reports and other publicly available information. Although we believe this information is reliable, we cannot guarantee the accuracy and completeness of the information and have not independently verified it. All industry and market data that are not cited as being from a specified source are from internal analyses based upon data available from noted sources or other proprietary research and analysis.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the risks of investing in our common stock discussed under “Risk Factors” and the financial statements and notes included elsewhere in this prospectus.

On December 13, 2002, we acquired Burger King Corporation, which we refer to as “BKC”, through private equity funds controlled by Texas Pacific Group, Bain Capital Partners and the Goldman Sachs Funds, or the “sponsors”. In this prospectus, unless the context otherwise requires, all references to “we”, “us” and “our” refer to Burger King Holdings, Inc. and its subsidiaries, including BKC, for all periods subsequent to our December 13, 2002 acquisition of BKC. All references to our “predecessor” refer to BKC and its subsidiaries for all periods prior to the acquisition, which operated under a different ownership and capital structure.

The King of Burgers

When the first Burger King® restaurant opened its doors back in 1954, our founders had a smart idea: serve great-tasting food fast and allow guests to customize their hamburgers their way. Much has changed in the half century since our founders sold the first Whopper® sandwiches in a Miami drive-up hamburger stand in 1957, but these core principles have remained.

We believe that the Burger King and Whopper brands are two of the world’s most widely-recognized consumer brands. These brands, together with our signature flame-broiled products and the Have It Your Way® brand promise, are among the strategic assets that we believe set Burger King apart from other regional and national fast food hamburger restaurant chains. Have It Your Way is increasingly relevant as consumers continue to demand personalization and choice over mass production. In a competitive industry, we believe we have differentiated ourselves through our attention to individual customers’ preferences by offering great tasting fresh food served fast and in a friendly manner and by recent advertising campaigns aimed at becoming a part of the popular culture.

We’re the world’s second largest fast food hamburger restaurant chain as measured by the number of restaurants and system-wide sales and one of the three largest quick service restaurant companies. We own or franchise 11,141 restaurants in 67 countries and U.S. territories. The fast food hamburger restaurant category in the United States had estimated annual sales of over $50 billion for the year ended October 31, 2005 and has a projected annual growth rate of 4.2% over the next five years, according to NPD Group, Inc.

Where We Started

Our founders sold Burger King Corporation to The Pillsbury Company in 1967, taking it from a small privately held franchised chain to a subsidiary of a large food conglomerate. The Pillsbury Company was purchased by Grand Met plc, which, in turn, was acquired by Diageo plc, a British spirits company. As a result, Burger King Corporation became a small, non-core subsidiary of a large conglomerate, making it difficult for the brand to prosper.

From 1989, when Grand Met plc acquired Burger King Corporation, to 2002, we experienced eight CEOs, which led to frequently changing strategies and an absence of consistent focus. Burger King Corporation operated globally, but marketing, operations and product development approaches were decided locally, leading to inconsistencies, despite a very strong brand.

Then in December 2002, Burger King Corporation was acquired by private equity funds controlled by Texas Pacific Group, Bain Capital Partners and the Goldman Sachs Funds, which we refer to as our sponsors. At the time

of the acquisition, we faced significant challenges, including declining average restaurant sales which resulted in lower restaurant profits compared to our competitors. Additionally, the number of U.S. franchise restaurants was shrinking, many of our franchisees in the United States and Canada were in financial distress, our menu and marketing strategies did not resonate with customers, relationships with franchisees were strained and many of our restaurants had poor service.

We’re Focused on Turning a Great Brand into a Great Business

In response to the challenges we faced in December 2002, the sponsors began building an experienced management team. In August 2004, Greg Brenneman, an executive with extensive experience in successfully turning around distressed businesses, such as Continental Airlines and Pricewaterhouse Coopers Consulting, joined the company as Chief Executive Officer. He inherited the core of an experienced management team, including John Chidsey, our President and Chief Financial Officer, who has valuable experience in working with franchised businesses through his long tenure at Cendant. Mr. Brenneman then finished assembling the company’s leaders by recruiting executives with significant experience in relevant areas. The team has considerable consumer brand experience from such companies as Avis, Budget Rent A Car System, The Coca-Cola Company, Continental Airlines, Dr Pepper/Seven-Up, McDonald’s, PepsiCo, Seagram, Wendy’s and Yum! Brands.

The team quickly put in place a strategic plan, called the Go Forward Plan. The plan has four guiding principles: Grow Profitably (a market plan); Fund the Future (a financial plan); Fire-up the Guest (a product plan); and Working Together (a people plan). We believe that a strong, simple, measurable, clearly communicated strategic plan gets results. All of our employees are measured by their contribution to the Go Forward Plan. In addition, all of our franchisees know exactly what we’re working on and can measure how well we’re doing; they, in turn, are able to contribute constant, constructive feedback. We benefit from having a group of employees and franchisees who have pulled together and worked hard during the last two years, as we focus on turning a great brand into a great business.

What We’ve Accomplished by Going Forward Together

Guided by our Go Forward Plan and strong executive team leadership, our accomplishments include:

•	seven consecutive quarters of positive comparable sales growth in the United States as compared to negative comparable sales growth in the previous seven consecutive quarters, our best comparable sales growth in a decade;

•	increasing average restaurant sales in the United States by 11% over the past two fiscal years and continued growth in the first six months of fiscal 2006;

•	improving the financial health of our franchise system in the United States and Canada as demonstrated by the significant reduction in the number of franchise restaurants in our franchisee financial restructuring program, which declined from over 2,540 in February 2003 to approximately 150 as of December 31, 2005, and by improved royalty collections;

•	launching an award-winning advertising and promotion program focused on our core customers;

•	implementing operational initiatives that enhanced restaurant-level economics in the United States;

•	implementing a new product development process aimed at improving our menu and generating a pipeline of new products;

•	designing a new restaurant model that lowered the average cost to build a new restaurant by over 25%, making building new restaurants more attractive;

•	improving relationships with our franchisees in the United States. Together we have achieved all time high customer satisfaction scores, as well as record speed of service and cleanliness scores;

•	increasing our international restaurant base by over 130 restaurants in 2005 and by 121 in the first six months of fiscal 2006 (net of closures); and

•	increasing EBITDA by 65%, from $136 million in fiscal 2004 to $225 million in fiscal 2005, with income from operations increasing from $73 million to $151 million in the corresponding period. EBITDA grew 28% from $144 million in the first six months of fiscal 2005 to $184 million in the first six months of fiscal 2006, with income from operations increasing from $110 million to $142 million in the corresponding period.

Why We Are “The King”

•	Distinctive brand with global platform: We believe that our Burger King and Whopper brands are two of the most widely-recognized consumer brands in the world. In 2005, Brandweek magazine ranked Burger King number 15 among the top 200 brands in the United States.

•	Attractive business model: Approximately 90% of our restaurants are franchised, which is a higher percentage than our major competitors. We believe that our franchise restaurants will generate a consistent, profitable royalty stream to us, with minimal associated capital expenditures or incremental expense by us. We also believe this will provide us with significant cash flow to reinvest in strengthening our brand and enhancing shareholder value.

•	Established and scalable international business: We have one of the largest restaurant networks in the world, with more than 3,800 franchise and company-owned restaurants outside the United States. We believe that the demand for new international franchise restaurants is growing and our established infrastructure is capable of supporting substantial restaurant expansion internationally.

•	Experienced management team with significant ownership: We have a seasoned management team with significant experience in turning around and growing companies. Following this offering, our executive officers will own approximately % of our common stock, on a fully-diluted basis, which we believe aligns their interests with those of our other shareholders.

Our Way Going Forward

•	Drive sales growth and profitability of our U.S. business: We believe that we have a long way to go to achieve our comparable sales and average restaurant sales growth potential in our core U.S. business. We will continue to promote innovative marketing campaigns, launch new products to fill gaps in our menu, enhance the price/value proposition of our products, improve restaurant operations and extend hours of operations to meet our customers’ needs and drive sales growth. We also have reduced the capital costs to build a restaurant, which is leading to increased restaurant development in our U.S. business.

•	Expand our large international platform: We will continue to build upon our substantial international infrastructure, franchise network and restaurant base, focusing mainly on under-penetrated markets where we already have a presence. Internationally we are about one-fourth of the size of our largest competitor, which we believe demonstrates significant growth opportunities for us.

•	Continue to build relationships with franchisees: We succeed when our franchisees succeed, and we will continue building our relationships with our franchisees. In the past two years, we have implemented advisory committees for marketing, operations, finance and people, realigned our global convention and established quarterly officer and director franchisee visits. We will continue to dedicate resources toward the creation of a cohesive organization that is focused on supporting the Burger King brand globally.

•	Become a world-class global company: Since 2004, we have integrated our domestic and international operations into one global company. This realignment of our company allows us to operate as a global brand and to execute our global growth strategy while remaining responsive to national differences in consumer preferences and local requirements.

Recent Developments

On February 21, 2006, we paid a cash dividend of $367 million, which we refer to as the February 2006 dividend, to holders of record of our common stock on February 9, 2006, including the private equity funds controlled by the sponsors which owned approximately 95% of the outstanding shares of our common stock at that time. At the same time, we paid $33 million to holders of our options and restricted stock unit awards, primarily members of senior management, which we refer to as a compensatory make-whole payment. This compensatory make-whole payment will be recorded as compensation expense in the third quarter of fiscal 2006.

On February 3, 2006, we agreed to pay a one-time $30 million fee to terminate our management agreement with the sponsors upon completion of this offering, which we refer to as the sponsor management termination fee. The management agreement currently obligates us to pay approximately $9 million per year to the sponsors.

On February 15, 2006, we amended our senior secured credit facility in order to declare and pay the February 2006 dividend and pay the compensatory make-whole payment and the sponsor management termination fee. At that time, we also borrowed an additional $350 million under our senior secured credit facility, all the proceeds of which were used to pay, along with $50 million of cash on hand, the February 2006 dividend and the compensatory make-whole payment. We refer to this financing as the February 2006 financing. See “Description of Our Credit Facility,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Certain Relationships and Related Transactions—Management Agreement.”

On February 14, 2006, we granted options to purchase shares of our common stock to each of approximately 5,000 of our employees worldwide who were not previously eligible to receive option grants, such as restaurant managers and support staff. These options generally vest on February 14, 2011, so long as the employee remains employed by us, and expire on February 14, 2016.

Ownership by Sponsors

Our principal stockholders are the private equity funds controlled by the sponsors. As of February 15, 2006, these funds beneficially owned approximately 95% of our outstanding common stock. Following completion of this offering, these funds will beneficially own approximately % of our common stock, or % if the underwriters’ option to purchase additional shares is fully exercised.

Our Headquarters

Our global headquarters are located at 5505 Blue Lagoon Drive, Miami, Florida 33126. Our telephone number is (305) 378-3000. Our website is accessible through www.burgerking.com or www.bk.com. Information on, or accessible through, this website is not a part of, and is not incorporated into, this prospectus.

Burger King®, Whopper®, Whopper Jr.®, Have It Your Way®, Burger King Bun Halves and Crescent Logo, Wake Up with the King™, TenderCrisp™, BK Joe™, BK™ Chicken Fries and BK™ Value Menu trademarks are protected under applicable intellectual property laws and are the property of Burger King Brands, Inc., an indirect wholly-owned subsidiary of Burger King Holdings, Inc. Other registered trademarks referred to in this prospectus are the property of their respective owners.

The Offering

Common stock offered by us	shares⁽¹⁾

Common stock offered by the selling stockholders	shares⁽²⁾

Total common stock offered hereby	shares⁽³⁾

Common stock to be outstanding after this offering	shares⁽⁴⁾

Voting Rights	One vote per share.

Use of Proceeds	We will receive net proceeds from this offering of approximately $ million, assuming an initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses. We expect to use the net proceeds to repay amounts outstanding under our senior secured credit facility. A $1.00 change in the per share offering price would change net proceeds by approximately $ million.

	We will not receive any of the net proceeds from the sale of shares of common stock by the selling stockholders.

Dividend Policy	We do not currently intend to pay cash dividends on shares of our common stock.

New York Stock Exchange Symbol	BKC

Risk Factors	See “Risk Factors” and the other information included in this prospectus for a discussion of the factors you should consider carefully before deciding to invest in shares of our common stock.


(1)	Excludes shares that may be sold by us upon exercise of the underwriters’ option to purchase additional shares.

(2)	Excludes shares that may be sold by the selling stockholders upon exercise of the underwriters’ option to purchase additional shares.

(3)	Excludes shares that may be offered upon exercise of the underwriters’ option to purchase additional shares.

(4)	Excludes (i) 333,302 shares of our common stock issuable upon the exercise of options outstanding as of December 31, 2005, of which options to purchase 95,556 shares were exercisable as of December 31, 2005, (ii) 50,682 additional shares of our common stock issuable under the Burger King Holdings, Inc. Equity Incentive Plan, (iii) 35,572 options issued by us to employees and directors since December 31, 2005 and (iv) shares that may be sold by us upon exercise of the underwriters’ option to purchase additional shares.

Unless we specifically state otherwise, the information in this prospectus does not take into account the sale of up to shares of common stock which the underwriters have the option to purchase from us and the selling stockholders.

Summary Consolidated Financial And Other Data

The following summary consolidated financial and other data should be read in conjunction with, and are qualified by reference to, the disclosures set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in the consolidated financial statements and their notes.

All references to our “predecessor” refer to BKC and its subsidiaries for all periods prior to our December 13, 2002 acquisition of BKC, which operated under a different ownership and capital structure. The acquisition was accounted for under the purchase method of accounting and resulted in purchase accounting allocations that affect the comparability of results of operations between periods before and after the acquisition. In addition, the combined financial data for the combined fiscal year ended June 30, 2003 have been derived from the audited consolidated financial statements and notes thereto of our predecessor and us, but have not been audited on a combined basis and, as a result, do not comply with generally accepted accounting principles and are not intended to represent what our operating results would have been if the acquisition of BKC had occurred at the beginning of the period.

	Predecessor									Burger King Holdings, Inc.						Burger King Holdings, Inc.

	For the fiscal year ended June 30,						For the period from July 1, 2002 to December 12,			For the period from December 13, 2002 to June 30,			Combined twelve months ended June 30,			For the fiscal year ended June 30,				For the six months ended December 31,

	2001			2002			2002			2003			2003			2004		2005		2004		2005

													(unaudited)							(unaudited)
	(in millions, except per share data)
Income Statement Data:

Total revenues	$	1,541		$	1,646		$	751		$	906		$	1,657		$	1,754	$	1,940	$	969	$	1,020
Total company restaurant
expenses		894			987			465			557			1,022			1,087		1,195		590		640
Selling, general and
administrative expenses (1)		400			429			225			253			478			482		496		236		213
Property expenses		59			58			27			28			55			58		64		30		28
Impairment of goodwill (2)		43			5			875			-			875			-		-		-		-
Other operating expenses
(income), net (2)		114			45			39			(7	)		32			54		34		3		(3	)

Total operating costs and
expenses	$	1,510		$	1,524		$	1,631		$	831		$	2,462		$	1,681	$	1,789	$	859	$	878
Income (loss) from operations		31			122			(880	)		75			(805	)		73		151		110		142
Interest expense, net		48			105			46			35			81			64		73		34		34
Loss on early extinguishment
of debt		-			-			-			-			-			-		-		-		13

(Loss) income before income
taxes	$	(17	)	$	17		$	(926	)	$	40		$	(886	)	$	9	$	78	$	76	$	95
Income tax expense (benefit)		21			54			(34	)		16			(18	)		4		31		31		46

Net (loss) income	$	(38	)	$	(37	)	$	(892	)	$	24		$	(868	)	$	5	$	47	$	45	$	49


Per common share:
Net income basic
Net income diluted
Shares outstanding, basic
Shares outstanding, diluted

	Predecessor							Burger King Holdings, Inc.					Burger King Holdings, Inc.

	For the fiscal year ended June 30,				For the period from July 1, 2002 to December 12,			For the period from December 13, 2002 to June 30,		Combined twelve months ended June 30,			For the fiscal year ended June 30,				For the six months ended December 31,

	2001		2002		2002			2003		2003			2004		2005		2004		2005

										(unaudited)							(unaudited)

Other Financial Data:
Cash provided by operating
activities	$	324	$	212	$	1		$	81	$	82		$	199	$	218	$	62	$	105
Capital expenditures		199		325		95			47	$	142			81		93		29		30
EBITDA (2) (3)	$	182	$	283	$	(837	)	$	118	$	(719	)	$	136	$	225	$	144	$	184

	As of December 31, 2005

	Actual		As adjusted (4)

			(unaudited)
	(in millions)
Balance Sheet Data:
Cash and cash equivalents	$	207	$
Total assets		2,476
Total debt and capital lease obligations		1,066
Total liabilities		1,946
Total stockholders’ equity	$	530	$

	Combined twelve months ended June 30, 2003			Burger King Holdings, Inc.

				For the fiscal year ended June 30,						For the six months ended December 31,


				2004			2005			2004			2005

	(unaudited) (in constant currencies)

Other System-Wide Operating Data:
Comparable sales growth (5) (6)		(5.9	)%		1.0	%		5.6	%		7.0	%		1.3	%
Average restaurant sales (in thousands) (5)	$	972		$	994		$	1,066		$	534		$	549
System-wide sales growth (5)		(4.7	)%		1.2	%		6.1	%		7.6	%		1.8	%
Restaurants (at end of period):
Company		1,061			1,087			1,187			1,058			1,228
Franchise		10,274			10,140			9,917			10,130			9,913

Total restaurants		11,335			11,227			11,104			11,188			11,141


Segment Data:
Revenues (in millions):
United States and Canada	$	1,114		$	1,117		$	1,275		$	632		$	682
EMEA/APAC (7)		477			566			586			298			294
Latin America (8)		66			71			79			39			44

Total revenues	$	1,657		$	1,754		$	1,940		$	969		$	1,020

System-wide restaurants (at end of period):
United States and Canada		8,264			7,976			7,720			7,891			7,634
EMEA/APAC (7)		2,459			2,585			2,656			2,600			2,738
Latin America (8)		612			666			728			697			769

Total restaurants		11,335			11,227			11,104			11,188			11,141


(1)	Selling, general and administrative expenses included $73 million and $72 million of intangible asset amortization in the fiscal years ended June 30, 2001 and 2002, respectively. Selling, general and administrative expenses also included $14 million and $7 million of fees paid to Diageo plc in the fiscal years ended June 30, 2001 and 2002, respectively.
(2)	In connection with our acquisition of BKC, our predecessor recorded $35 million of intangible asset impairment charges within other operating expenses (income), net and goodwill impairment charges of $875 million during the period from July 1, 2002 to December 12, 2002.
(3)	EBITDA is defined as net income before interest, taxes, depreciation and amortization, and is used by management as a performance measure. While EBITDA is not a recognized measure under GAAP, we believe that EBITDA is useful to investors because it is frequently used by securities analysts, investors, our lenders and other interested parties to evaluate companies in our industry and us. EBITDA is not intended to be a measure of free cash flow or indicator of operating performance as it does not consider certain requirements such as capital expenditures and related depreciation, principal and interest payments and tax payments.

The following table is a reconciliation of our net income to EBITDA:

	Predecessor									Burger King Holdings, Inc.					Burger King Holdings, Inc.

							For the period from July 1, 2002 to December 12, 2002			For the period from December 13, 2002 to June 30, 2003		Combined twelve months ended June 30, 2003
	For the fiscal year ended June 30,														For the fiscal year ended June 30,				For the six months ended December 31,

	2001			2002											2004		2005		2004		2005

												(unaudited)							(unaudited)
(in millions)
Net (loss) income	$	(38	)	$	(37	)	$	(892	)	$	24	$	(868	)	$	5	$	47	$	45	$	49
Interest expense, net		48			105			46			35		81			64		73		34		47	⁽⁹⁾
Income tax expense (benefit)		21			54			(34	)		16		(18	)		4		31		31		46

Income (loss) from operations	$	31		$	122		$	(880	)	$	75	$	(805	)	$	73	$	151	$	110	$	142
Depreciation, and amortization		151			161			43			43		86			63		74		34		42

EBITDA	$	182		$	283		$	(837	)	$	118	$	(719	)	$	136	$	225	$	144	$	184

(4)	As adjusted amounts give effect to (a) the February 2006 financing and related expenses, (b) the February 2006 dividend, (c) the compensatory make-whole payment, (d) the sponsor management termination fee and (e) the issuance and sale of shares of common stock by us in this offering at an assumed initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus, and the application of the net proceeds of this offering, after deducting estimated underwriting discounts and commissions and offering expenses payable by us, as set forth under “Use of Proceeds.” See “Use of Proceeds” and “Capitalization.”
(5)	These are our key business measures, which are analyzed on a constant currency basis, which means they are calculated using the same exchange rate over the periods under comparison, to remove the effects of currency fluctuations from these trend analyses. We believe these constant currency measures provide a more meaningful analysis of our business by identifying the underlying business trend, without distortion from the effect of foreign currency movements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Measures.”
(6)	Comparable sales growth refers to the change in restaurant sales in one period from a comparable period for restaurants that have been open for thirteen months or longer.
(7)	Refers to our operations in Europe, the Middle East, Africa, Asia and Australia and includes Guam.
(8)	Refers to our operations in Mexico, Central and South America and the Caribbean and includes Puerto Rico.
(9)	Includes $13 million recorded as a loss on early extinguishment of debt in connection with our July 2005 refinancing as defined in this prospectus.

RISK FACTORS

You should carefully consider the following risks and all of the other information set forth in this prospectus before deciding to invest in shares of our common stock. The following risks comprise all the material risks of which we are aware; however, these risks and uncertainties may not be the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also adversely affect our business or financial performance. If any of the events or developments described below actually occurred, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our common stock would likely decline, and you would lose all or part of your investment in our common stock.

Risks Related to Our Business

Our recent improvements in comparable sales, average restaurant sales and system-wide sales may not be indicative of future operating results.

Although our comparable sales, average restaurant sales and system-wide sales have improved significantly, these positive results may not continue. Our results of operations may fluctuate significantly because of a number of factors, including the risk factors discussed in this section. Moreover, we may not be able to successfully implement the business strategy described in this prospectus and implementing our business strategy may not sustain or improve our results of operations or increase our market share. As a result of the factors discussed in this section, operating results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and system-wide sales, comparable sales, and average restaurant sales for any future period may decrease. In the future, our operating results may fall below investor expectations. In that event, the price of our common stock would likely decrease.

Our success depends on our ability to compete with our major competitors.

The restaurant industry is intensely competitive and we compete in the United States and internationally with many well-established food service companies on the basis of price, service, location and food quality. Our competitors include a large and diverse group of restaurant chains and individual restaurants that range from independent local operators to well-capitalized national and international restaurant companies. McDonald’s Corporation, or McDonald’s, and Wendy’s International, Inc., or Wendy’s, are our principal competitors. As our competitors expand their operations, including through acquisitions or otherwise, we expect competition to intensify. Some of our competitors have substantially greater financial and other resources than we do, which may allow them to react to changes in pricing, marketing and the quick service restaurant industry in general better than we can. We also compete against regional hamburger restaurant chains, such as Carl’s Jr., Jack in the Box and Sonic.

To a lesser degree, we compete against national food service businesses offering alternative menus, such as Subway and Yum! Brands, Inc.’s Taco Bell, Pizza Hut and Kentucky Fried Chicken, casual restaurant chains, such as Applebee’s, Chili’s, Ruby Tuesday’s and “fast casual” restaurant chains, such as Panera Bread, as well as convenience stores and grocery stores that offer menu items comparable to that of Burger King restaurants. During the past year, the fast food hamburger restaurant, or FFHR, category has experienced flat or declining traffic which we believe is due in part to competition from these competitors. In one of our major European markets, the United Kingdom, much of the growth in the quick service restaurant segment is expected to come from bakeries and new entrants that are diversifying into healthier options to respond to nutritional concerns. We believe that the large hamburger chains in the United Kingdom have experienced declining sales as they face increased competition from not only the bakeries, but also from pubs that are repositioning themselves as family venues and offering inexpensive food.

Finally, the restaurant industry has few non-economic barriers to entry, and therefore new competitors may emerge at any time. To the extent that one of our existing or future competitors offers items that are better priced or more appealing to consumer tastes or a competitor increases the number of restaurants it operates in one of our key

markets or offers financial incentives to personnel, franchisees or prospective sellers of real estate in excess of what we offer, it could have a material adverse effect on our financial condition and results of operations. We also compete with other restaurant chains and other retail businesses for quality site locations and hourly employees.

Our business plan includes price discounting which may lead to declines in our margins and operating profits.

In order to respond to competitive pressures and to improve customer traffic in our restaurants, we have regionally tested a new BK Value Menu over the last 18 months at approximately 1,000 restaurants. We launched this BK Value Menu nationally in the United States in February 2006 and it includes a number of nationally mandated products, such as the Whopper Jr. sandwich, small fries and small sodas priced at no more than $1 and local options to sell other products at varying maximum prices. While the BK Value Menu has been extensively tested and has the support of our franchisees, it may not ultimately succeed due to the potential reaction of our major competitors, including the introduction of similar discounting, flaws in our testing methodologies or other factors. In addition, the BK Value Menu may not prove successful in every market in the United States due to existing franchisee pricing patterns and business conditions in those markets.

We have frequently in the past responded to competitive pressures by discounting our products and while this discounting has increased the number of customers that frequent our restaurants in the short term, it often has significantly eroded margins and profitability. For example, in fiscal 2003, we introduced without prior regional testing a different value menu that offered a variety of new products at $0.99. Our customers responded by purchasing these less expensive items instead of higher margin products like our flagship product, the Whopper sandwich. At the same time, McDonald’s introduced a competing $1 menu, and we responded by discounting the Whopper and other menu items not part of the initial value menu, which further eroded our margins and profitability. We believe that our new BK Value Menu differs substantially from the one introduced in fiscal 2003. The margins on the products on the new BK Value Menu are higher than the margins on the products on the old value menu. In addition, unlike in fiscal 2003, we currently offer a variety of premium products which we will continue to advertise as we launch the BK Value Menu. However, there can be no assurance that launching the BK Value Menu on a national basis will be successful and will not ultimately lead to declines in our margins and operating profits due to the actions of our competitors or for other reasons.

If we fail to successfully implement our international growth strategy, our ability to increase our revenues and operating profits could be adversely affected and our overall business could be adversely affected.

A significant component of our growth strategy involves opening new international restaurants in both existing and new markets. We and our franchisees face many challenges in opening new international restaurants, including, among others:

•	the selection and availability of suitable restaurant locations;

•	the negotiation of acceptable lease terms;

•	the ability of franchisees to obtain acceptable financing terms;

•	securing required foreign governmental permits and approvals;

•	securing acceptable suppliers; and

•	employing and training qualified personnel.

We are planning to expand our international operations in markets where we currently operate and in selected new markets. Operations in foreign markets may be affected by consumer preferences and local market conditions. For example, we have experienced declining sales in certain foreign markets, such as the United Kingdom, due in part to concerns about obesity as well as high operating expenses. We may not be successful in developing effective initiatives to reverse these trends. Therefore, to the extent that we open new company restaurants in existing foreign

markets, we may not experience the operating margins we expect, and our expected growth in our results of operations may be negatively impacted.

We expect that most of our international growth will be accomplished through the opening of additional franchise restaurants. However, our franchisees may be unwilling or unable to increase their investment in our system by opening new restaurants, particularly if their existing restaurants are not generating positive financial results. Moreover, opening new franchise restaurants depends, in part, upon the availability of prospective franchisees who meet our criteria, including extensive knowledge of the local market. In the past, we have approved franchisees that were unsuccessful in implementing their expansion plans, particularly in new markets. There can be no assurance that we will be able to find franchisees who meet our criteria, or if we find such franchisees, that they will successfully implement their expansion plans.

Our operating results are closely tied to the success of our franchisees. Over the last several years, many franchisees in the United States and Canada have experienced severe financial distress, and our franchisees may experience financial distress in the future.

We receive revenues in the form of royalties and fees from our franchisees. As a result, our operating results substantially depend upon our franchisees’ restaurant profitability, sales volumes and financial viability of our franchisees. In December 2002, over one-third of our franchisees in the United States and Canada were facing financial distress primarily due to over-leverage. Our largest franchisee, with over 350 restaurants, declared bankruptcy in December 2002 and a number of our other large franchisees defaulted on their indebtedness. This distress impacted our results of operations as the franchisees did not pay, or delayed or reduced payments of royalties, national advertising fund contributions and rents for properties we leased to them.

In response to this situation, we established the Franchise Financial Restructuring Program, or FFRP program, in February 2003 to address our franchisees’ financial problems in the United States and Canada. At the FFRP program’s peak in August 2003, over 2,540 restaurants were in the FFRP program. From December 2002 through June 30, 2005, we wrote off $106 million in the United States in uncollectible accounts receivable (principally royalties, advertising charges and rents). For more information on the FFRP program and its financial impact on us, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Comparability of Results—Historical Franchisee Financial Distress.” In addition, lenders to our franchisees were affected by the financial distress of our franchisees and there can be no assurance that current or prospective franchisees can obtain financing from these financing sources or from others in light of the history of those past problems.

We have introduced a similar program on a smaller scale in the United Kingdom. Franchisees that have completed the FFRP program in the United States, Canada or the United Kingdom, and franchisees that have not experienced financial distress in the past may experience financial distress in the future. The resolution of such future franchisee financial difficulties, if possible, could be difficult and would likely result in additional costs to us and might result in a decrease in our revenues and earnings.

Our reputation depends in large part on the success of our franchisees, and we could be harmed by actions taken by our franchisees that are outside of our control.

Approximately 90% of our restaurants are franchised and we do not expect the percentage of franchise restaurants to change significantly as we implement our growth strategy. Franchisees are independent operators and have a significant amount of flexibility in running their operations, including the ability to set prices of our products in their restaurants. Their employees are not our employees. We provide training and support to franchisees, but the quality of franchise restaurant operations may be diminished by any number of factors beyond our control. Consequently, franchisees may not successfully operate restaurants in a manner consistent with our standards and requirements, or may not hire and train qualified managers and other restaurant personnel. While we ultimately can take action to replace franchisees that are violating our standards, we may not be able to identify problems and take action quickly enough and, as a result, our image and reputation may suffer, and our franchise and property revenues could decline.

Our operating results depend on the effectiveness of our marketing and advertising programs and franchisee support of these programs.

Our revenues are heavily influenced by brand marketing and advertising. Our marketing and advertising programs may not be successful, which may lead us to fail to attract new customers and retain existing customers. If our marketing and advertising programs are unsuccessful, our results of operations could be materially adversely affected. Moreover, because franchisees and company restaurants contribute to our marketing fund based on a percentage of their gross sales, our marketing fund expenditures are dependent upon sales volumes at system-wide restaurants. If system sales decline, there will be a reduced amount available for our marketing and advertising programs.

The support of our franchisees is critical for the success of our marketing programs and any new strategic initiatives we seek to undertake. In the United States, we poll our franchisees before introducing any nationally- or locally-advertised price or discount promotion to gauge the level of support for the campaign. While we can mandate certain strategic initiatives through enforcement of our franchise agreements, we need the active support of our franchisees if the implementation of these initiatives is to be successful. Although we believe that our relationship with our franchisees is generally good, there can be no assurance that our franchisees will continue to support our marketing programs and strategic initiatives. The failure of our franchisees to support our marketing programs and strategic initiatives would adversely affect our ability to implement our business strategy and could materially harm our business, results of operations and financial condition.

Loss of key management personnel or our inability to attract and retain new qualified personnel could hurt our business and inhibit our ability to operate and grow successfully.

The success of our business to date has been, and our continuing success will be, dependent to a large degree on the continued services of our executive officers, including our Chairman and Chief Executive Officer, Greg Brenneman; President and Chief Financial Officer, John Chidsey; Chief Marketing Officer, Russell Klein; Chief Operations Officer, Jim Hyatt; and other key personnel who have extensive experience in the franchising industry, the food industry and in turning around under-performing companies. If we lost the services of any of these key personnel and fail to manage a smooth transition to new personnel, our business would suffer.

Incidents of food-borne illnesses or food tampering could materially damage our reputation and reduce our restaurant sales.

Our business is susceptible to the risk of food-borne illnesses (such as e-coli, bovine spongiform encephalopathy or “mad cow’s disease”, hepatitis A, trichinosis or salmonella). We cannot guarantee that our internal controls and training will be fully effective in preventing all food-borne illnesses. Furthermore, our reliance on third-party food suppliers and distributors increases the risk that food-borne illness incidents could be caused by third-party food suppliers and distributors outside of our control and/or multiple locations being affected rather than a single restaurant. New illnesses resistant to any precautions may develop in the future, or diseases with long incubation periods could arise, such as bovine spongiform encephalopathy, that could give rise to claims or allegations on a retroactive basis. Reports in the media of one or more instances of food-borne illness in one of our restaurants or in one of our competitor’s restaurants could negatively affect our restaurant sales, force the closure of some of our restaurants and conceivably have a national or international impact if highly publicized. This risk exists even if it were later determined that the illness had been wrongly attributed to the restaurant. Furthermore, other illnesses, such as foot and mouth disease or avian influenza could adversely affect the supply of some of our food products and significantly increase our costs.

In addition, our industry has long been subject to the threat of food tampering by suppliers, employees or customers, such as the addition of foreign objects in the food that we sell. Reports, whether or not true, of injuries caused by food tampering have in the past severely injured the reputations of restaurant chains in the quick service restaurant segment and could affect us in the future as well. Instances of food tampering, even those occurring solely at restaurants of our competitors could, by resulting in negative publicity about the restaurant industry, adversely affect our sales on a local, regional, national or system-wide basis. A decrease in customer traffic as a result of these

health concerns or negative publicity could materially harm our business, results of operations and financial condition.

Our business is affected by changes in consumer preferences and consumer discretionary spending.

The food service industry is affected by consumer preferences and perceptions. If prevailing health or dietary preferences and perceptions cause consumers to avoid our products in favor of alternative or healthier foods, our business could be hurt.

Our success depends to a significant extent on discretionary consumer spending, which is influenced by general economic conditions and the availability of discretionary income. Changes in economic conditions affecting our customers could reduce traffic in some or all of our restaurants or limit our ability to raise prices, either of which could have a material adverse effect on our financial condition and results of operations. Accordingly, we may experience declines in sales during economic downturns or periods of prolonged elevated energy prices or due to possible terrorist attacks. Any material decline in the amount of discretionary spending either in the United States or, as we continue to expand internationally, in other countries in which we operate, could have a material adverse effect on our business, results of operations and financial condition.

A substantial number of franchise agreements will expire in the next five years and there can be no assurance that the franchisees can or will renew their franchise agreements with us.

Our franchise agreements typically have a 20-year term, and franchise agreements covering approximately 2,000 restaurants, or approximately 20% of the total number of franchise restaurants, will expire in the next five years. These franchisees may not be willing or able to renew their franchise agreements with us. For example, franchisees may decide not to renew due to low sales volumes or may be unable to renew due to the failure to secure lease renewals. In order for a franchisee to renew its franchise agreement with us, it typically must pay a $50,000 franchise fee, remodel its restaurant to conform to our current standards and, in many cases, renew its property lease with its landlord. The average cost to remodel a stand-alone restaurant in the United States is approximately $230,000 and franchisees generally require additional capital to undertake the required remodeling and pay the franchise fee, which may not be available to the franchisee on acceptable terms or at all. We have instituted a program in the United States to allow franchisees to pay the $50,000 franchise fee in installments and delay the required restaurant remodel for up to two years, while providing an incentive to accelerate the completion of the remodel by offering reduced royalties for a limited period. If a substantial number of our franchisees cannot or decide not to renew their franchise agreement with us, then our business, results of operations and financial condition could suffer.

Increases in the cost of food, paper products and energy could harm our profitability and operating results.

The cost of the food and paper products we use depends on a variety of factors, many of which are beyond our control. Food and paper products typically represent approximately 31% of our cost of sales. Fluctuations in weather, supply and demand and economic conditions could adversely affect the cost, availability and quality of some of our critical products, including beef. Our inability to obtain requisite quantities of high-quality ingredients would adversely affect our ability to provide the menu items that are central to our business, and the highly competitive nature of our industry may limit our ability to pass through increased costs to our customers.

We purchase large quantities of beef and our beef costs in the United States represent approximately 19% of our food costs. The market for beef is particularly volatile and is subject to significant price fluctuations due to seasonal shifts, climate conditions, industry demand and other factors. For example, recent increased demand in beef resulted in shortages, requiring us to pay significantly higher prices for the beef we purchased. If the price of beef or other food products that we use in our restaurants increase in the future and we choose not to pass, or cannot pass, these increases on to our customers, our operating margins would decrease.

The recent increase in energy costs in the United States has also adversely affected our business. Energy costs in the United States, principally electricity for lighting restaurants and natural gas for our broilers, have increased 8% to $30 million in fiscal 2005 and typically represent approximately 4% of our cost of sales. We have generally

not been able to pass these increased costs on to our customers and continued high energy costs could adversely affect our and our franchisees’ business, results of operation and financial conditions.

We rely on distributors of food, beverages and other products that are necessary for our and our franchisees’ operations. If these distributors fail to provide the necessary products in a timely fashion, our business would face supply shortages and our results of operations might be adversely affected.

We and our franchisees are dependent on frequent deliveries of perishable food products that meet our specifications. Five distributors service approximately 84% of our U.S. system and the loss of any one of these distributors would likely adversely affect our business. Moreover, our distributors operate in a competitive and low-margin business environment and, as a result, they often extend favorable credit terms to our franchisees. If certain of our franchisees experience financial distress and do not pay distributors for products bought from them, those distributors’ operations would likely be adversely affected which could jeopardize their ability to continue to supply us and our other franchisees with needed products. Finally, unanticipated demand, problems in production or distribution, disease or food-borne illnesses, inclement weather, further terrorist attacks or other conditions could result in shortages or interruptions in the supply of perishable food products. A disruption in our supply and distribution network as a result of the financial distress of our franchisees or otherwise could result in increased costs to source needed products and could have a severe impact on our and our franchisees’ ability to continue to offer menu items to our customers. Such a disruption could adversely affect our business, results of operation and financial condition.

Labor shortages or increases in labor costs could slow our growth or harm our business.

Our success depends in part upon our ability to continue to attract, motivate and retain regional operational and restaurant general managers with the qualifications to succeed in our industry and the motivation to apply our core service philosophy. If we are unable to continue to recruit and retain sufficiently qualified managers or to motivate our employees to achieve sustained high service levels, our business and our growth could be adversely affected. Competition for these employees could require us to pay higher wages which could result in higher labor costs. In addition, increases in the minimum wage or labor regulation could increase our labor costs. For example, the European markets have seen increased minimum wages due to a higher level of regulation. We may be unable to increase our prices in order to pass these increased labor costs on to our customers, in which case our and our franchisees’ margins would be negatively affected.

Our international operations subject us to additional risks and costs and may cause our profitability to decline.

Our restaurants are currently operated, directly by us or by franchisees, in 66 foreign countries and U.S. territories (Guam and Puerto Rico, which are considered part of our international business). During fiscal 2005 and the six months ended December 31, 2005, our revenues from international operations were approximately $794 million and $409 million, or 41% and 40% of total revenues, respectively. Our financial condition and results of operations may be adversely affected if international markets in which our company and franchise restaurants compete are affected by changes in political, economic or other factors. These factors, over which neither we nor our franchisees have control, may include:

•	economic recessions;

•	changing labor conditions and difficulties in staffing and managing our foreign operations;

•	increases in the taxes we pay and other changes in applicable tax laws;

•	legal and regulatory changes and the burdens and costs of our compliance with a variety of foreign laws;

•	changes in inflation rates;

•	changes in exchange rates;

•	difficulty in collecting our royalties and longer payment cycles;

•	expropriation of private enterprises;

•	political and economic instability and anti-American sentiment; and

•	other external factors.

These factors may increase in importance as we expect to open additional company and franchise restaurants in international markets as part of our growth strategy.

Our business is subject to fluctuations in foreign currency exchange and interest rates.

Exchange rate fluctuations may affect the translated value of our earnings and cash flow associated with our foreign operations, as well as the translation of net asset or liability positions that are denominated in foreign currencies. In countries outside of the United States where we operate company restaurants, we generate revenues and incur operating expenses and selling, general and administrative expenses denominated in local currencies. In fiscal 2005, operating income in these countries would have decreased or increased $1 million if all foreign currencies uniformly weakened or strengthened 10% relative to the U.S. dollar.

In countries where we do not have company restaurants, our franchise agreements require franchisees to pay us in U.S. dollars. Royalty payments received from the franchisees are based upon a percentage of sales that are denominated in the local currency and are converted to U.S. dollars during the month of sales and as a result we bear the foreign currency exposure associated with revenues and expenses in these countries. In fiscal 2005, operating income in these countries would have decreased or increased $3 million if all foreign currencies uniformly weakened or strengthened 10% relative to the U.S. dollar.

Fluctuations in interest rates may also affect our business. We attempt to minimize this risk and lower our overall borrowing costs through the utilization of derivative financial instruments, primarily interest rate swaps. These swaps are entered into with financial institutions and have reset dates and critical terms that match those of the underlying debt. Accordingly, any change in market value associated with interest rate swaps is offset by the opposite market impact on the related debt. We do not attempt to hedge all of our debt and, as a result, may incur higher interest costs for portions of our debt which are not hedged.

We or our franchisees may not be able to renew leases or control rent increases at existing restaurant locations or obtain leases for new restaurants.

Many of our company restaurants are presently located on leased premises. In addition, our franchisees generally lease their restaurant locations. At the end of the term of the lease, we or our franchisees might be forced to find a new location to lease or close the restaurant. If we are able to negotiate a new lease at the existing location or an extension of the existing lease, the rent may increase substantially. Any of these events could adversely affect our profitability or our franchisees’ profitability. Some leases are subject to renewal at fair market value, which could involve substantial rent increases, or are subject to renewal with scheduled rent increases, which could result in rents being above fair market value. We compete with numerous other retailers and restaurants for sites in the highly competitive market for retail real estate and some landlords and developers may exclusively grant locations to our competitors. As a result, we may not be able to obtain new leases or renew existing ones on acceptable terms, which could adversely affect our sales and brand-building initiatives. In the United Kingdom, we have approximately 71 leases for properties that we sublease to franchisees in which the lease term with our landlords are longer than the sublease. As a result, we may be liable for lease obligations if such franchisees do not renew their subleases or if we cannot find substitute tenants.

Current restaurant locations may become unattractive, and attractive new locations may not be available for a reasonable price, if at all.

The success of any restaurant depends in substantial part on its location. There can be no assurance that current locations will continue to be attractive as demographic patterns change. Neighborhood or economic conditions where restaurants are located could decline in the future, thus resulting in potentially reduced sales in these locations. If we cannot obtain desirable locations at reasonable prices, our ability to effect our growth strategy will be adversely affected.

We may not be able to adequately protect our intellectual property, which could harm the value of our brand and branded products and adversely affect our business.

We depend in large part on our brand, which represents 36% of the total assets on our balance sheet, and we believe that it is very important to our success and our competitive position. We rely on a combination of trademarks, copyrights, service marks, trade secrets and similar intellectual property rights to protect our brand and branded products. The success of our business depends on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and further develop our branded products in both domestic and international markets. We have registered certain trademarks and have other trademark registrations pending in the United States and foreign jurisdictions. Not all of the trademarks that we currently use have been registered in all of the countries in which we do business, and they may never be registered in all of these countries. We may not be able to adequately protect our trademarks, and our use of these trademarks may result in liability for trademark infringement, trademark dilution or unfair competition. The steps we have taken to protect our intellectual property in the United States and in foreign countries may not be adequate. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States.

We may from time to time be required to institute litigation to enforce our trademarks or other intellectual property rights, or to protect our trade secrets. Such litigation could result in substantial costs and diversion of resources and could negatively affect our sales, profitability and prospects regardless of whether we are able to successfully enforce our rights.

Our indebtedness under our senior secured credit facility is substantial and could affect our business.

In connection with the refinancing in July 2005 of our and BKC’s existing indebtedness and our February 2006 financing, we incurred a significant amount of indebtedness. As of February 15, 2006, we had total debt under our senior secured credit facility of $1.35 billion. While we expect to pay down some of this debt with the proceeds of this offering, our substantial indebtedness could have important consequences to you.

For example, it could:

•	increase our vulnerability to general adverse economic and industry conditions;

•	require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness if we do not maintain specified financial ratios, thereby reducing the availability of our cash flow for other purposes; or

•	limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, thereby placing us at a competitive disadvantage compared to our competitors that may have less debt.

In addition, our senior secured credit facility permits us to incur substantial additional indebtedness in the future. As of February 15, 2006, we had $107 million available to us for additional borrowing under our $150 million revolving credit facility portion of our senior secured credit facility (net of $43 million in letters of credit issued under the revolving credit facility). If a substantial amount of new indebtedness is added to our current debt levels, the risks described above would intensify.

Our senior secured credit facility has restrictive terms and our failure to comply with any of these terms could put us in default, which would have an adverse effect on our business and prospects.

Our senior secured credit facility contains a number of significant covenants. These covenants limit our ability and the ability of our subsidiaries to, among other things:

•	incur additional indebtedness;

•	make capital expenditures and other investments above a certain level;

•	merge, consolidate or dispose of our assets or the capital stock or assets of any subsidiary;

•	pay dividends, make distributions or redeem capital stock in certain circumstances;

•	enter into transactions with our affiliates;

•	grant liens on our assets or the assets of our subsidiaries;

•	enter into the sale and subsequent lease-back of real property; and

•	make or repay intercompany loans.

Our senior secured credit facility requires us to maintain specified financial ratios. Our ability to meet these financial ratios and tests can be affected by events beyond our control, and we may not meet those ratios. A breach of any of these restrictive covenants or our inability to comply with the required financial ratios would result in a default under our senior secured credit facility or require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness. If the banks accelerate amounts owing under our senior secured credit facility because of a default and we are unable to pay such amounts, the banks have the right to foreclose on the stock of BKC and certain of its subsidiaries.

We face risks of litigation and pressure tactics, such as strikes, boycotts and negative publicity from customers, franchisees, suppliers, employees and others, which could divert our financial and management resources and which may negatively impact our financial condition and results of operations.

Class action lawsuits have been filed, and may continue to be filed, against various quick service restaurants alleging, among other things, that quick service restaurants have failed to disclose the health risks associated with high-fat foods and that quick service restaurant marketing practices have targeted children and encouraged obesity. In addition, we face the risk of lawsuits and negative publicity resulting from injuries, including injuries to infants and children, allegedly caused by our products, toys and other promotional items available in our restaurants or our playground equipment.

In addition to decreasing our sales and profitability and diverting our management resources, adverse publicity or a substantial judgment against us could negatively impact our business, results of operations, financial condition and brand reputation, hindering our ability to attract and retain franchisees and grow our business in the United States and internationally.

In addition, activist groups, including animal rights activists and groups acting on behalf of franchisees, the workers who work for our suppliers and others, have in the past, and may in the future, use pressure tactics to generate adverse publicity about us by alleging, for example, inhumane treatment of animals by our suppliers, poor working conditions or unfair purchasing policies. These groups may be able to coordinate their actions with other groups, threaten strikes or boycotts or enlist the support of well-known persons or organizations in order to increase the pressure on us to achieve their stated aims. In the future, these actions or the threat of these actions may force us to change our business practices or pricing policies, which may have a material adverse effect on our business, results of operations and financial condition.

Further, we may be subject to employee, franchisee and other claims in the future based on, among other things, mismanagement of the system, unfair or unequal treatment, discrimination, harassment, wrongful termination and wage, rest break and meal break issues, including those relating to overtime compensation. We have been subject to these types of claims in the past, and if one or more of these claims were to be successful or if there is a significant increase in the number of these claims, our business, results of operations and financial condition could be harmed.

Our failure to comply with existing or increased government regulations or becoming subject to future regulation relating to the products that we sell could adversely affect our business and operating results.

We are currently subject to numerous federal, state, local and foreign laws and regulations, including those relating to:

•	the preparation and sale of food;

•	building and zoning requirements;

•	environmental protection and litter removal;

•	minimum wage, overtime, immigration and other labor requirements;

•	the taxation of our business;

•	compliance with the Americans with Disabilities Act (ADA); and

•	working and safety conditions.

If we fail to comply with existing or future laws and regulations, we may be subject to governmental or judicial fines or sanctions. In addition, our and our franchisees’ capital expenditures could increase due to remediation measures that may be required if we are found to be noncompliant with any of these laws or regulations.

We are also subject to a Federal Trade Commission rule and to various state and foreign laws that govern the offer and sale of franchises. Additionally, these laws regulate various aspects of the franchise relationship, including terminations and the refusal to renew franchises. The failure to comply with these laws and regulations in any jurisdiction or to obtain required government approvals could result in a ban or temporary suspension on future franchise sales, fines, other penalties or require us to make offers of rescission or restitution, any of which could adversely affect our business and operating results. We could also face lawsuits by our franchisees based upon alleged violations of these laws.

The ADA prohibits discrimination on the basis of disability in public accommodations and employment. We have, in the past, been required to make certain modifications to our restaurants pursuant to the ADA. Although our obligations under those requirements are substantially complete, future mandated modifications to our facilities to make different accommodations for disabled persons could result in material unanticipated expense to us and our franchisees.

In addition, we may become subject to legislation or regulation seeking to tax and/or regulate high-fat and high-sodium foods, particularly in the United States and the United Kingdom. We cannot predict whether we will become subject in the future to these or other regulatory or tax regimes or how burdensome they could be to our business. Any future regulation or taxation of our products or payments from our franchisees could materially adversely affect our business, results of operations and financial condition.

Compliance with or cleanup activities required by environmental laws may hurt our business.

We are subject to various federal, state, local and foreign environmental laws and regulations. These laws and regulations govern, among other things, discharges of pollutants into the air and water as well as the presence, handling, release and disposal of and exposure to, hazardous substances. These laws and regulations provide for

significant fines and penalties for noncompliance. If we fail to comply with these laws or regulations, we could be fined or otherwise sanctioned by regulators. Third parties may also make personal injury, property damage or other claims against owners or operators of properties associated with releases of, or actual or alleged exposure to, hazardous substances at, on or from our properties.

Environmental conditions relating to prior, existing or future restaurants or restaurant sites, including franchised sites, may have a material adverse effect on us. Moreover, the adoption of new or more stringent environmental laws or regulations could result in a material environmental liability to us and the current environmental condition of the properties could be harmed by tenants or other third parties or by the condition of land or operations in the vicinity of our properties.

Regulation of genetically modified food products may force us to find alternative sources of supply.

As is the case with many other companies in the restaurant industry, some of our products contain genetically engineered food ingredients. Our U.S. suppliers are not required to label their products as such. Environmental groups, some scientists and consumers, particularly in Europe, are raising questions regarding the potential adverse side effects, long-term risks and uncertainties associated with genetically modified foods. Regulatory agencies in Europe and elsewhere have imposed labeling requirements on genetically modified food products. Increased regulation of and opposition to genetically engineered food products have in the past forced us and may in the future force us to use alternative non-genetically engineered sources at increased costs.

Risks Related to Investing in Our Stock

The price of our common stock may be volatile and you may not be able to sell your shares at or above the initial offering price.

Prior to this offering, there has been no public market for our common stock. An active and liquid public market for our common stock may not develop or be sustained after this offering. The price of our common stock in any such market may be higher or lower than the price you pay. If you purchase shares of common stock in this offering, you will pay a price that was not established in a competitive market. Rather, you will pay the price that we negotiated with the representatives of the underwriters. Many factors could cause the market price of our common stock to rise and fall, including the following:

•	variations in our or our competitors’ actual or anticipated operating results;

•	our or our competitors’ growth rates;

•	our or our competitors’ introduction of new locations, menu items, concepts, or pricing policies;

•	recruitment or departure of key personnel;

•	changes in the estimates of our operating performance or changes in recommendations by any securities analysts that follow our stock;

•	changes in the conditions in the restaurant industry, the financial markets or the economy as a whole;

•	substantial sales of our common stock;

•	announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; and

•	changes in accounting principles.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Due to the potential volatility of our stock price, we may

therefore be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.

Our current principal stockholders will continue to own the majority of our voting stock after this offering, which will allow them to control substantially all matters requiring stockholder approval.

Upon the completion of this offering, private equity funds controlled by the sponsors will together beneficially own approximately % of our outstanding common stock. In addition, we expect that six of our thirteen directors following this offering will be representatives of the private equity funds controlled by the sponsors. Following the initial public offering, each sponsor will retain the right to nominate two directors, subject to reduction based on the stock ownership percentage of the private equity funds controlled by it. As a result, these private equity funds will have significant influence over our decision to enter into any corporate transaction and may have the ability to prevent any transaction that requires the approval of stockholders, regardless of whether or not other stockholders believe that such transaction is in their own best interests. Such concentration of voting power could have the effect of delaying, deterring or preventing a change of control or other business combination that might otherwise be beneficial to our stockholders.

We will be a “controlled company” within the meaning of the New York Stock Exchange rules, and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.

After the completion of this offering, the private equity funds controlled by the sponsors will collectively own more than 50% of the total voting power of our common shares and we will be a “controlled company” under the New York Stock Exchange, or NYSE, corporate governance standards. As a controlled company, we intend to utilize certain exemptions under the NYSE standards that free us from the obligation to comply with certain NYSE corporate governance requirements, including the requirements:

•	that a majority of the board of directors consists of independent directors;

•	that we have a nominating and governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

•	that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

•	for an annual performance evaluation of the nominating and governance committee and compensation committee.

As a result of our use of these exemptions, you will not have the same protection afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.

Your percentage ownership in us may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote.

Following the completion of this offering, our board of directors has the authority, without action or vote of our stockholders, to issue all or any part of our authorized but unissued shares of common stock, including shares issuable upon the exercise of options, or shares of our authorized but unissued preferred stock. Issuances of common stock or voting preferred stock would reduce your influence over matters on which our stockholders vote, and, in the case of issuances of preferred stock, would likely result in your interest in us being subject to the prior rights of holders of that preferred stock.

The sale of a substantial number of shares of our common stock after this offering may cause the market price of shares of our common stock to decline.

Sales of our common stock by existing investors may begin shortly after the completion of this offering. Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that these sales could occur, could cause the market price of our common stock to decline. The shares of our common stock outstanding prior to this offering will be eligible for sale in the public market at various times in the future. We, all of our executive officers, directors and holders of substantially all of our common stock and certain of our other officers have agreed, subject to certain exceptions, not to sell any shares of our common stock for a period of 180 days after the date of this prospectus without the prior written consent of J.P. Morgan Securities Inc. Upon expiration of the lock-up period described above, up to approximately additional shares of common stock may be eligible for sale in the public market without restriction, and up to approximately shares of common stock held by affiliates may become eligible for sale, subject to the restrictions under Rule 144 under the Securities Act of 1933. In addition, holders of substantially all of our common stock have the right to require us to register their shares. For more information, see “Shares Eligible for Future Sale” and “Certain Relationships and Related Transactions—Shareholders’ Agreement”.

You will incur immediate and substantial dilution in the net tangible book value of your shares.

If you purchase shares in this offering, the value of your shares based on our actual book value will immediately be less than the price you paid. This reduction in the value of your equity is known as dilution. This dilution occurs in large part because our earlier investors paid substantially less than the initial public offering price when they purchased their shares of our common stock. Based upon the issuance and sale of shares of our common stock by us and the selling stockholders at an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, you will incur immediate dilution of $ in the net tangible book value per share. For more information, see “Dilution”.

Investors will incur additional dilution upon the exercise of outstanding stock options.

We will incur increased costs as a result of being a public company, which may divert management attention from our business and adversely affect our financial results.

As a public company, we will be subject to a number of additional requirements, including the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act of 2002 and the listing standards of the New York Stock Exchange. These requirements might place a strain on our systems and resources. The Securities Exchange Act of 1934 requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls for financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, significant resources and management oversight will be required. As a result, our management’s attention might be diverted from other business concerns, which could have a material adverse effect on our business, financial condition and operating results. Furthermore, we might not be able to retain our independent directors or attract new independent directors for our committees.

Provisions in our certificate of incorporation could make it more difficult for a third party to acquire us and could discourage a takeover and adversely affect existing stockholders.

Our certificate of incorporation authorizes our board of directors to issue up to preferred shares and to determine the powers, preferences, privileges, rights, including voting rights, qualifications, limitations and restrictions on those shares, without any further vote or action by our stockholders. The rights of the holders of our common shares will be subject to, and may be adversely affected by, the rights of the holders of any preferred shares that may be issued in the future. The issuance of preferred shares could have the effect of delaying, deterring or preventing a change in control and could adversely affect the voting power or economic value of your shares. See “Description of Capital Stock—Preferred Stock”.

We currently do not intend to pay dividends on our common stock and consequently, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.

We currently do not plan to pay dividends on shares of our common stock in the near future. The terms of our senior secured credit facility limit our ability to pay cash dividends. Furthermore, if we are in default under this credit facility, our ability to pay cash dividends will be limited in certain circumstances in the absence of a waiver of that default or an amendment to that facility. In addition, because we are a holding company, our ability to pay cash dividends on shares of our common stock may be limited by restrictions on our ability to obtain sufficient funds through dividends from our subsidiaries. Consequently, your only opportunity to achieve a return on your investment in our company will be if the market price of our common stock appreciates.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements under the captions “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” and in other sections of this prospectus that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, based on our growth strategies and anticipated trends in our business.

These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the factors listed below and the numerous risks outlined under “Risk Factors.”

These factors include, but are not limited to, the following:

•	Our ability to compete domestically and internationally in an intensely competitive industry;

•	Risks related to price discounting;

•	Our ability to successfully implement our international growth strategy;

•	Our continued relationship with and the success of our franchisees;

•	The effectiveness of our marketing and advertising programs and franchise support of these programs;

•	Our ability to retain or replace our executive officers and other key members of management with qualified personnel;

•	Changes in consumer perceptions of dietary health and food safety;

•	Changes in consumer preferences and consumer discretionary spending;

•	Increases in our operating costs, including food and paper products, energy costs and labor costs;

•	Interruptions in the supply of necessary products to us;

•	Risks related to our international operations;

•	Fluctuations in international currency exchange rates;

•	Our continued ability, and the ability of our franchisees, to obtain suitable locations and financing for new restaurant development;

•	Changes in demographic patterns of current restaurant locations;

•	Our ability to adequately protect our intellectual property;

•	Adverse legal judgments, settlements or pressure tactics; and

•	Adverse legislation or regulation.

These risks are not exhaustive. Other sections of this prospectus may include additional factors which could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this prospectus to conform our prior statements to actual results or revised expectations.

USE OF PROCEEDS

We will receive net proceeds from this offering of approximately $ million, or approximately $ million if the underwriters exercise their option to purchase additional shares in full, assuming an initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses. A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We expect to use the net proceeds to repay $ million in outstanding amounts under the term loan A and the term loan B-1 of our senior secured credit facility that were incurred to finance, in part, the February 2006 dividend. The interest rate under the senior secured credit facility for term loan A and the revolving credit facility is at our option either (a) the greater of the federal funds effective rate plus 0.50% and the prime rate, which we refer to as ABR, plus a rate not to exceed 0.75%, which varies according to our leverage ratio or (b) LIBOR plus a rate not to exceed 1.75%, which varies according to our leverage ratio. The interest rate for term loan B-1 is at our option either (a) ABR, plus a rate of 0.50% or (b) LIBOR plus 1.50%, in each case so long as our leverage ratio remains at or below certain levels (but in any event not to exceed 0.75%, in the case of ABR loans, and 1.75% in the case of LIBOR loans). The term loan A matures in June 2011 and the term loan B-1 matures in June 2012.

We will not receive any of the net proceeds from the sale of common stock by the selling stockholders, which are estimated to be approximately $ million, or $ million if the underwriters exercise their option to purchase additional shares in full.

DIVIDEND POLICY

On February 21, 2006, we paid an aggregate cash dividend of $367 million to holders of record of our common stock on February 9, 2006. At the same time, we paid the compensatory make-whole payment of $33 million to holders of our options and restricted stock unit awards, primarily members of senior management. This compensatory make-whole payment will be recorded as compensation expense in the third quarter of fiscal 2006.

We currently do not plan to declare further dividends on shares of our common stock in the near future. We expect to retain our future earnings, if any, for use in the operation and expansion of our business. The terms of our senior secured credit facility limit our ability to pay cash dividends in certain circumstances. Furthermore, if we are in default under this credit facility, our ability to pay cash dividends will be limited in the absence of a waiver of that default or an amendment to that facility. In addition, because we are a holding company, our ability to pay cash dividends on shares of our common stock may be limited by restrictions on our ability to obtain sufficient funds through dividends from our subsidiaries, including the restrictions under our senior secured credit facility. For more information on our senior secured credit facility, see “Description of Our Credit Facility”. Subject to the foregoing, the payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, capital requirements, our overall financial condition and any other factors deemed relevant by our board of directors.

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 2005:

•	on a historical basis; and

•	on an as adjusted basis to reflect:


	•	the February 2006 financing and related expenses;

	•	the February 2006 dividend and the compensatory make-whole payment;

	•	the payment of the sponsor management termination fee; and

	•	the sale by us of shares of common stock in this offering, assuming an initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses and application of the net proceeds to us therefrom as described in “Use of Proceeds”.

This table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto appearing elsewhere in this prospectus.

	December 31, 2005 (unaudited)

	Historical			As Adjusted

Cash and cash equivalents	$	207		$

Short-term debt	$	20		$
Long-term debt		980
Stockholders’ equity:
Common stock, $0.01 par value per share, shares authorized,
shares issued and outstanding as adjusted for this offering(1)		—
Restricted stock units		4
Additional paid-in capital		407
Retained earnings		125
Accumulated other comprehensive loss		(4	)
Treasury stock, at cost		(2	)

Total stockholders’ equity	$	530		$

Total capitalization(2)	$	1,530		$


(1)	Excludes (i) 333,302 shares of our common stock issuable upon the exercise of options outstanding as of December 31, 2005, of which options to purchase 95,556 shares were exercisable as of December 31, 2005, (ii) 50,682 shares of our common stock issuable under the Burger King Holdings, Inc. Equity Incentive Plan and (iii) 35,572 options issued by us to employees and directors since December 31, 2005.

(2)	A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

`DILUTION

If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share and the historical adjusted net tangible book value per share of common stock upon the consummation of this offering.

Our adjusted net tangible book value as of December 31, 2005 was approximately $ , or approximately $ per share of common stock, as adjusted to reflect the February 2006 financing and related expenses, the February 2006 dividend, the compensatory make-whole payment and the payment of the sponsor management termination fee. The number of shares outstanding excludes (i) 333,302 shares of our common stock issuable upon the exercise of options outstanding as of December 31, 2005, of which options to purchase 95,556 shares were exercisable as of December 31, 2005, (ii) 50,682 shares of our common stock issuable under the Burger King Holdings, Inc. Equity Incentive Plan and (iii) 35,572 options issued by us to employees and directors since December 31, 2005. Adjusted net tangible book value per share is determined by dividing our tangible net worth, total tangible assets less total liabilities, by the aggregate number of shares of common stock outstanding. After giving effect to the sale by us of the shares of common stock in this offering, at an assumed initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses and the receipt and application of the net proceeds, our pro forma net tangible book value as of December 31, 2005 would have been approximately $ , or approximately $ per share. This represents an immediate increase in pro forma net tangible book value to existing stockholders of $ per share and an immediate dilution to new investors of $ per share. The following table illustrates this per share dilution:

Assumed initial public offering price per share		$
Adjusted net tangible book value per share as of December 31, 2005 (excluding this offering)
Increase in net tangible book value per share attributable to new investors
Pro forma net tangible book value per share after offering
Dilution per share to new investors		$

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) our pro forma net tangible book value by $ million, the pro forma net tangible book value per share after this offering by $ and the dilution per share to new investors by $ , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares in full, the pro forma net tangible book value per share after this offering would be $ , the increase in pro forma net tangible book value per share to existing stockholders would be $ per share and the dilution per share to new investors would be $ .

The following table summarizes as of December 31, 2005 the number of shares of our common stock purchased from us, the total consideration paid to us, and the average price per share paid to us by our existing stockholders and to be paid by new investors purchasing shares of our common stock in this offering, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The table assumes an initial public offering price of $ per share, as specified above, and deducts underwriting discounts and commissions and estimated offering expenses payable by us:

	Shares Purchased				Total Consideration				Average Price Per Share

	Number	Percentage			Amount	Percentage

Existing stockholders				%	$			%	$
New investors				%	$			%	$

Total			100.0	%	$		100.0	%	$

The number of shares outstanding excludes (i) 333,302 shares of our common stock issuable upon the exercise of options outstanding as of December 31, 2005, of which options to purchase 95,556 shares were exercisable as of December 31, 2005, and (ii) 50,682 shares of our common stock issuable under the Burger King Holdings, Inc. Equity Incentive Plan, and (iii) 35,572 options issued by us to employees and directors since December 31, 2005.

If these outstanding options are exercised, new investors will experience further dilution.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

On December 13, 2002, we acquired BKC through private equity funds controlled by the sponsors. In this prospectus, unless the context otherwise requires, all references to “we”, “us” and “our” refer to Burger King Holdings, Inc. and its subsidiaries, including BKC, for all periods subsequent to our December 13, 2002 acquisition of BKC. All references to our “predecessor” refer to BKC and its subsidiaries for all periods prior to the acquisition, which operated under a different ownership and capital structure. In addition, the acquisition was accounted for under the purchase method of accounting and resulted in purchase accounting allocations that affect the comparability of results of operations between periods before and after the acquisition.

The following tables present selected consolidated financial and other operating data for us and our predecessor for each of the periods indicated. The selected historical financial data for our predecessor as of June 30, 2001 and 2002 and for the fiscal years ended June 30, 2001 and 2002 have been derived from the audited consolidated financial statements and notes thereto of our predecessor, which are not included herein. The selected historical financial data for our predecessor for the period July 1, 2002 to December 12, 2002 have been derived from the audited consolidated financial statements and notes thereto of our predecessor for that period included herein.

The selected historical financial data as of June 30, 2004 and 2005 and for the period December 13, 2002 to June 30, 2003, and for the fiscal years ended June 30, 2004 and 2005 have been derived from our audited financial statements and the notes thereto included herein. The combined financial data for the combined fiscal year ended June 30, 2003 have been derived from the audited consolidated financial statements and notes thereto of our predecessor and us, but have not been audited on a combined basis, do not comply with generally accepted accounting principles and are not intended to represent what our operating results would have been if the acquisition of BKC had occurred at the beginning of the period. The selected consolidated balance sheet data as of June 30, 2003 have been derived from our audited consolidated balance sheet and the notes thereto, which are not included herein. The selected historical financial data as of December 31, 2004 and 2005 and for the six months ended December 31, 2004 and 2005 have been derived from our unaudited consolidated financial statements and the notes thereto included herein. The other operating data for the fiscal years ended June 30, 2001 and 2002, and for the period July 1, 2002 to December 12, 2002 have been derived from the internal records of our predecessor. The other operating data for the period December 13, 2002 to June 30, 2003, for the fiscal years ended June 30, 2004 and 2005 and for the six months ended December 31, 2004 and 2005 have been derived from our internal records.

The selected consolidated financial and other operating data presented below contain all normal recurring adjustments that, in the opinion of management, are necessary to present fairly our financial position and results of operations as of and for the periods presented. The selected historical consolidated financial and other operating data included below and elsewhere in this prospectus are not necessarily indicative of future results. The information presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited consolidated financial statements and related notes and other financial information appearing elsewhere in this prospectus.

	Predecessor									Burger King Holdings, Inc.						Burger King Holdings, Inc.

	For the fiscal year ended June 30,						For the period from July 1, 2002 to December 12, 2002			For the period from December 13, 2002 to June 30, 2003			Combined twelve months ended June 30, 2003			For the fiscal year ended June 30,				For the six months ended December 31,


	2001			2002												2004		2005		2004		2005

													(unaudited)							(unaudited)
(in millions, except per share data)

Income Statement Data:
Revenues:
Company restaurant revenues	$	1,019		$	1,130		$	526		$	648		$	1,174		$	1,276	$	1,407	$	704	$	754
Franchise revenues		395			392			170			198			368			361		413		206		209
Property revenues		127			124			55			60			115			117		120		59		57

Total revenues	$	1,541		$	1,646		$	751		$	906		$	1,657		$	1,754	$	1,940	$	969	$	1,020
Company restaurant expenses:
Food, paper and product costs		330			354			162			197			359			391		437		218		237
Payroll and employee benefits		298			335			157			192			349			382		415		204		219
Occupancy and other
operating costs		266			298			146			168			314			314		343		168		184

Total company restaurant
expenses	$	894		$	987		$	465		$	557		$	1,022		$	1,087	$	1,195	$	590	$	640
Selling, general and
administrative expenses (1)		400			429			225			253			478			482		496		236		213
Property expenses		59			58			27			28			55			58		64		30		28
Impairment of goodwill (2)		43			5			875			-			875			-		-		-		-
Other operating expenses
(income), net (2)		114			45			39			(7	)		32			54		34		3		(3	)

Total operating costs and
expenses	$	1,510		$	1,524		$	1,631		$	831		$	2,462		$	1,681	$	1,789	$	859	$	878
Income (loss) from operations		31			122			(880	)		75			(805	)		73		151		110		142
Interest expense, net		48			105			46			35			81			64		73		34		34
Loss on early extinguishment of
debt		-			-			-			-			-			-		-		-		13

(Loss) income before income
taxes	$	(17	)	$	17		$	(926	)	$	40		$	(886	)	$	9	$	78	$	76	$	95
Income tax expense (benefit)		21			54			(34	)		16			(18	)		4		31		31		46


Net (loss) income	$	(38	)	$	(37	)	$	(892	)	$	24		$	(868	)	$	5	$	47	$	45	$	49


Per common share:
Net income basic
Net income diluted
Shares outstanding, basic
Shares outstanding, diluted

Other Financial Data:
Cash provided by operating
activities	$	324		$	212		$	1		$	81		$	82		$	199	$	218	$	62	$	105
Capital expenditures		199			325			95			47			142			81		93		29		30
EBITDA (2) (3)	$	182		$	283		$	(837	)	$	118		$	(719	)	$	136	$	225	$	144	$	184

	Predecessor				Burger King Holdings, Inc.

	As of June 30,				As of June 30,						As of December 31,

	2001		2002		2003		2004		2005		2004		2005

											(unaudited)
	(in millions)
Balance Sheet Data:
Cash and cash equivalents	$	36	$	54	$	203	$	221	$	432	$	349	$	207
Total assets		3,237		3,329		2,457		2,665		2,723		2,699		2,476
Total debt and capital lease obligations		1,120		1,323		1,251		1,294		1,339		1,315		1,066
Total liabilities		2,193		2,186		2,026		2,241		2,246		2,219		1,946
Total stockholders’ equity	$	1,044	$	1,143	$	431	$	424	$	477	$	480	$	530

	Combined twelve months ended June 30, 2003			Burger King Holdings, Inc.

				For the fiscal year ended June 30,						For the six months ended December 31,

				2004			2005			2004			2005

	(unaudited) (in constant currencies)

Other System-Wide Operating Data:
Comparable sales growth (4) (5)		(5.9	)%		1.0	%		5.6	%		7.0	%		1.3	%
Average restaurant sales (in thousands) (4)	$	972		$	994		$	1,066		$	534		$	549
System-wide sales growth (4)		(4.7	)%		1.2	%		6.1	%		7.6	%		1.8	%
Restaurants (at end of period):
Company		1,061			1,087			1,187			1,058			1,228
Franchise		10,274			10,140			9,917			10,130			9,913

Total restaurants		11,335			11,227			11,104			11,188			11,141


Segment Data:
Revenues (in millions):
United States and Canada	$	1,114		$	1,117		$	1,275		$	632		$	682
EMEA/APAC (6)		477			566			586			298			294
Latin America (7)		66			71			79			39			44

Total revenues	$	1,657		$	1,754		$	1,940		$	969		$	1,020

System-wide restaurants (at end of period):
United States and Canada		8,264			7,976			7,720			7,891			7,634
EMEA/APAC (6)		2,459			2,585			2,656			2,600			2,738
Latin America (7)		612			666			728			697			769

Total restaurants		11,335			11,227			11,104			11,188			11,141


(1)	Selling, general and administrative expenses included $73 million and $72 million of intangible asset amortization in the fiscal years ended June 30, 2001 and 2002, respectively. Selling, general and administrative expenses also included $14 million and $7 million of fees paid to Diageo plc in the fiscal years ended June 30, 2001 and 2002, respectively.

(2)	In connection with our acquisition of BKC, our predecessor recorded $35 million of intangible asset impairment charges within other operating expenses (income), net and goodwill impairment charges of $875 million during the period from July 1, 2002 to December 12, 2002.

(3)	EBITDA is defined as net income before interest, taxes, depreciation and amortization, and is used by management as a performance measure. While EBITDA is not a recognized measure under GAAP, we believe that EBITDA is useful to investors because it is frequently used by securities analysts, investors, our lenders and other interested parties to evaluate companies in our industry and us. EBITDA is not intended to be a measure of free cash flow or indicator of operating performance as it does not consider certain requirements such as capital expenditures and related depreciation, interest payments, tax payments and debt service requirements.

	Predecessor									Burger King Holdings, Inc.					Burger King Holdings, Inc.

	For the fiscal year ended June 30,						For the period from July 1, 2002 to December 12, 2002			For the period from December 13, 2002 to June 30, 2003		Combined twelve months ended June 30, 2003			For the fiscal year ended June 30,				For the six months ended December 31,

	2001			2002											2004		2005		2004		2005

												(unaudited)							(unaudited)
	(in millions)
Net (loss) income	$	(38	)	$	(37	)	$	(892	)	$	24	$	(868	)	$	5	$	47	$	45	$	49
Interest expense, net		48			105			46			35		81			64		73		34		47	⁽⁸⁾
Income tax expense (benefit)		21			54			(34	)		16		(18	)		4		31		31		46

Income (loss) from operations	$	31		$	122		$	(880	)	$	75	$	(805	)	$	73	$	151	$	110	$	142
Depreciation and amortization		151			161			43			43		86			63		74		34		42

EBITDA	$	182		$	283		$	(837	)	$	118	$	(719	)	$	136	$	225	$	144	$	184

	(4)	These are our key business measures, which are analyzed on a constant currency basis, which means they are calculated using the same exchange rate over the periods under comparison, to remove the effects of currency fluctuations from these trend analyses. We believe these constant currency measures provide a more meaningful analysis of our business by identifying the underlying business trend, without distortion from the effect of foreign currency movements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Measures”.
	(5)	Comparable sales growth refers to the change in restaurant sales in one period from a comparable period for restaurants that have been open for thirteen months or longer.
	(6)	Refers to our operations in Europe, the Middle East, Africa, Asia and Australia and includes Guam.
	(7)	Refers to our operations in Mexico, Central and South America and the Caribbean and includes Puerto Rico.
	(8)	Includes $13 million recorded as a loss on early extinguishment of debt in connection with our July 2005 refinancing as defined in this prospectus.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with “Selected Consolidated Financial and Other Data” and our audited and unaudited consolidated financial statements and the notes thereto included elsewhere in this prospectus. In addition to historical consolidated financial information, this discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Actual results could differ from these expectations as a result of factors including those described under “Risk Factors”, “Special Note Regarding Forward-Looking Statements” and elsewhere in this prospectus.

All references to fiscal 2003 in this section are to the twelve months ended June 30, 2003, derived by adding the audited results of operations of our predecessor from July 1, 2002 through December 12, 2002 to the audited results of our operations from December 13, 2002 through June 30, 2003. The combined financial data for fiscal 2003 have not been audited on a combined basis and, as a result, do not comply with generally accepted accounting principles and are not intended to represent what our operating results would have been if the acquisition of BKC had occurred at the beginning of the period. References to fiscal 2004, fiscal 2005 and fiscal 2006 in this section are to the fiscal years ended June 30, 2004, 2005 and 2006, respectively.

Overview

We are the second largest fast food hamburger restaurant, or FFHR, chain in the world as measured by the number of restaurants and system-wide sales, and one of the three largest quick service restaurant companies. As of December 31, 2005, we owned or franchised a total of 11,141 restaurants in 67 countries and U.S. territories, of which 7,634 were located in the United States and Canada. At that date, 1,228 restaurants were company-owned and 9,913 were owned by our franchisees. We operate in the FFHR category of the quick service restaurant, or QSR, segment of the restaurant industry. The FFHR category is highly competitive with respect to price, service, location and food quality. Our restaurants feature flame-broiled hamburgers, chicken and other specialty sandwiches, french fries, soft drinks and other reasonably-priced food items.

Our business operates in three reportable segments: the United States and Canada; Europe, Middle East, Africa and Asia Pacific, or EMEA/APAC; and Latin America. United States and Canada is our largest segment and comprised 66% of total revenues and 81% of operating income, excluding unallocated corporate general and administrative expenses, in fiscal 2005. EMEA/APAC comprised 30% of total revenues and 11% of operating income, excluding unallocated corporate general and administrative expenses, and Latin America comprised the remaining 4% of revenues and 8% of operating income, excluding unallocated corporate general and administrative expenses, in fiscal 2005.

We generate revenue from three sources:

•	sales at our company restaurants;
•	royalties and franchise fees paid to us by our franchisees; and
•	property income from restaurants that we lease or sublease to franchisees.

We refer to sales generated at our company restaurants and franchise restaurants as system-wide sales. In fiscal 2005, franchise restaurants generated approximately 90% of system-wide sales. Royalties paid by franchisees are based on a percentage of franchise restaurant sales and are recorded as franchise revenues. Franchise fees and franchise renewal fees are recorded as revenues in the year received. In fiscal 2005, company restaurant and franchise revenues represented 73% and 21% of total revenues, respectively. The remaining 6% of total revenues were derived from property income.

We have a higher percentage of franchise restaurants to company restaurants than our major competitors. We believe that this restaurant mix provides us with a strategic advantage because the capital required to grow and maintain our system is funded primarily by franchisees while giving us a sizable base of company restaurants to demonstrate credibility with our franchisees in launching new initiatives. As a result of the high percentage of

franchise restaurants in our system, we have lower capital requirements compared to our major competitors. Moreover, due to the steps that we have taken to improve the health of our franchise system in the United States and Canada, we expect that this mix will produce more stable earnings and cash flow in the future.

At the time of our December 2002 acquisition of BKC from Diageo plc, we faced significant challenges, including declining average restaurant sales, low restaurant profitability, shrinking U.S. restaurant count, financial distress in our franchise system in the United States and Canada, our menu and marketing strategies did not resonate with customers, relationships with our franchisees were strained and poor service in many of our restaurants. We also experienced significant senior management turnover after the acquisition. These factors led to disappointing financial performance for the remainder of fiscal 2003 and fiscal 2004.

Our management team has implemented a number of strategic initiatives to stabilize and improve overall operations and financial performance. These strategic initiatives included:

•	launching an award-winning advertising and promotion program focused on our core customers;

•	implementing a new product development process aimed at improving our menu and generating a pipeline of new products;

•	improving restaurant operations through our operational excellence programs as measured by objective criteria;

•	improving our communication and relationship with our franchisees;

•	providing assistance to franchisees in the United States and Canada that were in financial distress primarily due to over-leverage through our Franchise Financial Restructuring Program, or the FFRP program;

•	integrating our domestic and international operations and support functions to provide the foundation on which to operate as a global brand;

•	expanding our international presence and entering new international markets;

•	improving restaurant profitability by introducing cost reduction and profit improvement programs for our franchisees in the United States through arrangements with strategic vendors; and

•	developing a new restaurant design to make Burger King a more attractive investment to existing and potential franchisees by lowering the non-real estate costs associated with building a new restaurant.

Our achievements to date include:

•	seven consecutive quarters of positive comparable sales growth in the United States as compared to negative comparable sales growth in the previous seven consecutive quarters, our best comparable sales growth in a decade;

•	an 11% increase in average restaurant sales in the United States over the past two fiscal years and continued growth in the first six months of fiscal 2006;

•	a significant reduction in the number of franchise restaurants in the United States and Canada in our franchisee financial restructuring program which declined from over 2,540 in February 2003 to approximately 150 as of December 31, 2005, demonstrating the improved financial health of our franchise system;

a significantly improved collection rate of franchisee royalty and advertising contribution payments (defined as collections divided by billings on a one-month trailing basis) from 91% during the six months ended June 30, 2003 and fiscal 2004 to 100% in fiscal 2005 and the first half of fiscal 2006; and
a 65% increase in EBITDA, from $136 million in fiscal 2004 to $225 million in fiscal 2005, with income from operations increasing from $73 million to $151 million in the corresponding period. EBITDA grew 28% from $144 million in the first six months of fiscal 2005 to $184 million in the first six months of fiscal 2006, with income from operations increasing from $110 million to $142 million in the corresponding period.

Our Business

Revenues

System-wide revenues are heavily influenced by brand advertising, menu selection and initiatives to improve restaurant operations. Company restaurant revenues are affected by comparable sales, timing of company restaurant openings and closings, acquisitions by us of franchise restaurants and sales of company restaurants to franchisees. Royalties are paid to us based on a percentage of franchise restaurant sales, while franchise fees are paid upon the opening of a new franchise restaurant, or the renewal of an existing franchise agreement. Our property revenues represent income we earn under leasing and subleasing arrangements with our franchisees. Royalties, franchise fees and property revenues from franchisees are affected primarily by sales at franchise restaurants, the timing of franchise restaurant openings and closings and the financial strength and stability of the franchise system.

Costs and Expenses

Company restaurants incur three types of operating expenses:

food, paper and other product costs, which represent the costs of the food and beverages that we sell to consumers in company restaurants;
payroll and employee benefits costs, which represent the wages paid to company restaurant managers and staff, as well as the cost of their health insurance, other benefits and training; and
occupancy and other operating costs, which represent all other direct costs of operating our company restaurants, including the cost of rent or real estate depreciation (for restaurant properties owned by us), depreciation on equipment, repairs and maintenance, insurance and utilities.

As average restaurant sales increase, we can leverage payroll and employee benefits costs and occupancy and other costs, resulting in a direct improvement in restaurant profitability. As a result, we believe our continued focus on increasing average restaurant sales will result in improved profitability to our system-wide restaurants.

Our general and administrative expenses include the costs of field management for company and franchise restaurants, costs of our operational excellence programs (including program staffing, training and Clean & Safe certifications), and corporate overhead, including corporate salaries and facilities. We believe that our current staffing and structure will allow us to expand our business globally without increasing general and administrative expenses significantly. Our selling expenses are comprised of advertising and bad debt expenses. Selling, general and administrative expenses also include amortization of intangible assets and management fees paid to the sponsors under our management agreement with them.

Property expenses include costs of depreciation and rent on properties we lease and sublease to franchisees, respectively.

Items classified as other operating expenses, net include gains and losses on asset and business disposals, impairment charges, gains and losses on foreign currency transactions and other miscellaneous items.

Advertising Funds

We promote our brand and products by advertising in all the countries and territories in which we operate. In countries where we have company restaurants, such as the United States, Canada, the United Kingdom and Germany, we manage an advertising fund for that country by collecting required advertising contributions from company and franchise restaurants and purchasing advertising and other marketing initiatives on behalf of all Burger King restaurants in that country. These advertising contributions are based on a percentage of sales at company and franchise restaurants. We do not record advertising contributions collected from franchisees as revenues or expenditures of these contributions as expenses. Amounts which are contributed to the advertising funds by company restaurants are recorded as selling expenses. In countries where we manage an advertising fund, we plan the marketing calendar in advance based on expected contributions for that year into the fund. To the extent that contributions received exceed advertising and promotional expenditures, the excess contributions are recorded as accrued advertising liability on our consolidated balance sheets. If franchisees fail to make the expected contributions, we may not be able to continue with our marketing plan for that year unless we make additional contributions into the fund. These additional contributions are also recorded as selling expenses. In fiscal 2005, we made $15 million in additional contributions and we made no significant payments in the first six months of fiscal 2006.

Key Business Measures

We track our results of operations and manage our business by using three key business measures, comparable sales growth, average restaurant sales and system-wide sales growth. These measures are analyzed on a constant currency basis, which means they are calculated using the same exchange rate over the periods under comparison, to remove the effects of currency fluctuations from these trend analyses. We believe these constant currency measures provide a more meaningful analysis of our business by identifying the underlying business trend, without distortion from the effect of foreign currency movements.

Comparable Sales Growth

Comparable sales growth refers to the change in restaurant sales in one period from a comparable period for restaurants that have been open for thirteen months or longer. We believe comparable sales growth is a key indicator of our performance, as influenced by our initiatives and those of our competitors.

	For the fiscal year ended June 30,						For the six months ended December 31,

	2003		2004		2005		2004		2005

	(in constant currencies)
Comparable Sales Growth:
United States and Canada	(7.0	)%	(0.5	)%	6.6	%	8.4	%	1.6	%
EMEA/APAC	(3.4	)	5.4		2.8		2.9		0.3
Latin America	3.6		4.0		5.5		7.3		1.6
Total System-Wide	(5.9	)%	1.0	%	5.6	%	7.0	%	1.3	%

Our fiscal 2003 and early fiscal 2004 results were negatively affected by competitive discounting, particularly in the United States and Canada. Comparable sales growth in the United States and Canada began to improve in the second half of fiscal 2004 as a result of our strategic initiatives, including new premium products, our new advertising campaign targeting our core customers and our operational excellence programs. The comparable sales growth performance in EMEA/APAC has been led by positive sales performance in markets such as Spain and Turkey partially offset by poor sales performance in the United Kingdom and Germany. Latin America demonstrated strong results in the three-year period and continues to grow. Comparable sales growth continued to increase in the first six months of fiscal 2006 after significant increases in fiscal 2005.

Average Restaurant Sales

Average restaurant sales is an important measure of the financial performance of our restaurants and changes in the overall direction and trends of sales. Average restaurant sales is influenced by comparable sales performance and restaurant openings and closings.

	For the fiscal year ended June 30,						For the six months ended December 31,

		2003		2004		2005		2004		2005

				(in thousands) (in constant currencies)
Average Restaurant Sales	$	972	$	994	$	1,066	$	534	$	549

Our improvement in average restaurant sales in fiscal 2004 and fiscal 2005 was primarily due to improved comparable sales, the opening of new restaurants and closing of under-performing restaurants. Our comparable sales increased by 1% and 5.6% in fiscal 2004 and 2005, respectively, driven primarily by our strategic initiatives related to operational excellence, advertising and our menu. Additionally, we and our franchisees closed 1,314 restaurants between fiscal 2003 and fiscal 2005. Approximately 70% of these closures were franchise restaurants in the United States, which had average restaurant sales of approximately $630,000 in the 12 months prior to closure. We and our franchisees also opened 180 new restaurants in the United States between fiscal 2003 and 2005, of which 59 were open for at least 12 months as of December 31, 2005. The average restaurant sales of these new restaurants was approximately $1.3 million for the 12 months ended December 31, 2005. We expect these closings of unviable restaurants, combined with continued improvements to average restaurant sales of existing restaurants and strong sales at new restaurants, to result in financially stronger operators throughout our franchise base.

System-Wide Sales Growth

System-wide sales refer to sales at all company and franchise restaurants. System-wide sales and system-wide sales growth are important indicators of:

the overall direction and trends of sales and operating income on a system-wide basis; and
the effectiveness of our advertising and marketing initiatives.

	For the fiscal year ended June 30,						For the six months ended December 31,

	2003		2004		2005		2004		2005

	(in constant currencies)
System-Wide Sales Growth:
United States and Canada	(8.0	)%	(2.2	)%	4.9	%	7.0	%	(0.6	)%
EMEA/APAC	7.4		11.5		7.9		8.0		6.5
Latin America	1.6		8.4		14.5		14.6		12.9
Total System-Wide	(4.7	)%	1.2	%	6.1	%	7.6	%	1.8	%

The increases in system-wide sales growth in fiscal 2004 and fiscal 2005 primarily reflected improved comparable sales in all regions and sales at 618 new restaurants opened during that two-year period, which were partially offset by the closing of 849 under-performing restaurants during the same two-year period. This improving trend continued during the six months ended December 31, 2005, when comparable sales continued to increase on a system-wide basis coupled with 172 restaurant openings during the period, partially offset by 137 restaurant closings during the same period. We expect restaurant closures to continue to decline and that restaurant openings will gradually accelerate.

Following a pattern of declining sales in fiscal 2003 and the first half of fiscal 2004, sales in the United States and Canada increased 4.9% in fiscal 2005, primarily due to the implementation of our strategic initiatives related to

advertising, our menu and our operational excellence programs. Our system-wide sales in the United States and Canada decreased slightly in the first six months of fiscal 2006, primarily as a result of restaurant closings partially offset by positive comparable sales growth. We had 6,758 franchise restaurants in the United States and Canada at December 31, 2005, compared to 7,128 franchise restaurants at December 31, 2004.

EMEA/APAC demonstrated strong system-wide sales growth during the three-year period which reflected growth in several markets, including Germany, Spain, the Netherlands and smaller markets in the Mediterranean and Middle East. Partially offsetting this growth was the United Kingdom, where changes in consumer preferences away from the FFHR category have adversely affected sales for us. We opened 71 restaurants (net of closures) in EMEA/APAC during fiscal 2005 and 83 (net of closures) during the first six months of fiscal 2006, increasing our total system restaurant count in this segment to 2,738 at December 31, 2005.

Latin America’s system-wide sales growth was driven by new restaurant openings and strong comparable sales from fiscal 2003 through fiscal 2005. We opened 62 restaurants (net of closures) in Latin America during fiscal 2005 and 41 (net of closures) during the first six months of fiscal 2006, increasing our total system restaurant count in this segment to 769 at December 31, 2005.

Factors Affecting Comparability of Results

Purchase Accounting

The acquisition of BKC was accounted for using the purchase method of accounting, or purchase accounting, in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations. Purchase accounting required a preliminary allocation of the purchase price to the assets acquired and liabilities assumed at their estimated fair market values at the time of our acquisition of BKC in fiscal 2003. In December 2003, we completed our fair market value calculations and finalized the adjustments to these preliminary purchase accounting allocations. As part of finalizing our assessment of fair market values, we reviewed all of our lease agreements worldwide. Some of our lease payments were at below-market lease rates while other lease payments were at above-market lease rates. In cases where we were making below-market lease payments, we recorded an asset reflecting this favorable lease. We amortize this intangible asset over the underlying lease term, which has the effect of increasing our rent expense on a non-cash basis to the market rate. Conversely, in cases where we were making above-market lease payments, we recorded a liability reflecting this unfavorable lease. We amortize this liability over the underlying lease term, which has the effect of decreasing our rent expense on a non-cash basis to the market rate.

During fiscal 2004 and fiscal 2005, we recorded a net benefit from favorable and unfavorable lease amortization of $51 million and $29 million, respectively. The fiscal 2004 unfavorable and favorable benefit was higher than fiscal 2005 primarily as a result of final adjustments to our purchase price allocation which resulted in a higher benefit of $19 million associated with favorable and unfavorable lease amortization. The favorable and unfavorable lease benefit and other miscellaneous adjustments were partially offset by $18 million of incremental depreciation expense, resulting in a net benefit of $2 million in fiscal 2004, when we finalized our purchase accounting allocations.

In addition to the amortization of these favorable and unfavorable leases, purchase accounting resulted in certain other items that affect the comparability of the results of operations between us and our predecessor, including changes in asset carrying values (and related depreciation and amortization), expenses related to incurring the debt that financed the acquisition that were capitalized and amortized as interest expense, and the recognition of intangible assets (and related amortization).

Historical Franchisee Financial Distress

During the second half of fiscal 2003, we began to experience delinquencies in payments of royalties, advertising fund contributions and rent payments from certain franchisees in the United States and Canada. In February 2003, we initiated the FFRP program designed to proactively assist franchisees experiencing financial

difficulties due to over-leverage and other factors including weak sales, the impact of competitive discounting on operating margins and poor cost management. Under the FFRP program, we worked with those franchisees with strong operating track records, their lenders and other creditors to attempt to strengthen the franchisees’ financial condition. The FFRP program also resulted in closing unviable franchise restaurants and our acquisition of certain under-performing franchise restaurants in order to improve their performance. In addition, we entered into agreements to defer certain royalty payments, which we did not recognize as revenue during fiscal 2004, and acquired a limited amount of franchisee debt, often as part of broader agreements to acquire franchise restaurants or real estate. We also contributed funds to cover shortfalls in franchisee advertising contributions. See “—Other Commercial Commitments and Off-Balance Sheet Arrangements” for further information about the support we committed to provide in connection with the FFRP program, including an aggregate remaining commitment of $36 million to fund certain loans to renovate franchise restaurants, to make renovations to certain restaurants that we lease or sublease to franchisees, and to provide rent relief and/or contingent cash flow subsidies to certain franchisees.

Franchisee system distress had a significant impact on our results of operations during these periods:

	For the fiscal year ended June 30,							For the six months ended December 31,

		2003		2004		2005			2004		2005

				(in millions)
Revenues:
Revenue not recognized	$	–	$	22	$	(3	)¹	$	1	$	–
Selling, general and administrative:
Bad debt expense		53		11		1			2		–
Incremental advertising
contributions		49		41		15			9		1
Internal and external costs of
FFRP program administration		3		11		12			6		–

Total effect on selling, general and
administrative	$	105	$	63	$	28		$	18	$	1
Other operating expenses (income),
net:
Reserves on acquired debt, net		–		19		4			1		–
Other, net		–		1		5			–		1

Total effect on other operating
expenses (income), net		–		20		9			1		1

Total effect on income from
operations	$	105	$	105	$	34		$	20	$	2

⁽¹⁾This amount reflects the collection and recognition of revenue that was not recognized in fiscal 2004.

As a result of the franchisees’ distress, we did not recognize revenues associated with royalties and rent for certain franchise restaurants where collection was uncertain in fiscal 2004. In addition, provisions for bad debt expense were significantly higher than historical levels during fiscal 2003 and 2004, as a result of a substantial increase in past due receivables. As brand advertising is a significant element of our success, we contributed an incremental $49 million, $41 million and $15 million to the U.S. and Canada advertising fund for each of fiscal 2003, 2004 and 2005, respectively, to fund the shortfall in franchisee contributions. We also incurred significant internal and external costs to manage the FFRP program. During the first six months of fiscal 2006, we did not make significant incremental advertising contributions.

We believe the FFRP program has significantly improved the financial health and performance of our franchisee base in the United States and Canada. We believe that restaurant profitability has increased. Franchise restaurant average restaurant sales in the United States and Canada has improved from $973,000 in fiscal 2003 to $1.07 million in fiscal 2005. Our collection rates, which we define as collections divided by billings on a one-month

trailing basis, also improved during this period. Collection rates in the United States and Canada have improved from 91% during the six months ended June 30, 2003 and for fiscal 2004 to 100% in fiscal 2005, which reflects the improvement of our franchise system’s financial health. During the first half of fiscal 2006, our collections have remained at 100%, consistent with fiscal 2005.

We believe the investments we made historically in the FFRP program will continue to provide a return to us in the form of a reinvigorated franchise system in the United States and Canada.

Our Global Reorganization

After our acquisition of BKC, we retained consultants to assist us in the review of the management and efficiency of our business, focusing on our operations, marketing, supply chain and corporate structure. In connection with this review and the resulting corporate restructuring, we incurred costs of $22 million and $17 million in fiscal 2004 and fiscal 2005, respectively, consisting primarily of consulting and severance-related costs. The following table presents, for the periods indicated, such costs.

	For the fiscal year ended June 30,						For the six months ended December 31,

		2003		2004		2005		2004		2005

				(in millions)
Consulting fees	$	1	$	14	$	2	$	2	$	–
Severance-related costs of the global
reorganization		9		8		15		4		–

Total	$	10	$	22	$	17	$	6	$	–

Results of Operations

The following table presents, for the periods indicated, our results of operations.

	For the fiscal year ended June 30,											For the six months ended December 31,

		2003		2004				2005					2004	2005

		Amount			Amount	Increase/ (Decrease)			Amount	Increase/ (Decrease)			Amount		Amount		Increase/ (Decrease)

		(unaudited)											(unaudited)
	(in millions, except percentages)
Revenues:
Company restaurant revenues	$	1,174		$	1,276	9	%	$	1,407	10	%	$	704	$	754		7	%
Franchise revenues		368			361	(2	)%		413	14	%		206		209		1	%
Property revenues		115			117	2	%		120	3	%		59		57		(3	)%

Total revenues	$	1,657		$	1,754	6	%	$	1,940	11	%	$	969	$	1,020		5	%
Company restaurant expenses		1,022			1,087	6	%		1,195	10	%		590		640		8	%
Selling, general and
administrative expenses		478			482	1	%		496	3	%		236		213		(10	)%
Property expenses		55			58	5	%		64	10	%		30		28		(7	)%
Impairment of goodwill		875			–	*			–	*			–		–		–
Other operating expenses
(income), net		32			54	69	%		34	(37	)%		3		(3	)	(200	)%

Total operating costs and expenses	$	2,462		$	1,681	(32	)%		1,789	6	%	$	859	$	878		2	%

(Loss) income from operations		(805	)		73	*			151	107	%		110		142		29	%
Interest expense, net		81			64	(21	)%		73	14	%		34		34		–
Loss on early extinguishment of debt		–			–	–			–	–			–		13		*

(Loss) income before income taxes	$	(886	)	$	9	*		$	78	*		$	76	$	95		25	%
Income tax (benefit) expense		(18	)		4	*			31	*			31		46		48	%

Net (loss) income	$	(868	)	$	5	*		$	47	*		$	45	$	49		9	%

* Not meaningful.

Six Months Ended December 31, 2005 Compared to Six Months Ended December 31, 2004

Revenues

Company restaurant revenues increased 7% to $754 million in the first six months of fiscal 2006 compared to the same period in fiscal 2005, primarily as a result of the acquisition of 133 franchise restaurants, partially offset by a 0.2% decrease in comparable sales, driven primarily by negative results in Germany and the United Kingdom where 18% of our company restaurants were located at December 31, 2005.

Franchise revenues increased 1% to $209 million in the first six months of fiscal 2006 compared to the same period in fiscal 2005. Comparable sales growth at franchise restaurants was 1.5% during the first six months of fiscal 2006, and 163 new franchise restaurants were opened, including 141 new international franchise restaurants. Offsetting these factors was the elimination of royalties from 509 franchise restaurants that were closed or acquired, primarily in the United States and Canada.

Property revenues declined by $2 million to $57 million in the first six months of fiscal 2006 as a result of a decrease in the number of properties that we lease or sublease to franchisees, primarily due to restaurant closures and our acquisition of franchise restaurants.

Operating Costs and Expenses

Company restaurant expenses

Food, paper and product costs increased primarily as a result of increased company restaurant sales volumes. As a percentage of company restaurant revenues, food, paper and product costs increased 0.4% to 31.4% during the first six months of fiscal 2006 compared to the same period in fiscal 2005, primarily due to increases in beef prices in Europe. The price of beef has not increased significantly in the United States in the first six months of fiscal 2006.

Payroll and employee benefits costs as a percentage of company restaurant revenues was 29.0% during the first six months of fiscal 2006 and fiscal 2005. Payroll and employee benefits costs have continued to increase in fiscal 2006 as a result of increases in wages and other costs of labor, particularly health insurance. Partially offsetting these increased costs was a reduction in the cost of labor required to operate our restaurants, due to our operational excellence programs.

Occupancy and other operating costs include amortization of unfavorable and favorable leases from our acquisition of BKC, which resulted in a reduction to occupancy and other operating expenses. The net reduction in occupancy and other operating costs resulting from amortization of unfavorable and favorable leases was $7.9 million during the first six months of fiscal 2006 compared to $10.6 million in the same period in fiscal 2005, primarily as a result of the termination of certain unfavorable leases. Excluding the net reduction of favorable and unfavorable lease amortization, occupancy and other operating costs increased 7% to $192 million in the first six months of fiscal 2006, primarily as a result of acquisitions of franchise restaurants and new company restaurants, as well as increased costs, such as utilities in the United States and rents in the United Kingdom. Excluding the net reduction of favorable and unfavorable lease amortization, occupancy and other operating costs increased slightly as a percentage of company restaurant revenues to 25.5% in the first six months of fiscal 2006 compared to 25.4% in the same period of fiscal 2005.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased 10% to $213 million during the first six months of fiscal 2006 compared to the same period in fiscal 2005, primarily as a result of the absence of $23 million in expenses related to franchise system distress and our global reorganization costs in the first six months of fiscal 2006

compared to the comparable period in fiscal 2005. Partially offsetting this were increases in general and administrative expenses resulting from our acquisition of franchise restaurants.

Under the management agreement with the sponsors, which we entered into in connection with our acquisition of BKC, we paid a management fee to the sponsors equal to 0.5% of our total current year revenues, which amount was limited to 0.5% of the prior year’s total revenues. Management fee expense was $4 million in both six-month periods. We have agreed with the sponsors that the management agreement will terminate following the completion of this offering and the sponsors will no longer charge us a management fee. We will incur a one-time fee in connection with the termination of the management agreement equal to $30 million which will be reflected in our results for fiscal 2006. In addition, the compensatory make-whole payment of $33 million will also be reflected as compensation expense in the third quarter of fiscal 2006.

Property expenses

Property expenses decreased by $2 million to $28 million in the first six months of fiscal 2006 from the same period in fiscal 2005 as a result of a decrease in the number of properties that we lease or sublease to franchisees, primarily due to restaurant closures and our acquisition of franchise restaurants.

Other operating expenses (income), net

Other operating income, net was $3 million in the first six months of fiscal 2006 compared to operating expenses, net of $3 million in the same period in fiscal 2005. Other operating expenses (income), net was comprised primarily of gains and losses on property disposals and other miscellaneous items in both six-month periods.

Interest expense, net

Interest expense, net was $34 million in the first six months of fiscal 2006 and in fiscal 2005.

Loss on early extinguishment of debt

In connection with our July 2005 refinancing, $13 million of deferred financing fees recorded in connection with the financing of our acquisition of BKC in fiscal 2003 were recorded as a loss on early extinguishment of debt. In connection with the February 2006 financing, we expect to incur $5 million in financing fees in fiscal 2006.

Income tax expense

Income tax expense increased $15 million to $46 million in the first six months of fiscal 2006 from the same period in fiscal 2005, primarily due to the $19 million increase in income before income taxes in the first six months of fiscal 2006 as compared to the prior period. In addition, our effective tax rate increased by 7.6% for the first six months of fiscal 2006 to 48.4% . The higher effective tax rate is primarily attributable to adjustments to deferred tax asset valuation reserves in certain foreign countries and higher tax expense associated with adjustments to valuation reserves, established during purchase accounting, which are required to be applied against intangible assets recorded in purchase accounting rather than recording a benefit to tax expense. The adjustments to these valuation reserves resulted from our ability to utilize net operating losses as a result of improved operations in certain foreign countries.

Fiscal Year Ended June 30, 2005 Compared to Fiscal Year Ended June 30, 2004

Revenues

Company restaurant revenues increased 10% to $1,407 million in fiscal 2005 as a result of strong comparable sales in the United States and Canada and Latin America segments, where approximately 76% of our company restaurants are located, primarily due to the implementation of strategic initiatives related to our menu, advertising and our operational excellence programs, as well as the acquisition of 101 franchise restaurants.

Franchise revenues increased 14% to $413 million in the first six months of fiscal 2006 compared to the same period in fiscal 2005, as a result of improved sales at franchise restaurants in all segments due primarily to the implementation of our menu, marketing and operational excellence programs, the improved financial condition of our franchise system in the United States, and the opening of new franchise restaurants in international markets. In addition to increased royalties from improved franchise restaurant sales, we recognized $3 million of franchise revenues not previously recognized in fiscal 2005, compared to $17 million of franchise revenues not recognized in fiscal 2004. In addition, our franchisees opened 233 new franchise restaurants in international locations in fiscal 2005, contributing to a 4% net increase in the number of international franchise restaurants from fiscal 2004. Partially offsetting these factors was the elimination of royalties from 318 franchise restaurants that were closed and 99 franchise restaurants that were acquired in the United States and Canada during fiscal 2005.

Property revenues increased 3% to $120 million in fiscal 2005. Our fiscal 2004 property revenues excluded $5 million of property revenues not recognized, partially offset by $3 million of revenue recognized in connection with finalizing our purchase accounting allocations.

Operating Costs and Expenses

Company restaurant expenses

Food, paper and product costs increased 12% to $437 million in fiscal 2005, principally as a result of increases in company restaurant sales volumes. Food, paper and product costs as a percentage of company restaurant revenues increased 0.5% to 31.1% in fiscal 2005 compared to fiscal 2004, primarily as a result of increases in the price of beef in the United States.

Payroll and employee benefits costs increased 9% to $415 million in fiscal 2005 as a result of increased wages, health insurance and training expenses, as well as the acquisition of 101 franchise restaurants in fiscal 2005. Payroll and employee benefits decreased 0.4% to 29.5% of company restaurant revenues in fiscal 2005 as higher costs of wages and health insurance benefits were more than offset by increasing restaurant sales and efficiency gains from our operational excellence programs to reduce the labor required to operate our restaurants.

The net reduction to occupancy and other operating costs resulting from the amortization of unfavorable and favorable leases was $20 million in fiscal 2005, compared to $37 million in fiscal 2004. Excluding this net reduction and depreciation adjustments of $14 million recorded in fiscal 2004 when we finalized our purchase accounting allocations, occupancy and other operating costs increased 8% to $363 million in fiscal 2005. This increase resulted primarily from the acquisition of franchise restaurants and increases in certain other operating costs, such as utilities in the United States and rent in the United Kingdom. Excluding this net reduction and the other adjustments, occupancy and other operating costs decreased as a percentage of company restaurant revenues to 25.8% in fiscal 2005 from 26.4% in fiscal 2004.

Selling, general and administrative expenses

Selling, general and administrative expenses increased 3% to $496 million in fiscal 2005. General and administrative costs increased 10% to $408 million in fiscal 2005, while our selling expenses decreased 21% to $88 million in fiscal 2005.

General and administrative expenses included $29 million and $33 million of costs associated with the FFRP program’s administration and severance and consulting fees incurred in connection with our global reorganization in fiscal 2005 and fiscal 2004, respectively. Our fiscal 2005 general and administrative cost increases also included $14 million of incremental incentive compensation as a result of improved restaurant operations and our improved financial performance, as well as $7 million of increased costs associated with operational excellence initiatives. Our remaining general and administrative expense increases in fiscal 2005 were attributable to the acquisition of franchise restaurants and increases in restaurant operations and business development teams, particularly in EMEA/APAC where our general and administrative expenses increased by $18 million in fiscal 2005. Management fee expense paid to the sponsors totaled $9 million and $8 million in fiscal 2005 and fiscal 2004, respectively.

The decrease in selling expenses is attributable to a decrease in advertising expense and bad debt expense. Our bad debt expense decreased to $1 million in fiscal 2005 from $11 million in fiscal 2004 and our incremental advertising expense resulting from franchisee non-payment of advertising contributions was $15 million in fiscal 2005 compared to $41 million in fiscal 2004. These improvements resulted from the strengthening of our franchise system during fiscal 2005. We do not expect to incur significant incremental marketing expenses as a result of franchisee non-payment of advertising contributions in fiscal 2006. Partially offsetting these reductions were incremental advertising expenses for company restaurants opened or acquired in fiscal 2005.

Property expenses

The net reduction to property expenses resulting from the amortization of unfavorable and favorable leases was $9 million in fiscal 2005, compared to $14 million in fiscal 2004. Excluding this net reduction and other adjustments recorded when we finalized our purchase accounting allocations in fiscal 2004, property expenses increased 6% to $73 million in fiscal 2005. Excluding this net reduction and the other adjustments, property expenses as a percentage of property income increased to 60.8% in fiscal 2005 from 60.5% in fiscal 2004.

Other operating expenses (income), net

		For the fiscal year ended June 30,

		2004		2005

		(in millions)
Losses on asset disposals	$	15	$	13
Impairment of long-lived assets		–		4
Impairment of investments in franchisee debt		19		4
Impairment of investments in unconsolidated investments		4		–
Litigation settlements and reserves		4		2
Other, net		12		11

Total other operating expenses (income), net	$	54	$	34

Gains and losses on asset disposals are primarily related to exit costs associated with restaurant closures and gains and losses from selling company restaurants to franchisees.

All of the fiscal 2005 and $12 million of the fiscal 2004 impairment of investments in franchisee debt related to our assessments of the net realizable value of certain third-party debt of franchisees that we acquired, primarily in connection with the FFRP program. The remaining fiscal 2004 impairment of debt investments was recorded in connection with the forgiveness of a note receivable from an unconsolidated affiliate in Australia.

Other, net included $5 million of settlement losses recorded in connection with the acquisition of franchise restaurants and $5 million of costs associated with the FFRP program in fiscal 2005. In fiscal 2004, other, net included $3 million of losses from unconsolidated investments and $2 million each of losses from transactions denominated in foreign currencies, property valuation reserves, and re-branding costs related to our operations in Asia.

Interest expense, net

Interest expense, net increased 21% to $82 million in fiscal 2005 due to higher interest rates related to term debt and debt payable to Diageo plc and the private equity funds controlled by the sponsors incurred in connection with our acquisition of BKC. Interest income was $9 million in fiscal 2005, an increase of $5 million from fiscal 2004, primarily as a result of an increase in cash and cash equivalents due to improved cash provided by operating activities and increased interest rates on investments.

Income tax expense

Income tax expense increased $27 million to $31 million in fiscal 2005 primarily due to the $69 million increase in income before income taxes in fiscal 2005. Our effective tax rate declined by 4.7% for fiscal 2005 to 39.7%, partially offsetting the effect of the increase in income before income taxes. The majority of the change in our effective tax rate is attributable to adjustments to our valuation allowances related to deferred tax assets in foreign countries and certain state income taxes in fiscal 2005. See Note 12 to our audited consolidated financial statements for further information regarding our effective tax rate and valuation allowances.

Fiscal Year Ended June 30, 2004 Compared to Fiscal Year Ended June 30, 2003

All references to fiscal 2003 are to the twelve months ended June 30, 2003, derived by adding the audited results of operations of our predecessor from July 1, 2002 through December 12, 2002 to the audited results of our operations from December 13, 2002 through June 30, 2003. The combined financial data for fiscal 2003 have not been audited on a combined basis, do not comply with generally accepted accounting principles and are not intended to represent what our operating results would have been if the acquisition of BKC had occurred at the beginning of the period.

We do not believe that the combined financial data for fiscal 2003 are comparable to our current results of operations as our predecessor operated under a different ownership, management and capital structure. In addition, our acquisition of BKC was accounted for under the purchase method of accounting which also affects comparability.

Revenues

Company restaurant revenues increased 9% to $1,276 million in fiscal 2004 as a result of positive comparable sales due to the implementation of our menu, advertising and operational excellence initiatives and the acquisition of 38 franchise restaurants.

Franchise revenues declined 2% to $361 million in fiscal 2004 due to the financial distress of our franchise system in the United States and Canada during fiscal 2004. A total of 392 under-performing franchise restaurants closed in fiscal 2004, compared to 275 new franchise restaurants that opened, resulting in a net decrease of 147 franchise restaurants. Our franchise revenues were also affected in fiscal 2004 by the non-recognition of $17 million of franchise revenues related to franchisees in the United States and Canada from which collection of royalties was not reasonably assured due to their deteriorating financial condition. Property revenues increased 2% to $117 million in fiscal 2004. Our fiscal 2004 property revenues excluded $5 million of property revenues not recognized, partially offset by $3 million of revenue recognized in connection with finalizing our purchase accounting allocations.

Partially offsetting the impact of the franchise system distress in the United States and Canada were increases in franchise and property revenues in EMEA/APAC and Latin America of $24 million.

Operating Costs and Expenses

Company restaurant expenses

Food, paper and product costs increased 9% to $391 million in fiscal 2004, principally as a result of increased sales volume. Food, paper and product costs remained a consistent percentage of company restaurant revenues in fiscal 2004 and fiscal 2003, as an increase in the price of beef was mitigated by the introduction of premium products and a strategic shift in our menu strategy to discontinue lower margin products and Whopper discounting during fiscal 2004.

Payroll and employee benefits costs increased 9% to $382 million in fiscal 2004 as a result of increased wages, health insurance and training expenses, as well as the acquisition of 38 franchise restaurants in fiscal 2004. Payroll and employee benefits increased 0.2% to 29.9% of company restaurant revenues in fiscal 2005 as higher costs of

wages and health insurance benefits were partially offset by increasing restaurant sales and efficiency gains from our strategic initiatives to improve restaurant profitability and from our operational excellence programs to reduce the labor required to operate our restaurants.

Occupancy and other operating costs remained flat at $314 million in each of fiscal 2004 and fiscal 2003 as increased depreciation expense arising from purchase accounting, the acquisition of franchise restaurants and increases in certain other operating costs, such as utilities in the United States and rent in the United Kingdom, were offset by the amortization of unfavorable and favorable leases.

Selling, general and administrative expenses

Selling, general and administrative expenses increased 1% to $482 million in fiscal 2004. General and administrative costs increased 17% to $371 million in fiscal 2004, while our selling expenses decreased 31% to $111 million in fiscal 2004.

General and administrative expenses included $33 million and $13 million of costs associated with FFRP program administration and severance and consulting fees incurred in connection with our global reorganization in fiscal 2004 and fiscal 2003, respectively. Our fiscal 2004 general and administrative cost increases also included $14 million of incremental incentive compensation as a result of improved restaurant operations and our improved financial performance, $3 million of incremental depreciation expense, as a result of finalizing purchase accounting, and $3 million of increased costs associated with our operational excellence programs. Our remaining general and administrative expense increases in fiscal 2004 were attributable to increases in restaurant operations and business development teams in EMEA/APAC where our general and administrative expenses increased by $14 million in fiscal 2004. Partially offsetting these increases was the elimination of $14 million in corporate expenses, primarily due to savings from our global reorganization. Management fee expense paid to the sponsors totaled $5 million for the period December 13, 2002 to June 30, 2003. Prior to our acquisition of BKC, $1 million in management fees were paid to Diageo plc for the period July 1, 2002 to December 12, 2002.

Selling expenses decreased in fiscal 2004 as a result of a decrease in bad debt expenses and advertising expenses. Our bad debt expense decreased to $11 million in fiscal 2004 from $53 million in fiscal 2003, partially as a result of our non-recognition of $22 million in franchise and property revenues in fiscal 2004, and partially as a result of improvements in our collection rates in the second half of fiscal 2004. Our incremental advertising expense resulting from franchisee non-payment of advertising contributions was $41 million in fiscal 2004 compared to $49 million in fiscal 2003. Additional factors affecting our selling expenses were incremental advertising expenses for company restaurants opened or acquired in fiscal 2004.

Property expenses

Property expenses increased 5% to $58 million in fiscal 2004 primarily due to increased depreciation expense arising from a net increase in asset carrying values in connection with the purchase accounting allocations we finalized in fiscal 2004, offset in large part by the amortization of unfavorable and favorable leases.

Impairment of goodwill

Our predecessor recorded a goodwill impairment charge of $875 million in fiscal 2003 in connection with a reduction to the purchase price paid in our acquisition of BKC. The purchase price was reduced prior to the completion of the acquisition as a result of BKC’s deteriorating financial performance and franchise system financial distress.

Other operating expenses (income), net

		For the fiscal year ended June 30,

		2003			2004

		(in millions)
Losses on asset disposals	$	(3	)	$	15
Impairment of long-lived assets		52			–
Impairment of investments in franchisee debt		–			19
Impairment of investments in unconsolidated investments		–			4
Litigation settlements and reserves		(5	)		4
Other, net		(12	)		12

Total other operating expenses (income), net	$	32		$	54

Of the impairment of long-lived assets in fiscal 2003, $35 million pertained to the Burger King brand, which was impaired in connection with the reduction in the purchase price paid for our acquisition of BKC. The remaining long-lived asset impairment charges in fiscal 2003 pertained to long-lived assets in Europe, which were impaired as a result of deteriorating financial performance in that region.

Other, net includes a gain of $7 million in fiscal 2003, recorded in connection with the final settlement of the bankruptcy of a former supplier, prior to our acquisition of BKC. The remaining components of fiscal 2003 other, net are comprised primarily of $10 million in net gains from foreign exchange forward contracts and transactions denominated in foreign currency. During fiscal 2003, we carried large intercompany balances with our international subsidiaries, which were subject to gains and losses from foreign currency translation. During fiscal 2004, we reduced this exposure to foreign currency translation by substantially settling these intercompany balances.

Interest expense, net

Interest expense, net was $64 million in fiscal 2004, compared to $81 million in fiscal 2003. Included in the $81 million for fiscal 2003 was $43 million of interest paid to Diageo plc by our predecessor, and $33 million of interest related to the debt financing used to complete our acquisition of BKC. Interest income increased to $4 million in fiscal 2004 from $3 million in fiscal 2003.

Income tax expense

We recorded an income tax benefit of $18 million in fiscal 2003 related to our loss before income taxes.

Quarterly Financial Data

The following table presents unaudited consolidated income statement data for each of the ten fiscal quarters in the period ended December 31, 2005. The operating results for any quarter are not necessarily indicative of the results for any future period. These quarterly results were prepared in accordance with generally accepted accounting principles and reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results.

	Three months ended

	September 30, 2003		December 31, 2003		March 31, 2004		June 30, 2004		September 30, 2004		December 31, 2004		March 31, 2005		June 30, 2005		September 30, 2005		December 31, 2005

								(unaudited) (in millions)
Total revenues	$	434	$	418	$	426	$	476	$	481	$	488	$	468	$	503	$	508	$	512

Company restaurant
expenses		266		265		268		288		298		292		296		309		319		321
Selling, general and
administrative expenses		125		110		108		139		112		125		126		133		101		110

	Three months ended

	September 30, 2003		December 31, 2003		March 31, 2004			June 30, 2004			September 30, 2004		December 31, 2004		March 31, 2005		June 30, 2005		September 30, 2005		December 31, 2005

Property expenses		16		6		20			16			14		15		14		21		14		14
Other operating expenses
(income), net		3		8		20			23			1		2		15		16		2		(3	)

Total operating costs and
expenses		410		389		416			466			425		434		451		479		436		442

Income (loss) from
operations		24		29		10			10			56		54		17		24		72		70


Net income (loss)	$	4	$	9	$	(5	)	$	(3	)	$	21	$	23	$	1	$	2	$	22	$	27

Restaurant sales are affected by the timing and effectiveness of our advertising, new products and promotional programs. Our results of operations also fluctuate from quarter to quarter as a result of seasonal trends and other factors, such as the timing of restaurant openings and closings and our acquisition of franchise restaurants as well as variability of the weather. Restaurant sales are typically higher in our fourth and first fiscal quarters, which are the spring and summer months when weather is warmer, than in our second and third fiscal quarters, which are the fall and winter months. Restaurant sales during the winter are typically highest in December, during the holiday shopping season.

New restaurants typically have lower operating margins for three months after opening, as a result of start-up expenses. Similarly, many franchise restaurants that we acquire are under-performing and continue to have lower margins before we make operational improvements. The timing of new restaurant openings has not caused a material fluctuation in our quarterly results of operations. However, we acquired 133 franchise restaurants in the third and fourth quarters of fiscal 2005, which resulted in increased revenues and operating expenses in the first two quarters of fiscal 2006 compared to fiscal 2005.

Our quarterly results also fluctuate due to the timing of expenses and charges associated with franchisee distress, our global reorganization, gains and losses on asset and business disposals, impairment charges, and settlement losses recorded in connection with acquisitions of franchise restaurants. Our results of operations for the quarter ended September 30, 2005 also reflect a $13 million loss on the early extinguishment of debt, recorded in connection with our July 2005 refinancing.

Liquidity and Capital Resources

Overview

Historically, our cash flow from operations has been positive. Our cash flow from operations for the second half of fiscal 2006 will be adversely affected by our payment of the compensatory make-whole payment and the sponsor management termination fee. We had cash and cash equivalents of $207 million and $432 million at December 31, 2005 and June 30, 2005, respectively. In addition, we currently have a borrowing capacity of $107 million under our $150 million revolving credit facility (net of $43 million in letters of credit issued under the revolving credit facility). We do not expect to need to borrow funds to meet our expected capital expenditures for the foreseeable future.

We expect that cash on hand, cash flow from operations and our borrowing capacity under our revolving credit facility will allow us to meet cash requirements, including capital expenditures and debt service payments, in the short-term and for the foreseeable future.

If additional funds are needed for strategic initiatives or other corporate purposes, we believe we could borrow additional funds or raise funds through the issuance of our securities or asset sales.

July 2005 Refinancing, February 2006 Financing and Dividend, the Compensatory Make-Whole Payment and the Sponsor Management Termination Fee

On July 13, 2005, BKC entered into a $1.15 billion senior secured credit facility guaranteed by us, which we refer to as the July 2005 refinancing and which consisted of a $150 million revolving credit facility, a $250 million term loan, which we refer to as term loan A, and a $750 million term loan, which we refer to as term loan B. We used $1 billion in proceeds from the term loans A and B, $47 million of the revolving credit facility, and cash on hand to repay in full the existing senior secured credit facility and payment-in-kind notes payable to Diageo plc, the private equity funds controlled by the sponsors and certain directors that we incurred in connection with our acquisition of BKC and to pay $16 million in financing costs.

On February 15, 2006, we and BKC amended and restated the senior secured credit facility in order to borrow an additional $350 million and obtain certain amendments to permit us to declare and pay the February 2006 dividend and pay the compensatory make-whole payment and the sponsor management termination fee. This senior secured credit facility contains customary financial and other covenants and restrictions. For more information on our senior secured credit facility, see “Description of Our Credit Facility.”

We used the $350 million in additional borrowings under the February 2006 financing and $55 million in cash on hand to pay the $367 million February 2006 dividend and the $33 million compensatory make-whole payment on February 21, 2006 and $5 million in financing costs and expenses. We expect to use the net proceeds from this offering to repay, in part, amounts outstanding under our senior secured credit facility. We also expect to pay the one-time $30 million sponsor management termination fee upon completion of this offering.

Other Debt Facilities

As of December 31, 2005, we had agreements with foreign banks to provide lines of credit in an aggregate amount of $4 million. We had no outstanding borrowings under these lines of credit at December 31, 2005.

Comparative Cash Flows

Operating Activities. Cash flows from operating activities were $105 million and $62 million in the first six months of fiscal 2006 and fiscal 2005, respectively. The $43 million increase was due primarily to improved collections from franchisees and increases in net income. Our cash flow from operations will be negatively affected by our payment of the compensatory make-whole payment and the sponsor management termination fee in the second half of fiscal 2006.

Cash flows from operating activities increased to $218 million in fiscal 2005, compared to $199 million and $81 million for fiscal 2004 and fiscal 2003, respectively, primarily as a result of improved operating results.

Investing Activities. Cash used in investing activities was $29 million in the first six months of fiscal 2006 and cash provided by investing activities was $61 million in the first six months of fiscal 2005. The $90 million decrease was due primarily to the sale of securities available for sale in the first six months of fiscal 2005, offset by reduced spending on acquisitions of franchisee operations and debt in the first six months of fiscal 2005.

Cash used in investing activities was $5 million in fiscal 2005 compared to $184 million in fiscal 2004 and $587 million in fiscal 2003. In fiscal 2005, $122 million of securities purchased as short-term investments in fiscal 2004 were sold for $122 million. In fiscal 2003, we used $439 million to partially fund the acquisition of our predecessor and pay costs incurred in connection with the acquisition. In fiscal 2005, we acquired franchise restaurants for $28 million compared to $6 million in fiscal 2004 and $14 million in fiscal 2003. We also acquired third party debt and loaned an aggregate of $24 million to franchisees in fiscal 2005 compared to $19 million in fiscal 2004.

Historically, the most significant ongoing component of our investing activities was for capital expenditures to open new company restaurants, remodel and maintain restaurant properties to our standards and to develop our

corporate infrastructure in connection with our acquisition of BKC, particularly investment in information technology. The following table presents capital expenditures, by type of expenditure.

	For the fiscal year ended June 30,						For the six months ended December 31,

		2003		2004		2005		2004		2005

				(in millions)
New restaurants	$	23	$	22	$	26	$	7	$	6
Real estate purchases		4		5		5		2		7
Maintenance capital		81		43		44		15		11
Other, including corporate		34		11		18		5		6

Total	$	142	$	81	$	93	$	29	$	30

Maintenance capital includes renovations to company restaurants, including restaurants acquired from franchisees, investments in new equipment and normal annual capital investments for each company restaurant to maintain its appearance in accordance with our standards, which typically range from $10,000 to $15,000 per restaurant per year. Maintenance capital also includes investments in improvements to properties we lease and sublease to franchisees, including contributions we make towards improvements completed by franchisees.

Other capital expenditures include significant investments in information technology systems, as well as investments in technologies for deployment in restaurants, such as point-of-sale software.

Capital expenditures increased $12 million to $93 million in fiscal 2005, primarily as a result of increased development of new restaurants, improvements to acquired restaurants, and funding of corporate projects, partially offset by decreased spending on new equipment for company restaurants. Our fiscal 2003 capital expenditures reflect investments to remodel company restaurants and properties leased or subleased to franchisees, as well as substantial investments in corporate projects, primarily related to information technology as we continued to invest in a new corporate infrastructure, which our predecessor initiated in fiscal 2003.

We expect capital expenditures of approximately $100 million in fiscal 2006, of which $30 million was spent and $5 million was contractually committed as of December 31, 2005. In addition, we expect cash requirements for acquiring restaurants in fiscal 2006 to range from $10 million to $15 million, of which $7 million was spent as of December 31, 2005.

Financing Activities. Financing activities used cash of $301 million and no cash in the first six months of fiscal 2006 and fiscal 2005, respectively. The $301 million increase was due primarily to cash used in our July 2005 refinancing.

Financing activities used cash of $2 million and provided cash of $3 million and $719 million in fiscal 2005, fiscal 2004 and fiscal 2003, respectively. Cash provided by financing activities in fiscal 2003 related primarily to the financing of our acquisition of BKC.

Contractual Obligations and Commitments

The following table presents information relating to our contractual obligations as of June 30, 2005, except for long-term debt, which includes our debt arising from the July 2005 refinancing and February 2006 financing.

	Payment due by period

Contractual Obligations		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years

				(in millions)
Capital lease obligations	$	112	$	11	$	20	$	19	$	62
Operating lease obligations(1)		1,359		143		266		220		730

	Payment due by period

Contractual Obligations		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years

				(in millions)
Long-term debt, including current portion and interest(2)		1,867		77		244		294		1,252

Total	$	3,338	$	231	$	530	$	533	$	2,044


(1)	Operating lease obligations include lease payments for company restaurants and franchise restaurants that sublease the property from us. Rental income from these franchisees was $88 million and $91 million for fiscal 2004 and fiscal 2005, respectively.

(2)	We intend to use the net proceeds of this offering to repay certain long term debt. See “Use of Proceeds.”

As of June 30, 2005, we leased 1,132 restaurant properties to franchisees. At June 30, 2005, we also leased land, buildings, office space and warehousing under operating leases, and leased or subleased land and buildings that we own or lease, respectively, to franchisees under operating leases. In addition to the minimum obligations included in the table above, contingent rentals may be payable under certain leases on the basis of a percentage of sales in excess of stipulated amounts. See Note 14 to our audited consolidated financial statements for further information about our leasing arrangements.

As of June 30, 2005, the projected benefit obligation of our defined benefit pension plans exceeded pension assets. We made contributions totaling $17 million into our pension plans during fiscal year 2005. Estimates of reasonably likely future pension contributions are dependent on future events outside our control, such as future pension asset performance, future interest rates, future tax law changes, and future changes in regulatory funding requirements. We estimate contributions to our pension plans in fiscal year 2006 will be $1 million and estimated benefit payments will be $4 million.

In November 2005, we announced the curtailment of our pension plans in the United States and we froze future pension benefit accruals, effective December 31, 2005. These plans will continue to pay benefits and invest plan assets. We recognized a one-time pension curtailment gain of approximately $6 million in December 2005. In conjunction with this curtailment gain, we accrued a contribution totaling $6 million as of December 31, 2005, on behalf of those pension participants who were affected by the curtailment. The curtailment gain and contribution offset each other to result in no net effect on our results of operation.

We commit to purchase advertising and other marketing services from third parties in advance on behalf of the Burger King system in the United States and Canada. These commitments are typically made in September of each year for the upcoming twelve-month period. If our franchisees fail to pay required advertising contributions we could be contractually committed to fund any shortfall to the degree we are unable to cancel or reschedule the timing of such committed amounts. We have similar arrangements in other international markets where we operate company restaurants. At September 30, 2005, the time of the year when our advertising commitments are typically highest and at December 31, 2005, our advertising commitments totaled $135 million and $99 million, respectively.

In May 2005, we entered into an agreement to lease a building to serve as our global headquarters, which will allow us to move out of two facilities that currently serve in such capacity. The estimated annual rent for the 15-year initial lease term is expected to approximate the rents for the two facilities to be replaced. We will also incur moving and tenant improvement costs in connection with our move to the building, to be partially offset by a tenant improvement allowance under the building’s lease, estimated at approximately $8 million, to be finalized upon completion of the building’s construction. We have not reflected the rent for this building in the table above, because it will not be finalized until construction is complete, which is expected in 2008. Similarly, we have not projected the costs of moving and making tenant improvements to the building for inclusion in the table above. One of our directors has an ownership interest in this building. See “Certain Relationships and Related Transactions—New Global Headquarters”.

Other Commercial Commitments and Off-Balance Sheet Arrangements

Guarantees

We guarantee certain lease payments of franchisees, arising from leases assigned in connection with sales of company restaurants to franchisees, by remaining secondarily liable under the assigned leases of varying terms, for base and contingent rents. The maximum contingent rent amount payable is not determinable as the amount is based on future revenues. In the event of default by the franchisees, we have typically retained the right to acquire possession of the related restaurants, subject to landlord consent. The aggregate contingent obligation arising from these assigned lease guarantees was $115 million at December 31, 2005, expiring over an average period of seven years.

Other commitments, arising out of normal business operations, were $9 million as of December 31, 2005. These commitments consist primarily of guarantees covering foreign franchisees’ obligations, obligations to suppliers, and acquisition-related guarantees.

Letters of Credit

At December 31, 2005, we had $44 million in irrevocable standby letters of credit outstanding, of which $43 million were issued to certain insurance carriers to guarantee payment for various insurance programs such as health and commercial liability insurance and were issued under our $150 million revolving credit facility and $1 million was posted by Diageo plc on behalf of us and which relate to open casualty claim matters. Additionally, $1 million in letters of credit were issued relating to our headquarters. As of December 31, 2005, none of these irrevocable standby letters of credit had been drawn.

As of December 31, 2005, we had posted bonds totaling $13 million, which related to certain marketing activities.

Commitments Related to the FFRP Program

In connection with the FFRP program we have made commitments:

to fund loans to certain franchisees for the purpose of remodeling restaurants;
to remodel certain properties we lease or sublease to franchisees;
to provide temporary rent reductions to certain franchisees; and
to fund shortfalls in certain franchisee cash flow beyond specified levels (to annual and aggregate maximums).

As of December 31, 2005 our remaining commitments under the FFRP program totaled $36 million, the majority of which are scheduled to expire over the next five years.

Vendor Relationships

In fiscal 2000, we entered into long-term, exclusive contracts with The Coca-Cola Company and with Dr Pepper/Seven Up, Inc. to supply company and franchise restaurants with their products and obligating Burger King restaurants in the United States to purchase a specified number of gallons of soft drink syrup. These volume commitments are not subject to any time limit. As of June 30, 2005, we estimate that it will take approximately 17 years and 19 years to complete the Coca-Cola and Dr Pepper purchase commitments, respectively.

Other

We expect to pay the $30 million sponsor management termination fee upon the completion of this offering.

We are self-insured for most workers’ compensation, health care claims, and general liability losses. These self-insurance programs are supported by third-party insurance policies to cover losses above our self-insured amounts. If we determine that the liability exceeds the recorded obligation, the cost of self-insurance programs will increase in the future, as insurance reserves are increased to revised expectations, resulting in an increase in self-insurance program expenses.

Impact of Inflation

We believe that our results of operations are not materially impacted by moderate changes in the inflation rate. Inflation and changing prices did not have a material impact on our operations in fiscal 2003, fiscal 2004, fiscal 2005 or the six months ended December 31, 2005. Severe increases in inflation, however, could affect the global and U.S. economies and could have an adverse impact on our business, financial condition and results of operations.

Critical Accounting Policies and Estimates

This discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosures of contingent assets and liabilities. We evaluate our estimates on an ongoing basis and we base our estimates on historical experience and various other assumptions we deem reasonable to the situation. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Changes in our estimates could materially impact our results of operations and financial condition in any particular period.

Based on the high degree of judgment or complexity in their application, we consider our critical accounting policies and estimates to be:

Business Combinations and Intangible Assets

The December 2002 acquisition of our predecessor required the application of the purchase method of accounting in accordance with Financial Accounting Standard Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations. The purchase method of accounting involves the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed. This allocation process involves the use of estimates and assumptions to derive fair values and to complete the allocation. Due to the high degree of judgment and complexity involved with the valuation process, we hired a third party valuation firm to assist with the determination of the fair value of the net assets acquired.

In the event that actual results vary from any of the estimates or assumptions used in any valuation or allocation process under SFAS No. 141, we may be required to record an impairment charge or an increase depreciation or amortization in future periods, or both. See Note 1 and Note 7 to our audited consolidated financial statements included elsewhere in this prospectus for further information about purchase accounting allocations, related adjustments and intangible assets recorded in connection with our acquisition of BKC.

Long-Lived Assets

Long-lived assets (including definite-lived intangible assets) are reviewed for impairment at least annually, or more frequently if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Restaurant assets are grouped together for impairment testing at a market-level in the United States or at a market or country level, internationally. Some of the events or changes in circumstances that would trigger an impairment review include, but are not limited to:

significant under-performance relative to expected and/or historical results (negative comparable sales or cash flows for two years);

significant negative industry or economic trends; or
knowledge of transactions involving the sale of similar property at amounts below our carrying value.

When assessing the recoverability of our long-lived assets, we make assumptions regarding estimated future cash flows and other factors. Some of these assumptions involve a high degree of judgment and also bear a significant impact on the assessment conclusions. Included among these assumptions are estimating future cash flows, including the projection of comparable sales, restaurant operating expenses, and capital requirements for property and equipment. We formulate estimates from historical experience and assumptions of future performance, based on business plans and forecasts, recent economic and business trends, and competitive conditions. In the event that our estimates or related assumptions change in the future, we may be required to record an impairment charge in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

Impairment of Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets consist of values assigned to brands which we own and goodwill recorded upon acquisitions. The most significant indefinite lived asset we have is our brand asset with a carrying book value of $900 million at December 31, 2005. We test our indefinite-lived intangible assets for impairment on an annual basis or more often if an event occurs or circumstances change that indicates impairment might exist. Our impairment test for indefinite-lived intangible assets consists of a comparison of the fair value of the asset with its carrying amount. When assessing the recoverability of these assets, we make assumptions regarding estimated future cash flow similar to those when testing long-lived assets, as described above. In the event that our estimates or related assumptions change in the future, we may be required to record an impairment charge in accordance with SFAS No. 142, Goodwill and Other Intangible Assets.

Reserves for Uncollectible Accounts and Revenue Recognition

We collect from franchisees royalties, advertising fund contributions and, in the case of approximately 11% of our franchise restaurants, rents. We recognize revenue that is estimated to be reasonably assured of collection, and also record reserves for estimated uncollectible revenues and advertising contributions, based on monthly reviews of franchisee accounts, average sales trends, and overall economic conditions. In the event that franchise restaurant sales declined, or the financial health of franchisees otherwise deteriorated, we may be required to increase our reserves for uncollectible accounts and/or defer or not recognize revenues, the collection of which we deem to be less than reasonably assured.

Accounting for Income Taxes

We record income tax liabilities utilizing known obligations and estimates of potential obligations. A deferred tax asset or liability is recognized whenever there are future tax effects from existing temporary differences and operating loss and tax credit carry-forwards. When considered necessary, we record a valuation allowance to reduce deferred tax assets to the balance that is more likely than not to be realized. We must make estimates and judgments on future taxable income, considering feasible tax planning strategies and taking into account existing facts and circumstances, to determine the proper valuation allowance. When we determine that deferred tax assets could be realized in greater or lesser amounts than recorded, the asset balance and income statement reflects the change in the period such determination is made. Due to changes in facts and circumstances and the estimates and judgments that are involved in determining the proper valuation allowance, differences between actual future events and prior estimates and judgments could result in adjustments to this valuation allowance.

We use an estimate of the annual effective tax rate at each interim period based on the facts and circumstances available at that time, while the actual effective tax rate is calculated at fiscal year-end.

Self-Insurance Programs

We record estimates of insurance liabilities based on independent actuarial studies and assumptions based on historical and recent claim cost trends and changes in benefit plans that could affect self-insurance liabilities. We review all self-insurance reserves at least quarterly, and review our estimation methodology and assumptions at least annually. If we determine that the liability exceeds the recorded obligation, the cost of self-insurance programs will increase in the future, as insurance reserves are increased to revised expectations, resulting in an increase in self-insurance program expenses.

Newly Issued Accounting Standards

In December 2004, the FASB issued Statement No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”). SFAS No. 123(R) supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB No. 25”). SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. Under SFAS No. 123(R) the effective date for a nonpublic entity that becomes a public entity after June 15, 2005 is the first interim or annual reporting period beginning after becoming a public company. Further, SFAS No. 123(R) states that an entity that makes a filing with a regulatory agency in preparation for the sale of any class of equity securities in a public market is considered a public entity for purposes of SFAS No. 123(R). We expect to implement SFAS No. 123(R) effective July 1, 2006, the beginning of our next fiscal year.

As permitted by SFAS No. 123, we currently account for share-based payments to employees using APB No. 25’s intrinsic value method and, as such, generally recognize no compensation expense for employee stock options. As we currently apply SFAS No. 123 pro forma disclosure using the minimum value method of accounting, we are required to adopt SFAS No. 123(R) using the prospective transition method. Under the prospective transition method, non-public entities that previously applied SFAS No. 123 using the minimum value method continue to account for non-vested awards outstanding at the date of adoption of SFAS No. 123(R) in the same manner as they had been accounted to prior to adoption. For us, since we currently account for our equity awards using the minimal value method under APB No. 25, we will continue to apply APB No. 25 in future periods to equity awards outstanding at the date we adopt SFAS No. 123(R), and as a result not recognize compensation expense for awards issued prior to the date of this filing.

After the filing date of this registration statement, we will be required to apply the modified prospective transition method to any share-based payments issued subsequent to the filing of this registration statement but prior to the effective date of our adoption of SFAS No. 123(R). Under the modified prospective transition method, compensation expense is recognized for any un-vested portion of the awards granted between filing date and adoption date of SFAS No. 123(R) over the remaining vesting period of the awards beginning the adoption date, for us July 1, 2006.

For any awards granted subsequent to the adoption of SFAS No. 123(R), compensation expense will be recognized generally over the vesting period of the award. As a result of the transition method described above, we do not expect to recognize any compensation expense under SFAS No. 123(R) for awards outstanding at the date of this filing, unless the awards are modified after the date of this filing.

Quantitative and Qualitative Disclosures About Market Risk

Market Risk

We are exposed to financial market risks associated with foreign currency exchange rates, interest rates and commodity prices. In the normal course of business and in accordance with our policies, we manage these risks through a variety of strategies, which may include the use of derivative financial instruments to hedge our underlying exposures. Our policies prohibit the use of derivative instruments for trading purposes, and we have procedures in place to monitor and control their use.

Foreign Currency Exchange Risk

Movements in foreign currency exchange rates may affect the translated value of our earnings and cash flow associated with our foreign operations, as well as the translation of net asset or liability positions that are denominated in foreign countries. In countries outside of the United States where we operate company restaurants, we generate revenues and incur operating expenses and selling, general and administrative expenses denominated in local currencies. In fiscal 2005, operating income in these countries would have decreased or increased $1 million if all foreign currencies uniformly weakened or strengthened 10% relative to the U.S. dollar.

In countries where we do not have company restaurants, our franchise agreements require franchisees to pay us in U.S. dollars. Royalty payments received from the franchisees are based upon a percentage of sales that are denominated in the local currency and are converted to U.S. dollars during the month of sales. As a result we bear the foreign currency exposure associated with revenues and expenses in these countries. In fiscal 2005, operating income in these countries would have decreased or increased $3 million if all foreign currencies uniformly weakened or strengthened 10% relative to the U.S. dollar.

Interest Rate Risk

We have a market risk exposure to changes in interest rates, principally in the United States. We attempt to minimize this risk and lower our overall borrowing costs through the utilization of derivative financial instruments, primarily interest rate swaps. These swaps are entered into with financial institutions and have reset dates and critical terms that match those of the underlying debt. Accordingly, any change in market value associated with interest rate swaps is offset by the opposite market impact on the related debt.

During the fiscal quarter ended September 30, 2005, we entered into interest rate swaps with a notional value of $750 million that qualify as cash flow hedges under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The interest rate swap helps us manage exposure to interest rate risk by converting the floating interest-rate component of approximately 75% of our total debt obligations outstanding at December 31, 2005 to fixed rates. A 1% change in interest rates on our existing debt of $1.35 billion would result in an increase or decrease in interest expense of approximately $6 million in a given year, as we have hedged $750 million of our debt.

Commodity Price Risk

We purchase certain products, particularly beef, which are subject to price volatility that is caused by weather, market conditions and other factors that are not considered predictable or within our control. Additionally, our ability to recover increased costs is typically limited by the competitive environment in which we operate. We do not utilize commodity option or future contracts to hedge commodity prices and do not have long-term pricing arrangements. As a result, we purchase beef and other commodities at market prices, which fluctuate on a daily basis.

The estimated change in company restaurant food, paper and product costs from a hypothetical 10% change in average beef prices would have been approximately $8 million and $5 million in fiscal 2005 and the first six months fiscal 2006, respectively. The hypothetical change in food, paper and product costs could be positively or negatively affected by changes in prices or product sales mix.

BUSINESS

Overview

We are the world’s second largest fast food hamburger restaurant, or FFHR, chain as measured by the number of restaurants and system-wide sales and one of the three largest quick service restaurant, or QSR, companies. As of December 31, 2005, we owned or franchised a total of 11,141 restaurants in 67 countries and U.S. territories, of which 1,228 restaurants were company-owned and 9,913 were owned by our franchisees. Of these restaurants, 7,301 or 66% were located in the United States and 3,840 or 34% were located in our international markets. Our restaurants feature flame-broiled hamburgers, chicken and other specialty sandwiches, french fries, soft drinks and other reasonably-priced food items. During our more than 50 years of operating history, we have developed a scalable and cost-efficient quick service hamburger restaurant model that offers customers fast food at modest prices.

We believe that the Burger King and Whopper brands are two of the world’s most widely-recognized consumer brands. These brands, together with our signature flame-broiled products and the Have It Your Way brand promise, are among the strategic assets that we believe set Burger King apart from other regional and national FFHR chains. Have It Your Way is increasingly relevant as consumers continue to demand personalization and choice over mass production. In a competitive industry, we believe we have differentiated ourselves through our attention to individual customers’ preferences, by offering great tasting fresh food served fast and in a friendly manner and by conducting recent advertising campaigns aimed at becoming a part of the popular culture.

We generate revenues from three sources: sales at our company restaurants; royalties and franchise fees paid to us by our franchisees; and property income from certain franchise restaurants that lease or sublease property from us. Approximately 90% of our restaurants are franchised and we have a higher percentage of franchise restaurants to company restaurants than our major competitors. We believe that this restaurant mix provides us with a strategic advantage because the capital required to grow and maintain our system is funded primarily by franchisees while giving us a sizeable base of company restaurants to demonstrate credibility with our franchisees in launching new initiatives. As a result of the high percentage of franchise restaurants in our system, we have lower capital requirements compared to our major competitors. Moreover, due to the steps that we have taken to improve the health of our franchise system in the United States and Canada, we expect that this mix will produce more stable earnings and cash flow in the future.

Our History

Burger King Corporation, which we refer to as BKC, was founded in 1954 when James McLamore and David Edgerton opened the first Burger King restaurant in Miami, Florida. The Whopper sandwich was introduced in 1957. BKC opened its first international restaurant in the Bahamas in 1966. BKC opened the first Burger King restaurant in Canada in 1969, in APAC in Australia in 1971 and in EMEA in Madrid, Spain in 1975. BKC also established its brand identity with the introduction of the “bun halves” logo in 1969 and the launch of the first Have It Your Way campaign in 1974. BKC introduced drive-thru service, designed to satisfy customers “on-the-go” in 1975. In 1985, BKC rounded out its menu offerings by adding breakfast on a national basis.

In 1967, Mr. McLamore and Mr. Edgerton sold BKC to Minneapolis-based Pillsbury Company. BKC became a subsidiary of Grand Metropolitan plc in 1989 when it acquired Pillsbury. Grand Metropolitan plc merged with Guinness plc to form Diageo plc in 2000. These conglomerates were focused more on their core operations than on BKC. On December 13, 2002, Diageo plc sold BKC to private equity funds controlled by the sponsors, and for the first time since 1967 BKC became an independent company, which has allowed us to focus exclusively on our restaurant business.

Our Industry

We operate in the FFHR category of the QSR segment of the restaurant industry. In the United States, the QSR segment is the largest segment of the restaurant industry and has demonstrated steady growth over a long period of time. According to NPD Group, Inc., which prepares and disseminates the Consumer Report of Eating Share Trends (CREST), QSR sales have grown at an average annual rate of 4.8% over the past 10 years, totaling approximately $206 billion for the year ended October 31, 2005 and up 4.5% over the same period last year. According to NPD Group, Inc., QSR sales are projected to increase at an annual rate of 4% between 2006 and 2011. We believe this attractive historical and projected growth is the result of a number of favorable trends:

an increasing percentage of meals being eaten out of the home;
growing disposable incomes;
favorable demographic trends in the Echo Boomer generation (those born between the late 1970s and early 1990s), who are typically inclined toward QSR dining;
new marketing vehicles such as the internet and video games, which lend themselves to marketing QSR concepts; and
the continued expansion of QSR menu offerings into more varied and premium products.

Furthermore, we believe the QSR sector is generally resistant to economic downturns, due to the value that QSRs deliver to consumers, as well as some “trading down” by customers from other restaurant industry segments during adverse economic conditions, as they seek to preserve the “away from home” dining experience on tighter budgets.

According to NPD Group, Inc., the FFHR category is the largest category in the QSR segment, generating sales of over $50 billion in the United States for the year ended October 31, 2005, representing 27% of total QSR sales. The FFHR category grew 3.6% in terms of sales during the same period and, according to NPD Group, Inc., is expected to increase at an average rate of 4.2% per year over the next five years. For the year ended October 31, 2005, the top three FFHR chains (McDonald’s, Burger King and Wendy’s) accounted for 73% of the category’s total sales, with 15% attributable to Burger King.

The FFHR category is highly competitive with respect to price, service, location and food quality. During the past year, the FFHR category has experienced flat or declining customer traffic, although sales are up due to the sale of premium products. In order to increase sales, we believe that FFHR chains have focused on improving menu offerings and drive-thru efficiency, growing breakfast and late-night sales and accepting credit/debit cards.

Our Competitive Strengths

We believe that we are well-positioned to capitalize on the following competitive strengths to achieve future growth:

Distinctive brand with global platform. We believe that our Burger King and Whopper brands are two of the most widely-recognized consumer brands in the world. In 2005, Brandweek magazine ranked Burger King number 15 among the top 200 brands in the United States. We also believe that consumers associate our brands with our signature flame-broiled products and Have It Your Way brand promise. According to National Adult Tracking data, our flame-broiled preparation method is preferred over frying, and our flagship product, the Whopper sandwich, is the number one large branded burger in the United States. We believe the ability of our major competitors to duplicate our flame-broiled method is limited by the substantial cost necessary to convert their existing systems and retrain their staff.

Attractive business model. Approximately 90% of our restaurants are franchised, which is a higher percentage than our major competitors. We believe that our franchise restaurants will generate a consistent, profitable royalty stream to us, with minimal associated capital expenditures or incremental expense by us. We also believe this will provide us with significant cash flow to reinvest in strengthening our brand and enhancing shareholder value.
Established and scalable international business. We have one of the largest restaurant networks in the world, with more than 3,800 franchise and company-owned restaurants outside the United States. We believe that the demand for new international franchise restaurants is growing and our established infrastructure is capable of supporting substantial restaurant expansion in the years ahead.
Experienced management team with significant ownership. Led by Greg Brenneman, our Chairman and Chief Executive Officer, we have assembled a seasoned management team with significant experience in turning around and growing companies. Mr. Brenneman has extensive turn-around experience, and served as President and Chief Operating Officer of Continental Airlines and Chief Executive Officer of PriceWaterhouseCoopers Consulting. John Chidsey, our President and Chief Financial Officer, has extensive experience in managing franchise businesses, including the Avis Rent-A-Car and Budget Rent-A- Car systems and Jackson Hewitt Tax Services. Russ Klein, our Chief Marketing Officer, has 26 years of retail and consumer marketing experience. Jim Hyatt, our Global Operations Officer, has more than 30 years of brand experience as both a franchisee and senior executive of Burger King. In addition, other members of our management team have worked at McDonald’s, Taco Bell, The Coca-Cola Company and KFC. Nine out of 13 members of our management team are new to BKC in the last three years. Following this offering, our executive officers will own approximately % shares of our outstanding common stock, on a fully diluted basis, which we believe aligns their interests with those of our other shareholders.

Our Business Strategy

We intend to achieve further growth and strengthen our competitive position through the continued implementation of the following key elements of our business strategy:

Drive sales growth and profitability of our U.S. business. Although we have achieved seven consecutive quarters of comparable sales growth and increased average restaurant sales by 11% since fiscal 2003 in our U.S. business, we believe that we have a long way to go to reach our comparable sales and average restaurant sales growth potential in the United States. We also believe that our purchasing scale, coupled with our initiatives to promote restaurant efficiency, will further improve restaurant-level profitability. We have reduced the capital costs to build a restaurant, which is leading to increased restaurant development in the United States.

We intend to continue to meet our customers’ needs and drive sales growth and profitability by implementing the following strategic initiatives:

Promote innovative advertising campaigns. We believe that our innovative and award-winning advertising campaigns have helped drive improvements in comparable sales and average restaurant sales. Our advertising campaigns have outperformed our main competitors in terms of message recall, brand recall and likeability. Our marketing strategy is focused on our core customer, who we refer to as the SuperFan. SuperFans are consumers who reported eating at a fast food hamburger outlet nine or more times in the past month. We plan to concentrate our marketing on television advertising, which we believe is the most effective way to reach the SuperFan.

Launch new products to fill gaps in our menu. The strength of our menu has been built on the core assets of allowing consumers to customize their hamburgers “their way” and using our distinct flame-broiled cooking platform to make better tasting hamburgers. Our menu strategy seeks to optimize our menu by further leveraging these core assets while improving menu variety. To fill product gaps in our breakfast, late night and snack offerings, we expect to launch a variety of new products, such as

breakfast sandwiches, cheesy hash browns and a new line of soft serve ice cream products. In addition, work is underway to launch over 15 other products and product improvements in the second half of fiscal 2006 and 2007.

Enhance the price/value proposition of our products. We will continue to use a variety of strategies to enhance the price/value proposition offered to our customers, including value meals, limited time offers, free samples and coupon mailings. We have also developed a national BK Value Menu which was launched in February 2006. The BK Value Menu includes six core items priced at no more than $1 and local options to sell other products at varying maximum prices.

Improve restaurant operations. We will continue our efforts to improve restaurant operations by making our restaurants clean and safe, serving hot and fresh food, providing fast and friendly service to our customers and implementing systems to measure our performance. We believe that these initiatives have significantly improved the customer experience and resulted in increased comparable sales and average restaurant sales growth. As a result of these efforts, our key customer satisfaction and operations metrics were at all-time highs in December 2005, and we were rated ahead of McDonald’s and Wendy’s in the overall rankings of the annual speed of drive-thru service survey published by QSR Magazine, a leading industry publication.

Extend hours of operations. For the convenience of our customers and to more effectively compete with other quick service restaurant chains, we have implemented a program to encourage U.S. franchisees to keep extended hours, particularly at the drive-thru window. We believe that reducing the gap between our operating hours and those of our competitors will be a key component in improving customer traffic and driving future growth in comparable sales and average restaurant sales.

Improve restaurant profitability. We believe that significant opportunities exist to enhance restaurant profitability by better utilizing our fixed cost base and continuing to explore ways to reduce variable costs. For example, we have negotiated arrangements with strategic vendors which we believe will deliver cost reductions and profit improvement for our franchisees. In addition, we have developed a labor scheduling system which we believe will reduce labor costs. We have started to implement this system in our U.S. company restaurants and expect to begin introducing it to U.S. franchisees in fiscal 2007. We have also developed a new flexible broiler that we expect will reduce utility costs.

Improve return on investment. We are focused on making Burger King a more attractive investment by improving the return on invested capital for ourselves and our franchisees. We have designed a new restaurant model that allows us and our franchisees to reduce the average non-real estate costs to build a new restaurant from approximately $1.1 million to approximately $800,000. We have opened five new restaurants in this format to date, with an additional eight to 12 scheduled to open in fiscal 2006. The cost reductions achieved from this new restaurant model are now being reviewed to understand which potential reductions can be applied to the remodeling of existing restaurants. As a result of this effort and other cost saving initiatives, we have identified and recommended over $115,000 worth of savings for standard remodels.

Expand our large international platform. We will continue to build upon our substantial international infrastructure, franchise network and restaurant base, focusing mainly on under-penetrated markets where we already have a presence. Internationally we are about one-fourth of the size of our largest competitor, which we believe demonstrates significant growth opportunities for us. We believe that our established infrastructure is capable of supporting substantial restaurant expansion in the years ahead with a limited increase in general and administrative costs. We have developed a detailed global development plan to seed worldwide growth over the next five years. We expect that most of this growth will come from franchisees in our established markets, particularly in Germany, Spain and Mexico, although we also intend to aggressively pursue market expansion opportunities in Brazil. In addition, we will focus on expanding our presence in many of our under-penetrated European and Asian markets.

Continue to build relationships with franchisees. We succeed when our franchisees succeed, and we will continue building our relationships with our franchisees. In the past two years, we have held regional conferences with franchisees to promote our operations and marketing initiatives and share best practices, and we intend to continue holding these conferences in the future. We have established quarterly officer and director visits to franchisees, which have more closely aligned the people in our company to our franchise base. We have implemented advisory committees for marketing, operations, finance and people, which we believe will ensure that franchisee expertise and best practices are incorporated into all U.S. system initiatives prior to rollout. We held our first global franchisee convention in Las Vegas in May 2005, with the second global franchisee convention scheduled for April 2006 in Orlando, Florida. We will continue to dedicate resources toward the creation of a cohesive organization that is focused on supporting the Burger King brand globally.
Become a world-class global company. Since 2004, we have integrated our domestic and international operations into one global company. For fiscal 2006, we have developed a global marketing calendar to create more consistent advertising and brand positioning strategies across our markets. We have also established a global product development team to reduce complexity and increase consistency in our worldwide menu. We expect to leverage our global purchasing power to negotiate lower product costs and savings for our restaurants outside of the United States and Canada. We believe that the organizational realignments that we have implemented will position us to execute our global growth strategy, while remaining responsive to national differences in consumer preferences and local requirements.

Global Operations

We operate in three reportable business segments: United States and Canada; Europe, Middle East and Africa and Asia Pacific, or EMEA/APAC; and Latin America. We organize our lines of business in each segment into three categories: (1) company restaurant operations, (2) franchise operations and (3) property operations.

United States and Canada

Restaurant Operations

Our restaurants are limited-service restaurants of distinctive design and are generally located in high-traffic areas throughout the United States and Canada. At December 31, 2005, 876 company restaurants and 6,758 franchise restaurants were operating in the United States and Canada, which generated system-wide sales in fiscal 2005 of approximately $8.4 billion. We believe our restaurants appeal to a broad spectrum of consumers, with multiple meal segments appealing to different customer groups.

Operating Procedures. All of our restaurants must adhere to strict standardized operating procedures and requirements which we believe are critical to the image and success of the Burger King brand. Each restaurant is required to follow the Manual of Operating Data, an extensive operations manual containing mandatory restaurant operating standards, specifications and procedures prescribed from time to time to assure uniformity of operations and consistent high quality of products at Burger King restaurants. Among the requirements contained in the Manual of Operating Data are standard design, equipment system, color scheme and signage, uniform operating procedures and standards of quality for products and services. Our restaurants are typically open seven days per week with minimum operating hours from 7:00 a.m. to 11:00 p.m. We have recently implemented a program to encourage franchisees to be open for extended hours, particularly at the drive-thru. We believe that reducing the gap between our operating hours and those of our competitors will be a key component in capturing a greater share of FFHR sales in the United States and Canada.

Management. Substantially all of our executive management, finance, marketing, legal and operations support functions are conducted from our global headquarters in Miami, Florida. There is also a field staff consisting of operations, training, real estate and marketing personnel who support company restaurant and franchise operations in the United States and Canada. Our franchise operations are organized into two “zones”, each headed by a senior vice president. There are nine divisions across the two zones, each of which is headed by a division vice president

supported by field personnel who interact directly with the franchisees. Each company restaurant is managed by one restaurant manager and one to three assistant managers, depending upon the restaurant’s sales volume. Management of a franchise restaurant is the responsibility of the franchisee, who is trained in our techniques and is responsible for ensuring that the day-to-day operations of the restaurant are in compliance with the Manual of Operating Data.

Restaurant Menu. The basic menu of all of our restaurants consists of hamburgers, cheeseburgers, chicken and fish sandwiches, breakfast items, french fries, onion rings, salads, desserts, soft drinks, shakes, milk and coffee. In addition, promotional menu items are introduced periodically for limited periods. We continually seek to develop new products as we endeavor to enhance the menu and service of all of our restaurants. In the last three years, we have launched new menu items such as the Angus Steak Burger, the TenderCrisp chicken sandwich, BK Chicken Fries, the BK Big Fish sandwich and the Enormous Omelet Sandwich breakfast item. Franchisees must offer all mandatory menu items.

Restaurant Design and Image. Our restaurants consist of several different building types with various seating capacities. The traditional Burger King restaurant is free-standing, ranging in size from approximately 1,900 to 4,300 square feet, with seating capacity of 40 to 120 customers, drive-thru facilities and adjacent parking areas. Some restaurants are located in institutional locations, such as airports, shopping malls, toll road rest areas and educational and sports facilities. In fiscal 2005, we developed a new smaller restaurant model that reduces the average non-real estate costs associated with constructing a new building by 27% from approximately $1.1 million to approximately $800,000. The seating capacity for this smaller restaurant model is between 40 and 80 customers. We believe this seating capacity is adequate since approximately 60% of our U.S. system-wide sales are made at the drive-thru. We have opened five new restaurants in this format to date, with an additional eight to 12 scheduled to open in fiscal 2006.

We are currently engaged in a program to improve the appearance of our restaurants. This program, known as “softscape”, includes repainting the dining rooms and removing old wallpaper and outdated artwork and replacing it with décor elements that will highlight our core message of Have It Your Way. Our goal is to roll out this program to 70% of U.S. restaurants by the end of fiscal 2006. We have also begun implementing softscape in international locations, beginning with the United Kingdom in December 2005.

New Restaurant Development and Renewals. We employ a sophisticated and disciplined market planning and site selection process through which we identify trade areas and approve restaurant sites throughout the United States and Canada that will provide for quality expansion. We have established a development committee to oversee all new restaurant development within the United States and Canada. The development committee’s objective is to ensure that every proposed new restaurant location is carefully reviewed and that each location meets the stringent requirements established by the committee, which include factors such as site accessibility and visibility, traffic patterns, signage, parking, site size in relation to building type and certain demographic factors. Our model for evaluating sites accounts for potential changes to the site, such as road reconfiguration and traffic pattern alterations.

Each franchisee wishing to develop a new restaurant is responsible for selecting a new site location. However, we work closely with our franchisees to assist them in selecting sites. They must agree to search for a potential site within an identified trade area and to have the final site location approved by the development committee.

Our franchisees closed 925 restaurants in the United States between fiscal 2003 and fiscal 2005. Many of these closures involved franchisees in bankruptcy and the FFRP program. The franchise restaurants that closed had average restaurant sales of approximately $630,000 in the 12 months prior to closure. We and our franchisees opened 180 new restaurants in the United States between fiscal 2003 and fiscal 2005, of which 59 were open for at least 12 months as of December 31, 2005. The average restaurant sales of these new restaurants was approximately $1.3 million for the 12 months ended December 31, 2005. We expect between 50 and 60 restaurants will be opened and approximately 220 restaurants will be closed in the United States in fiscal 2006. We believe that the number of closures will significantly decline in fiscal 2007 and beyond. We have instituted a program to encourage U.S. franchisees to open new restaurants by offering them reduced upfront franchise fees.

In recent years, we have experienced low levels of franchisees renewing their expiring franchise agreements. To encourage franchisees to renew, we have instituted a program in the United States to allow them to pay the $50,000 franchise fee in installments and to delay the required restaurant remodel for up to two years, while providing an incentive to accelerate the completion of the remodel by offering reduced royalties for a limited period. We believe that this program is important to maintaining our base of restaurants since we have over 450 restaurants in the United States with

franchise agreements expiring in fiscal 2006. This number will gradually decrease over the next few years. As a result of this program and our other initiatives, we have seen an increase in the number of restaurants with renewed franchise agreements.

Company Restaurants

As of December 31, 2005, we owned and operated 876 restaurants in the United States and Canada, representing 11% of total U.S. and Canada system restaurants. Included in this number are 30 restaurants that we operate but are owned by a joint venture between us and an independent third party. Our company restaurants in the United States and Canada generated $923 million in revenues in fiscal 2005, or 72% of our total U.S. and Canada revenues and 48% of our total worldwide revenues. We also use our company restaurants to test new products and initiatives before rolling them out to the wider Burger King system. Over the past two fiscal years we have acquired 139 franchise restaurants, principally from distressed franchisees. We do not expect to acquire a significant number of franchise restaurants in the future.

The following table details the locations of our company restaurants in the United States and Canada at December 31, 2005.

Rank	State/Province	Company Restaurant Count	% of Total U.S. and Canada Company Restaurants

1	Florida	227	25.9	%
2	Ontario	68	7.7	%
3	Indiana	60	6.8	%
4	North Carolina	57	6.5	%
5	Georgia	47	5.3	%
6	Virginia	44	5.0	%
7	Massachusetts	41	4.6	%
8	Ohio	38	4.3	%
9	South Carolina	38	4.3	%
10	Connecticut	33	3.8	%
11	New York	33	3.8	%
12	New Hampshire	27	3.1	%
13	Quebec	27	3.1	%
14	New Jersey	25	2.9	%
15	Pennsylvania	19	2.2	%
16	Tennessee	18	2.1	%
17	Texas	14	1.6	%
18	Alberta	12	1.4	%
19	Manitoba	12	1.4	%
20	Kentucky	11	1.3	%
21	Alabama	11	1.3	%
22	Saskatchewan	7	0.8	%
23	Illinois	6	0.7	%
24	British Columbia	1	0.1	%

	Total	876	100.0	%

Of these 876 company restaurants, we own the properties for 343 restaurants and we lease the remaining 533 properties from third-party landlords.

Franchise Operations

General. We grant franchises to operate restaurants using Burger King trademarks, trade dress and other intellectual property, uniform operating procedures, consistent quality of products and services and standard procedures for inventory control and management.

Our growth and success have been built in significant part upon our substantial franchise operations. We franchised our first restaurant in 1961, and as of December 31, 2005 there were approximately 6,758 franchise restaurants, owned by approximately 874 independent franchisees, in the United States and Canada. Franchisees report gross sales on a monthly basis and pay royalties based on reported sales. Franchise restaurants in the United States and Canada generated revenues of $269 million in fiscal 2005, or 21% of our total U.S. and Canada revenues and 14% of our total worldwide revenues. The five largest franchisees in the United States and Canada in terms of restaurant count represented in the aggregate approximately 15% of U.S. and Canadian Burger King restaurants at December 31, 2005.

The following is a list of the five largest franchisees in terms of restaurant count in the United States and Canada at December 31, 2005.

Rank	Name	Restaurant Count	Location

1	Carrols Corporation	336	Northeast and Midwest
2	Heartland Food Corp.	234	Mid South and Northwest
3	Strategic Restaurants Corp.	224	Midwest and Southeast
4	Bravokilo Corporation	124	Midwest
5	Army Air Force Exchange Services	123	Across the United States

	Total	1,041

Franchise Agreement Terms. For each franchise restaurant, we enter into a franchise agreement covering a standard set of terms and conditions. The typical franchise agreement in the United States and Canada has a 20-year term (for both initial grants and renewals of franchises) and contemplates a one-time franchise fee of $50,000, which must be paid in full before the restaurant opens for business, or in the case of renewal, before expiration of the current franchise term.

Recurring fees consist of monthly royalty and advertising payments. Franchisees in the United States and Canada are generally required to pay us an advertising contribution equal to a percentage of gross sales, typically 4%, on a monthly basis. In addition, most existing franchise restaurants in the United States and Canada pay a royalty of 3.5% and 4% of gross sales, respectively, on a monthly basis. As of July 1, 2000, a new royalty rate structure became effective in the United States for most new franchise agreements, including both new restaurants and renewals of franchises, but limited exceptions were made for agreements that were grandfathered under the old fee structure or entered into pursuant to certain early renewal incentive programs. In general, new franchise restaurants opened and franchise agreement renewals after June 30, 2003 will generate royalties at the rate of 4.5% of gross sales for the full franchise term.

Franchise agreements are not assignable without our consent, and we have a right of first refusal if a franchisee proposes to sell a restaurant. Defaults (including non-payment of royalties or advertising contributions, or failure to operate in compliance with the terms of the Manual of Operating Data) can lead to termination of the franchise agreement.

Property Operations

Our property operations consist of restaurants where we lease the land and often the building to the franchisee. Our real estate operations in the United States and Canada generated $83 million of our revenues in fiscal 2005, or 4.3% of total worldwide revenue.

For properties that we lease from third-party landlords and sublease to franchisees, leases generally provide for fixed rental payments and may provide for contingent rental payments based on a restaurant’s annual gross sales. Franchisees who lease land only or land and building from us do so on a “triple net” basis. Under these triple net leases, the franchisee is obligated to pay all costs and expenses, including all real property taxes and assessments, repairs and maintenance and insurance. Of the 880 properties that we lease or sublease to franchisees in the United States and Canada, we own 470 properties and lease either the land or the land and building from third-party landlords on the remaining 410 properties.

Europe, Middle East and Africa/Asia Pacific (EMEA/APAC) Regions

Restaurant Operations

These regions, and the markets within these regions, differ substantially in many respects, including customer taste preferences, consumer disposable income, occupancy costs, food costs, operating margins and the level of competitive activity. The following discussion is intended as a summary of our EMEA/APAC business as a whole. However, some of the information discussed below may not be applicable to individual countries within our EMEA/APAC operations.

EMEA. EMEA is the second largest geographic area in the Burger King system behind the United States. At December 31, 2005, EMEA had 2,115 restaurants in 27 countries and territories, including 287 company restaurants located in the United Kingdom, Germany, Spain and the Netherlands. For fiscal 2005, total system sales in EMEA were approximately $2.4 billion. The United Kingdom is the largest market in EMEA with 648 restaurants at December 31, 2005. Between fiscal 1999 and fiscal 2005, the number of restaurants in EMEA grew 57% from 1,304 to 2,041. In the first six months of fiscal 2006, 75 restaurants were opened (net of closures).

We are focused on improving our sales performance in targeted markets in EMEA. Although our restaurants in Germany have generally performed well, we experienced declining comparable sales in this country during fiscal 2005 after several years of high comparable sales growth. We believe this challenge was due in part to high unemployment and other adverse economic conditions which negatively impacted consumer confidence to which our largest competitor, McDonald’s, responded with aggressive discounting. We developed a comprehensive business strategy to reverse this trend, including new product introductions, coupon mailings and value focused marketing, which improved our average restaurant sales and took market share from McDonald’s. In the United Kingdom, our business faces challenges due to franchisee financial distress, a negative brand image resulting from concerns about obesity and food-borne illness, high labor and real estate costs and increased competition from bakeries and other new entrants that are diversifying into healthier options in response to nutritional concerns. We plan to address these challenges in the United Kingdom by improving operations and the image of our restaurants, filling menu gaps to more closely match consumer tastes and focusing on value offerings to drive traffic. We are also working with a small number of our franchisees in the United Kingdom to assist them with their financial difficulties.

APAC. At December 31, 2005, APAC had 623 restaurants in 12 countries and territories, including China, Malaysia, Thailand, Australia, Philippines, Taiwan, Singapore, New Zealand, Japan and South Korea, with total APAC sales of approximately $650 million for fiscal 2005. All of the restaurants in the region other than our two restaurants in China are franchised. Australia is the largest market in APAC, with 295 restaurants at December 31, 2005, all of which operate under Hungry Jack’s, a brand that we own in Australia and New Zealand. Australia is the only market in which we operate under a brand other than Burger King. Between fiscal 1999 and fiscal 2005, the number of restaurants in APAC increased by 31% from 469 to 615. We believe there is significant potential for growth in APAC, particularly in our existing markets of Korea, Taiwan, Hong Kong, Singapore, Malaysia and the

Philippines. We have recently created the position of President of Asia Pacific and hired a senior executive who is assembling an experienced team to manage the region.

Our restaurants located in EMEA/APAC generally adhere to the standardized operating procedures and requirements followed by U.S. restaurants. However, regional and country-specific market conditions often require some variation in our standards and procedures. Some of the major differences between U.S. and EMEA/APAC operations are discussed below.

Management Structure. Our EMEA/APAC operations are managed from restaurant support centers located in Madrid, London, Munich and Rotterdam (for EMEA) and Singapore and Shanghai (for APAC). These centers are staffed by teams who support both franchised operations and company restaurants.

Menu and Restaurant Design. Restaurants must offer certain global Burger King menu items. In many countries, special products developed to satisfy local tastes and respond to competitive conditions are also offered. Many restaurants are in-line facilities in smaller, attached buildings without a drive-thru or in food courts rather than free-standing buildings. In addition, the design, facility size and color scheme of the restaurant building may vary from country to country due to local requirements and preferences.

New Restaurant Development. Unlike the United States and Canada, where all new development must be approved by the development committee, our market planning and site selection process in EMEA/APAC is managed by our regional teams, who are knowledgeable about the local market. In several of our markets, there is typically a single franchisee that owns and operates all of the restaurants within a country. We have identified particular opportunities for extending the reach of the Burger King brand in many countries, including Spain, Germany, Austria, Switzerland and Italy in EMEA, and Singapore, Taiwan, Malaysia, the Philippines, China and Hong Kong in APAC. We are currently negotiating with our franchisee in the Middle East to develop restaurants in Egypt, Libya and Morocco. We are also considering the possibility of entering into other European markets, such as Poland, Russia and France, and we are in the process of identifying prospective new franchisees for these markets.

Company Restaurants

Over the past several years, we have concentrated on developing company restaurants, primarily in Germany and Spain. We have invested approximately $25 million in new restaurant development in these countries over the last three years, and a total of approximately $34 million across EMEA. At December 31, 2005, 287 (or 14%) of the restaurants in EMEA were company restaurants. There are two company restaurants in APAC, all of which are located in China, and we are planning to open six additional company restaurants in China by the end of fiscal 2006. The following table details company restaurant locations in EMEA at December 31, 2005:

Rank	Country	Company Restaurant Count	% of Total EMEA Company Restaurants

1	Germany	148	52	%
2	United Kingdom	73	25	%
3	Spain	42	15	%
4	The Netherlands	24	8	%

	Total	287	100	%

Franchise Operations

At December 31, 2005, 2,449 or 89% of our restaurants in EMEA/APAC were franchised. Some of our international markets are operated by a single franchisee. Other markets, such as the United Kingdom, Germany, Spain and Australia, have multiple franchisees. In general, we enter into a franchise agreement for each restaurant. International franchise agreements generally contemplate a one-time franchise fee of $50,000, with monthly royalties and advertising contributions each of up to 5% of gross sales.

We have granted master franchises in Australia and Turkey, where the franchisees are allowed to sub-franchise restaurants within their particular territory. Additionally, in New Zealand and certain Middle East and Persian Gulf countries, we have entered into arrangements with franchisees under which they have agreed to nominate third parties to develop and operate restaurants within their respective territories under franchise agreements with us. As part of these arrangements, the franchisees have agreed to provide certain support services to third party franchisees on our behalf, and we have agreed to share the franchise fees and royalties paid by such third party franchisees. Our franchisee in the Middle East and Persian Gulf is also allowed to grant development rights to a single franchisee with respect to each country within its territory. We have also entered into exclusive development agreements with franchisees in a number of countries throughout EMEA and APAC. These exclusive development agreements generally grant the franchisee exclusive rights to develop restaurants in a particular geographic area and contain growth clauses requiring franchisees to open a minimum number of restaurants within a specified period.

The following is a list of the five largest franchisees in terms of restaurant count in EMEA/APAC at December 31, 2005:

Rank	Name	Restaurant Count	Location

1	Hungry Jack’s Pty Ltd.	242	Australia
2	Army Air Force Exchange Services	124	Various
3	Tab Gida Sanayl Ve Ticaret AS	105	Turkey
4	Granada Hospitality Limited (Compass Group)	104	United Kingdom
5	Doosan Corporation	92	South Korea

		667

Property Operations

Our property operations in EMEA primarily consist of franchise restaurants located in the United Kingdom, Germany and Spain, which we lease or sublease to franchisees. We have no property operations in APAC. Of the 143 properties that we lease or sublease to franchisees, we own five properties and lease the land and building from third party landlords on the remaining 138 properties. Our EMEA property operations generated $37 million of our revenues in fiscal 2005, or 2% of our total worldwide revenues.

Lease terms on properties that we lease or sublease to our EMEA franchisees vary from country to country. These leases generally provide for 20-year terms, depending on the term of the related franchise agreement. We lease most of our properties from third party landlords and sublease them to franchisees. These leases generally provide for fixed rental payments based on our underlying rent plus a small markup. In general, franchisees are obligated to pay for all costs and expenses associated with the restaurant property, including property taxes, repairs and maintenance and insurance.

Latin America

At December 31, 2005, we had 769 restaurants in 26 countries and territories in Latin America, with total system sales in fiscal 2005 of approximately $669 million. There were 63 company restaurants in Latin America, all located in Mexico, and 706 franchise restaurants in the region at December 31, 2005. The Mexican market is the largest in the region, with a total of 277 restaurants at December 31, 2005, or 36% of the region. In fiscal 2005, we opened 45 new restaurants in Mexico, of which nine were company restaurants and 36 franchise restaurants, and we are the market leader in 13 of our 26 markets in Latin America, including Puerto Rico, in terms of number of restaurants.

We have experienced significant growth in Mexico over the past three years. We plan to significantly increase our restaurant count in Mexico and the rest of Latin America. Between fiscal 1999 and fiscal 2005, the number of restaurants in Latin America grew by 67% from 437 to 728. We have recently opened 11 restaurants in Brazil and have entered into agreements with franchisees for the development of over 100 new restaurants during the next five years. In the first six months of fiscal 2006, 41 restaurants were opened (net of closures).

The following is a list of the five largest franchisees in terms of restaurant count in Latin America at December 31, 2005:

Rank	Name	Restaurant Count	Location

1	Caribbean Restaurants	170	Puerto Rico
2	West Alimentos S.A. de C.V.	78	Mexico
3	Geboy de Tijuana, S.A. de C.V.	40	Mexico
4	Salvador Safie, Fernando Safie and Ricardo Safie	35	Guatemala
5	Operadora Exe S.A. de C.V.	32	Mexico

		355

Advertising and Promotion

We believe sales in the QSR segment can be significantly affected by the frequency and quality of advertising and promotional programs. We believe that two of our major competitive advantages are our strong brand equity and market position and our global franchise network which allows us to drive sales through extensive advertising and promotional programs.

Franchisees must make monthly contributions, generally 4% to 5% of gross sales, to our advertising funds, and we contribute on the same basis for company restaurants. Advertising contributions are used to pay for all expenses relating to marketing, advertising and promotion, including market research, production, advertising costs, public relations and sales promotions. In international markets where there is no company restaurant presence, franchisees typically manage their own advertising expenditures, and these amounts are not included in the advertising fund. However, as part of our global marketing strategy, we intend to provide these franchisees with assistance in order to deliver a consistent global brand message.

In the United States and in those other countries where we have company restaurants, we have full discretion as to the development, budgeting and expenditures for all marketing programs, as well as the allocation of advertising and media contributions among national, regional and local markets, subject in the United States to minimum expenditure requirements for media costs and certain restrictions as to new media channels. We are required, however, under our U.S. franchise agreements to discuss the types of media in our advertising campaigns and the percentage of the advertising fund to be spent on media with the recognized franchisee association, currently the National Franchise Association, Inc.

Our current global marketing strategy is based upon customer choice. We believe that quality, innovation and differentiation drive profitable customer traffic and pricing power over the long term. Our global strategy is focused on our core customer, the SuperFan, our Have It Your Way brand promise, our core menu items, such as burgers, fries and Coca-Cola, the development of innovative products (such as Whopper, Angus Steak Burger, TenderCrisp, breakfast, desserts and kids meals) and the consistent communication of our brand. We concentrate our marketing on television advertising, which we believe is the most effective way to reach the SuperFan. We also use radio and Internet advertising and other marketing tools on a more limited basis.

We have engaged the advertising agency of Crispin Porter + Bogusky to create compelling advertising that will resonate with the SuperFan. During fiscal 2005, the “Wake up with the King” and “Office Lunch Break” commercials garnered numerous awards, including the 2005 Grand Clio, Gold Lion at Cannes and Point of Purchase Awards. Appearances and mentions in various pop culture media outlets such as The Apprentice, The Simple Life, The Late Show with David Letterman and The Tonight Show, as well as multi-media campaigns such as the Subservient Chicken, Dr. Angus and Star Wars “Sith Sense” websites have allowed us to reach a broader audience. Promotional tie-ins with major motion pictures and the NFL, including television advertising during Superbowl XL, have also helped to create a pop culture “buzz” around Burger King. For fiscal 2006, we have developed a global marketing calendar that leverages the talent of our advertising agency and creates more consistent advertising and brand positioning strategies across all of our markets.

Property

The following table presents information regarding our properties as of December 31, 2005.

	Owned⁽¹	⁾		Leased		Total

			Land	Land & Building	Leases

United States and Canada:
Company restaurants	343		188	345	533	876
Franchisee-operated properties	470		245	165	410	880
Non-operating restaurant locations	51		23	16	39	90
Offices	—		—	6	6	6

Total	864		456	532	988	1,852


International:
Company restaurants	17		26	309	335	352
Franchisee-operated properties	5		3	216	219	224
Non-operating restaurant locations	1		1	31	32	33
Offices	—		—	9	9	9

Total	23		30	565	595	618


(1) Owned refers to properties where we own the land and the building.

Our global headquarters is located in Miami, Florida and consists of approximately 213,000 square feet which we lease, as well as another 42,950 square foot building in Dadeland, Florida, which we also lease. We have recently signed a 15-year lease to move our global headquarters into a building to be constructed in Coral Gables, Florida. We currently plan to occupy a space of 224,638 square feet in the new building beginning in 2008. Our regional headquarters are located in London for EMEA and Singapore for APAC. The lease for our London office is currently scheduled to expire in March 2006, and we have the right to renew at market rates. We also lease properties for our regional offices in Germany and Spain. We lease an office space of 46,864 square feet in Munich, Germany under a lease that expires in August 2015. In Madrid, Spain, we lease an office space of 16,210 square feet under a lease that expires in March 2009. We believe that our existing headquarters and other leased and owned facilities are adequate to meet our current requirements.

Our Employees

As of December 31, 2005, we had approximately 30,300 employees in our company restaurants, field management offices and our global headquarters. As franchisees are independent business owners, they and their employees are not included in our employee count. We consider our relationship with our employees and franchisees to be good.

None of our employees are represented by a labor union or covered by a collective bargaining agreement, other than our employees in Germany and Mexico.

Supply and Distribution

We establish the standards and specifications for most of the goods used in the development, improvement and operation of our restaurants and for the direct and indirect sources of supply of most of those items. These requirements help us assure the quality and consistency of the food products sold at our restaurants and protect and enhance the image of the Burger King system and the Burger King brand.

In general, we approve the manufacturers of the food, packaging and equipment products and other products used in Burger King restaurants, as well as the distributors of these products to Burger King restaurants. Franchisees

are generally required to purchase these products from approved suppliers. We consider a range of criteria in evaluating existing and potential suppliers and distributors, including product and service consistency, delivery timeliness and financial condition. Approved suppliers and distributors must maintain standards and satisfy other criteria on a continuing basis and are subject to continuing review. Approved suppliers may be required to bear development, testing and other costs associated with our evaluation and review.

Restaurant Services, Inc., or RSI, is a not-for-profit, independent purchasing cooperative formed in 1991 to leverage the purchasing power of the Burger King system. RSI is the purchasing agent for the Burger King system in the United States and negotiates the purchase terms for most equipment, food, beverages (other than branded soft drinks), other products such as promotional toys and paper products used in restaurants. RSI is also authorized to purchase and manage distribution services on behalf of the company restaurants and franchisees who appoint RSI as their agent for these purposes. At December 31, 2005, RSI has been appointed the distribution manager for approximately 92% of the restaurants in the United States. A subsidiary of RSI is also purchasing food and paper products for our Canadian restaurants under a contract with us. Five distributors service 83.5% of the U.S. system and the loss of any one of these distributors would likely adversely affect our business.

In fiscal 2000, we entered into long-term exclusive contracts with The Coca-Cola Company and with Dr Pepper/Seven Up, Inc. to supply company and franchise restaurants with their products, which obligate Burger King restaurants in the United States to purchase a specified number of gallons of soft drink syrup. These volume commitments are not subject to any time limit. As of June 30, 2005, we estimate that it will take approximately 17 years and 19 years to complete the Coca-Cola and Dr Pepper purchase commitments, respectively. If these agreements were terminated, we would be obligated to pay significant termination fees and certain other costs, including in the case of the contract with The Coca-Cola Company, the unamortized portion of the cost of installation and the entire cost of refurbishing and removing the equipment owned by Coca-Cola and installed in company restaurants in the three years prior to the termination.

There is currently no purchasing agent that represents franchisees in our international regions. However, we are considering an initiative to leverage our global purchasing power and negotiate lower product costs and savings for our restaurants outside of the United States. We approve suppliers and use similar standards and criteria to evaluate international suppliers that we use for U.S. suppliers. Franchisees may propose additional suppliers, subject to our approval. In countries where we operate company restaurants, we negotiate the purchase terms with suppliers, and those terms are made available to company restaurants and franchise restaurants. In non-company restaurant markets, franchisees typically negotiate the purchase terms directly with Burger King approved suppliers for food and packaging products used in their restaurants.

Research and Development

Company restaurants play a key role in the development of new products and initiatives because we can use them to test and perfect new products, equipment and programs before introducing them to franchisees, which we believe gives us credibility with our franchisees in launching new initiatives. This strategy allows us to keep research and development costs down and simultaneously facilitates the ability to sell new products and to launch initiatives both internally to franchisees and externally to customers.

We operate a research and development facility or “test kitchen” at our headquarters in Miami. In addition, certain vendors have granted us access to their facilities in the United Kingdom and China to test new products. While research and development activities are important to our business, these expenditures are not material. Independent suppliers also conduct research and development activities for the benefit of the Burger King system. We believe new product development is critical to our long-term success and is a significant factor behind our comparable sales growth. Product innovation begins with an intensive research and development process that analyzes each potential new menu item, including market tests to gauge consumer taste preferences, and includes an ongoing analysis of the economics of food cost, margin and final price point.

We have developed a new flexible batch broiler that is significantly smaller, less expensive and easier to maintain than the current broiler used in our restaurants. We expect that the new broiler will reduce operating costs

(principally through reduced utility costs), without sacrificing speed or efficiency, although we have not yet verified how the broiler will perform under restaurant conditions. We currently are testing the new broiler in certain company restaurants and hope to make it available for widespread use in our restaurants during fiscal 2007. We have filed a patent application with respect to the broiler technology and design. We have licensed one of our equipment vendors on an exclusive basis to manufacture and supply the new broiler to the Burger King system throughout the world.

Management Information Systems

Franchisees typically use a point of sale (POS) cash register system to record all sales transactions at the restaurant. We have not historically required franchisees to use a particular brand or model of hardware or software components for their restaurant system. However, we have recently established specifications to reduce cost, improve service and allow better data analysis and have approved three global POS vendors and one regional vendor for each of our three key regions to sell these systems to our franchisees. Currently, franchisees report sales manually, and we do not have the ability to verify sales data electronically by accessing their POS cash register systems. The new POS system will make it possible for franchisees to submit their sales and transaction level details to us in near-real-time in a common format, allowing us to maintain one common database of sales information. We expect that it will be three to five years before the majority of franchisees have the new POS systems. We provide proprietary software to our U.S. franchisees for labor and product management.

We replaced all of our POS hardware systems in our U.S., Canada, Mexico and United Kingdom company restaurants in 2002 and will complete the related POS software upgrades in fiscal 2006. These upgraded systems facilitate financial and management control of restaurant operations and provide management with the ability to analyze sales and product data, to minimize shrinkage using inventory control and centralized standard cost systems and to manage and control labor costs.

Over the past two years, we have made significant improvements to our technology infrastructure, such as deploying a common platform for our SAP software across all regions as well as improving our intranet for internal and franchisee communications. We expect to continue to make infrastructure investments in fiscal 2006, including the completion of several technology enhancing projects at the restaurant and global headquarters level.

Quality Assurance

We are focused on achieving a high level of customer satisfaction through the close monitoring of restaurants for compliance with our key operations platforms: Clean & Safe, Hot & Fresh and Friendly & Fast. We have uniform operating standards and specifications relating to the quality, preparation and selection of menu items, maintenance and cleanliness of the premises and employee conduct.

The Clean & Safe certification is administered by an independent outside vendor whose purpose is to bring heightened awareness of food safety, and includes immediate follow-up procedures to take any action needed to protect the safety of our customers. We measure our Hot & Fresh and Friendly & Fast operations platforms principally through Guest Trac, a rating system based on survey data submitted by our customers.

We measure the overall performance of our operations platforms through an Operations Excellence Review, which focuses on evaluating and improving restaurant operations and customer satisfaction.

All Burger King restaurants are operated in accordance with quality assurance and health standards which we establish, as well as standards set by federal, state and local governmental laws and regulations. These standards include food preparation rules regarding, among other things, minimum cooking times and temperatures, sanitation and cleanliness.

We closely supervise the operation of all of our company restaurants to help ensure that standards and policies are followed and that product quality, customer service and cleanliness of the restaurants are maintained. Detailed reports from management information systems are tabulated and distributed to management on a regular basis to

help maintain compliance. In addition, we conduct scheduled and unscheduled inspections of company and franchise restaurants throughout the Burger King system.

Intellectual Property

We and our wholly-owned subsidiary, Burger King Brands, Inc., own approximately 2,520 trademark and service mark registrations and applications and approximately 293 domain name registrations around the world. We also have established the standards and specifications for most of the goods and services used in the development, improvement and operation of Burger King restaurants. These proprietary standards, specifications and restaurant operating procedures are trade secrets owned by us. Additionally, we own certain patents relating to equipment used in our restaurants and provide proprietary product and labor management software to our franchisees.

Competition

We operate in the FFHR category of the QSR segment within the broader restaurant industry. Our two main domestic competitors in the FFHR category are McDonald’s and Wendy’s. According to public data, McDonald’s and Wendy’s had worldwide system restaurants of approximately 30,500 and 6,700, respectively, and total worldwide system sales of approximately $50.1 billion and $8.5 billion, respectively, for fiscal 2004.

To a lesser degree, we compete against national food service businesses offering alternative menus, such as Subway, Yum! Brands, Inc.’s Taco Bell, Pizza Hut and Kentucky Fried Chicken, casual restaurant chains, such as Applebee’s, Chili’s, Ruby Tuesday’s and “fast casual” restaurant chains, such as Panera Bread, as well as convenience stores and grocery stores that offer menu items comparable to that of Burger King restaurants. During the past year, the FFHR category has experienced flat or declining traffic which we believe is due in part to competition from these competitors. In the United States, the Subway sandwich chain has grown significantly in recent years and positions itself directly as an alternative to our products. In one of our major European markets, the United Kingdom, much of the growth in the quick service restaurant segment is expected to come from bakeries and new entrants that are diversifying into healthier options to respond to nutritional concerns. We believe that the large hamburger chains in the United Kingdom have experienced declining sales as they face increased competition from not only the bakeries, but also from pubs that are repositioning themselves as family venues and offering inexpensive food.

Our largest U.S. competitor, McDonald’s, has significant international operations. For fiscal 2004, McDonald’s had approximately 17,900 international restaurants and international system sales of $25.7 billion (51% of total system sales). Other U.S.-based FFHR chains, however, such as Wendy’s, Hardee’s and Jack in the Box, are not currently significant competitors of Burger King internationally. However, Wendy’s has 736 international units, which generated approximately 9% of total system sales. Non-FFHR based chains, such as KFC and Pizza Hut, have many outlets in international markets that compete with Burger King and other FFHR chains. In addition, Burger King restaurants compete internationally against local FFHR chains and single-store locations.

Government Regulation

We are subject to various federal, state and local laws affecting the operation of our business, as are our franchisees. Each Burger King restaurant is subject to licensing and regulation by a number of governmental authorities, which include zoning, health, safety, sanitation, building and fire agencies in the jurisdiction in which the restaurant is located. Difficulties in obtaining, or the failure to obtain, required licenses or approvals can delay or prevent the opening of a new restaurant in a particular area.

In the United States, we are subject to the rules and regulations of the Federal Trade Commission, or the FTC, and various state laws regulating the offer and sale of franchises. The FTC and various state laws require that we furnish to prospective franchisees a franchise offering circular containing proscribed information. A number of states, in which we are currently franchising, regulate the sale of franchises and require registration of the franchise offering circular with state authorities and the delivery of a franchise offering circular to prospective franchisees. We are currently operating under exemptions from registration in several of these states based upon our net worth and

experience. Substantive state laws that regulate the franchisor/franchisee relationship presently exist in a substantial number of states, and bills have been introduced in Congress from time to time that would provide for federal regulation of the franchisor/franchisee relationship in certain respects. The state laws often limit, among other things, the duration and scope of non-competition provisions, the ability of a franchisor to terminate or refuse to renew a franchise and the ability of a franchisor to designate sources of supply.

We may have to make appropriate amendments to our franchise offering circular used to comply with our disclosure obligations under federal and state law and the laws of certain foreign jurisdictions to reflect this offering and other relevant information.

Company restaurant operations and our relationships with franchisees are subject to federal and state antitrust laws. Company restaurant operations are also subject to federal and state laws governing such matters as wages, working conditions, citizenship requirements and overtime. Some states have set minimum wage requirements higher than the federal level.

In addition, we may become subject to legislation or regulation seeking to tax and/or regulate high-fat and high-sodium foods, particularly in the United States and the United Kingdom. For example, a bill was recently introduced in the United States Congress that would compel the listing of all nutritional information on fast food menu boards and the Center for Science in the Public Interest, a non-profit advocacy organization, has sued the U.S. Food and Drug Administration to reduce the permitted sodium levels in processed foods. The Attorney General of the State of California is currently suing us and our major competitors under Proposition 65 to force the disclosure of warnings that carbohydrate-rich foods cooked at high temperatures, such as french fries, contain the potentially cancer-causing chemical acrylamide. In addition, public interest groups have also focused attention on the marketing of these foods to children in a stated effort to combat childhood obesity and legislators in the United States have proposed replacing the self-regulatory Children’s Advertising Review Board with formal governmental regulation under the Federal Trade Commission.

Internationally, our company and franchise restaurants are subject to national and local laws and regulations, which are generally similar to those affecting our U.S. restaurants, including laws and regulations concerning franchises, labor, health, sanitation and safety. Our international restaurants are also subject to tariffs and regulations on imported commodities and equipment and laws regulating foreign investment.

Tax Matters

We are in the process of being audited by the Internal Revenue Service. The audit relates to both executive compensation and income taxes for our 2003 and 2004 fiscal years. At this time, we do not know when this audit will be completed or what its impact, if any, will be.

Legal Proceedings

On September 5, 2002, the Council for Education and Research on Toxics, or CERT, sued McDonald’s and us in California, alleging that the defendants violated Proposition 65 and the California Unfair Competition Act by failing to warn about the presence of acrylamide, a Proposition 65 regulated chemical, in french fries. The case has been stayed pending the outcome of a proposed regulatory action by California’s Office of Environmental Health Hazard Assessment, the lead agency with primary jurisdiction for implementing Proposition 65. The court agreed to stay the case until the agency proposed updated regulations for acrylamide in foods. In April 2005, the agency proposed new regulations, including safe harbor warning language and a format for warnings to be provided on signs at retail grocery stores or restaurants.

In a related case before the same court, the Attorney General for California has filed a lawsuit against us and others in the food industry, seeking an order providing for an unspecified warning to be provided to consumers regarding the presence of acrylamide in french fries. The court has scheduled a hearing for March 28, 2006 on the defendants’ motion to continue the stay of the CERT case and to stay the Attorney General’s action pending

regulatory action. The court has given the Attorney General leave to file discovery requests in advance of that hearing, although any response periods will be deferred until at least the date of the hearing.

In the event that there is a finding of liability in theses cases, we would be exposed to a potential obligation for payment of damages, plaintiff’s attorneys’ fees, penalties (in an amount to be set by the court) and injunctive relief. It is not possible to ascertain with any degree of confidence the amount of our financial exposure, if any.

From time to time, we are involved in other legal proceedings arising in the ordinary course of business, relating to matters including, but not limited to, disputes with franchisees, suppliers, employees and customers and disputes over our intellectual property.

MANAGEMENT

Executive Officers and Directors

Set forth below is information concerning our executive officers and directors. Our directors are generally elected for one-year terms. We expect following the offering to appoint additional directors over time who are not our employees or otherwise affiliated with management.

Name	Age	Position

Gregory D. Brenneman	44	Chairman of the Board and Chief Executive Officer
John W. Chidsey	43	President and Chief Financial Officer
Russell B. Klein	48	Chief Marketing Officer
James F. Hyatt	49	Chief Operations Officer
Peter C. Smith	49	Chief Human Resources Officer
Martin Brok	39	Senior Vice President, Franchise Operations and Marketing, EMEA
Anne Chwat	46	General Counsel and Secretary
Steve DeSutter	52	President, EMEA
David Gagnon	58	Senior Vice President, Company Operations
Denny Marie Post	48	Chief Concept Officer
Julio Ramirez	51	President, Latin America
Clyde Rucker	42	Senior Vice President, Global Communications & External Affairs
Peter Tan	50	President, Asia Pacific
Andrew B. Balson	39	Director
David Bonderman	63	Director
Richard W. Boyce	51	Director
David A. Brandon	53	Director
Armando Codina	59	Director
Peter Raemin Formanek	62	Director
Manny Garcia	62	Director
Adrian Jones	41	Director
Sanjeev K. Mehra	46	Director
Stephen G. Pagliuca	50	Director
Brian Thomas Swette	51	Director
Kneeland C. Youngblood	50	Director

Gregory D. Brenneman has served as our Chief Executive Officer and a director since August 2004. Mr. Brenneman was named Chairman of the Board in February 2005. Mr. Brenneman has been with TurnWorks, Inc., a consulting company owned 100% by Mr. Brenneman, in The Woodlands, Texas, serving as Chairman and Chief Executive Officer from November 1994 through to the present. From June 2002 through October 2002, Mr. Brenneman served as Chief Executive Officer and President of PriceWaterhouseCoopers Consulting in New York, New York. From May 1995 through May 2001, Mr. Brenneman served as President and Chief Operating Officer of Continental Airlines in Houston, Texas. Mr. Brenneman is a director of The Home Depot and Automatic Data Processing.

John W. Chidsey has served as our President and Chief Financial Officer since September 2005. From June 2004 until September 2005, he was our President of North America. Mr. Chidsey joined us as Executive Vice President, Chief Administrative and Financial Officer in March 2004 and held that position until June 2004. From January 1996 to March 2003, Mr. Chidsey served in numerous positions at Cendant Corporation, most recently as Chief Executive Officer of the Vehicle Services Division and the Financial Services Division.

Russell B. Klein has served as our Chief Marketing Officer since June 2003. From August 2002 to May 2003, Mr. Klein served as Chief Marketing Officer at 7-Eleven Inc. From January 1999 to July 2002, Mr. Klein served as a Principal at Whisper Capital.

James F. Hyatt has served as our Chief Operations Officer since August 2005. Mr. Hyatt had previously served as Executive Vice President, U.S. Franchise Operations from July 2004 to August 2005 and Senior Vice President, U.S. Franchise Operations from February 2004 to July 2004. Mr. Hyatt joined us as Senior Vice President, Operations Services and Programs in May 2002. From 1995 to May 2002, Mr. Hyatt was a Burger King franchisee in Atlanta, Georgia.

Peter C. Smith has served as our Chief Human Resources Officer since December 2003. From September 1998 to November 2003, Mr. Smith served as Senior Vice President of Human Resources at AutoNation.

Martin Brok has served as our Senior Vice President Franchise Operations and Marketing, EMEA since September 2005. From December 2004 to August 2005, Mr. Brok served as our Senior Vice President, European Franchise Markets & the UK. From July 2004 to December 2004, Mr. Brok served as our Vice President, European Franchise Markets. From February 2004 to June 2004, Mr. Brok served as our Vice President, Central Europe and Middle East. Prior to that Mr. Brok served as our General Manager, Central and Eastern European Franchise Markets from August 2003 to February 2004 and as General Manager, Franchise Markets South from November 2001 to August 2003. Prior to joining us, Mr. Brok spent 13 years at the Coca-Cola Company, most recently as the director of the Burger King Account Team - Europe, Middle East and Africa, based in London.

Anne Chwat has served as our General Counsel and Secretary since September 2004. From September 2000 to September 2004, Ms. Chwat served in various positions at BMG Music (now SonyBMG Music Entertainment) including as Senior Vice President, General Counsel and Chief Ethics and Compliance Officer.

Steve C. DeSutter has served as our President, EMEA since November 2005. Previously Mr. DeSutter had served as our President, EMEA and Asia Pacific from December 2004 to November 2005. From August 2004 to November 2004, Mr. DeSutter served as our Senior Vice President, Corporate Communications. Prior to joining us, Mr. DeSutter served as Senior Vice President of TurnWorks, Inc. from July 2001 to June 2002. From June 2002 to October 2002, Mr. DeSutter joined the senior team at PricewaterhouseCoopers Consulting as Senior Vice President, Corporate Communication and then returned to TurnWorks, Inc. as Senior Vice President until July 2004.

Dave Gagnon has served as Senior Vice President, Company Operations since April 2005. Since June 2004, Mr. Gagnon has also served as President of BK Magic Holdings, LLC, a joint venture between us and an independent third party that operates approximately 30 of our franchise restaurants in the United States. From November 2004 to April 2005, Mr. Gagnon served as our Senior Vice President of North American Company Operations. From May 2003 to November 2004, Mr. Gagnon served as Senior Vice President, U.S. Company Operations. Prior to joining us, Mr. Gagnon had been at Taco Bell since 1984. From December 1999 to January 2002, Mr. Gagnon served as National Vice President, U.S. Company Operations and from January 2002 to May 2003 Mr. Gagnon served as Head Coach/East.

Denny Marie Post has served as our Chief Concept Officer since April 2004. From 1995 to March 2004, Ms. Post served in various positions for Yum! Brands, Inc. including Chief Innovation Officer at KFC, Chief Marketing Officer for KFC, Taco Bell and Pizza Hut in Canada and VP Concept Innovation for KFC.

Julio Ramirez has served as our President, Latin America since January 2002. Mr. Ramirez has worked for Burger King Corporation for more than 20 years. During his tenure, Mr. Ramirez has held several positions within the United States and the Latin America region. From February 2000 to December 2001, Mr. Ramirez served as Senior Vice President of U.S. Franchise Operations & Development. Prior to that, Mr. Ramirez served as President, Latin America from 1997 until 2000.

Clyde Rucker has served as our Senior Vice President, Global Communications & External Affairs since June 2005. He had previously served as Senior Vice President, Chief Support Officer since December 2004 and Senior

Vice President, Diversity Capability and Business Development and Chief of Staff since March 2004. From September 2003 to March 2004, Mr. Rucker served as Senior Vice President, Diversity Capability and Business Development. Prior to that, Mr. Rucker was our Vice President, U.S. Franchise Operations, Mountain and Southwest region since January 2000.

Peter Tan has served as our President, Asia Pacific since November 2005. From 2002 to 2005, Mr. Tan served as Corporate Senior Vice President and President of Greater China for McDonald’s Corporation. Prior to that, from 1999 to 2003, Mr. Tan served as President, McDonald’s China Development Company.

Andrew B. Balson has served on our board since December 2002. Mr. Balson is a Managing Director of Bain Capital Partners, where he has worked since 1996. Mr. Balson is a director of Domino’s Pizza, UGS and Dunkin Brands.

David Bonderman has served on our board since December 2002. Mr. Bonderman is a Founding Partner of Texas Pacific Group and has served in that role since 1992. Mr. Bonderman is a director of the following public companies: CoStar Group, Inc., Ducati Motor Holding S.p.A., RyanAir Holdings, plc and Gemplus International S.A.

Richard W. Boyce has served on our board since December 2002. Mr. Boyce has been a Partner of Texas Pacific Group based in San Francisco, California since January 1999. Mr. Boyce is a director of ON Semiconductor, a supplier of power management and distribution products.

David A. Brandon has served on our board since September 2003. Mr. Brandon is Chairman and CEO of Domino’s Pizza in Ann Arbor, Michigan and has served in that role since March 1999. From 1989 to 1998, Mr. Brandon served as President and CEO of Valassis Communication, Inc. and he was Chairman of Valassis from 1997 to 1998. Mr. Brandon is a director of The TJX Companies, Domino’s Pizza and Kaydon Corporation.

Armando Codina has served on our board since November 2005. Mr. Codina is founder and Chairman of Codina Group, a real estate development company, established in 1979. Mr. Codina is a director of American Airlines, General Motors, Merrill Lynch and Bell South.

Peter Raemin Formanek has served on our board since September 2003. Mr. Formanek has been a private investor in Memphis, Tennessee since May 1994. Mr. Formanek is a director of The Sports Authority and was a co-founder of AutoZone, Inc., a retailer of automotive parts and accessories.

Manny Garcia has served on our board since September 2003. Mr. Garcia has served as President and Chief Executive Officer of Atlantic Coast Management, an operator of various restaurants in the Orlando, Florida area, since 1996.

Adrian Jones has served on our board since December 2002. Mr. Jones has been with Goldman, Sachs & Co. in New York, New York and London, UK since 1994, and has been a Managing Director since November 2002. Mr. Jones is a director of Autocam Corporation and Signature Hospital Holding, LLC.

Sanjeev K. Mehra has served on our board since December 2002. Mr. Mehra has been with Goldman, Sachs & Co. in New York, New York since 1986, and has been a Managing Director since 1996. Mr. Mehra is a director of Hexcel Corporation, Nalco Company, Madison River Telephone Company, LLC and SunGard Data Systems, Inc.

Stephen G. Pagliuca has served on our board since December 2002. Mr. Pagliuca has served as a Managing Director of Bain Capital Partners since 1989. Mr. Pagliuca is a director of Gartner Group and ProSeiben.

Brian Thomas Swette has served on our board since April 2003. Mr. Swette served as Chief Operating Officer of eBay in San Jose, California from 1998 to 2002.

Kneeland C. Youngblood has served on our board since October 2004. Mr. Youngblood has served as Managing Partner of Pharos Capital Group in Dallas, Texas since 1998. Mr. Youngblood is a director of Starwood Hotels and Resorts.

Board Structure and Composition

Our board of directors currently has twelve non-management members. Messrs. Balson, Bonderman, Boyce, Jones, Mehra and Pagliuca were appointed to our board of directors by the sponsors pursuant to a shareholders’ agreement under which each of the sponsors currently has the right to appoint two members of our board of directors. For more information on this shareholders’ agreement, see “Certain Relationships and Related Transactions––Shareholders’ Agreement”.

We will be deemed to be a “controlled company” under the rules of the New York Stock Exchange, and we will qualify for, and intend to rely on, the “controlled company” exception to the board of directors and committee composition requirements under the rules of the New York Stock Exchange. Pursuant to this exception, we will be exempt from the rule that requires that our board of directors be comprised of a majority of “independent directors;” our compensation committee be comprised solely of “independent directors;” and our executive and corporate governance committee be comprised solely of “independent directors” as defined under the rules of the New York Stock Exchange. The “controlled company” exception does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of the Sarbanes-Oxley Act and the New York Stock Exchange rules, which require that our audit committee be composed of three independent directors.

Director Compensation

Directors who are employees of the company or the sponsors do not receive any fees for their services as directors. The other directors currently receive an annual retainer of $50,000 for service on our board payable at their option either 100% in cash or 100% in stock options. They also receive $1,000 for each board meeting attended. Effective July 1, 2006, we intend to amend our existing director compensation program and to offer the following director compensation. Non-management directors will continue to receive an annual retainer of $50,000, but it will be payable at their option either 100% in cash or 100% in deferred shares. In addition, each non-management member of our board will be granted on an annual basis deferred shares having a fair market value on the grant date of $85,000 and each non-management committee chair will receive an additional $10,000 fee, payable at his or her option either 100% in cash or 100% in deferred shares. Deferred shares will be settled upon termination of board service. No separate committee meeting fees will be paid.

All directors are reimbursed for reasonable travel and lodging expenses incurred by them in connection with attending board and committee meetings.

Board Committees

Our board of directors has established an audit committee, a compensation committee and an executive and corporate governance committee. The members of each committee are appointed by the board of directors and serve one-year terms.

Audit Committee

Our audit committee selects the independent auditors to be submitted for approval by the stockholders and reviews the independence of such auditors, approves the audit fee payable to the independent auditors and reviews audit results with the independent auditors. The audit committee is currently composed of Messrs. Formanek, Garcia and Boyce (chair). KPMG LLP currently serves as our independent registered public accounting firm.

Compensation Committee

Our compensation committee provides a general review of, and makes recommendations to the board of directors and/or to the Company’s shareholders with respect to, our equity-based compensation plans; reviews and

approves all of our equity-based compensation plans that are not otherwise subject to the approval of our shareholders; implements, administers, operates and interprets all equity-based and similar compensation plans to the extent provided under the terms of such plans, including the power to amend such plans; and reviews and approves all awards of shares or options to officers and employees pursuant to our equity-based plans. The compensation committee is currently composed of Messrs. Bonderman, Mehra and Pagliuca (chair).

Executive and Corporate Governance Committee

Our executive and corporate governance committee acts for the board of directors with respect to any matters delegated to it by the board. Our board has delegated to this committee the authority to identify and recommend potential candidates qualified to become board members and recommend directors for appointment to board committees. It also exercises general oversight with respect to the governance and performance of our board, as well as corporate governance matters applicable to us and our employees and directors. This committee also has authority to take actions on behalf of the company (except if prohibited by applicable law or regulation) if the amounts associated with such actions do not individually exceed $25 million. The executive committee is currently composed of Messrs. Boyce, Pagliuca, Brenneman and Mehra (chair).

Executive Compensation

The following table sets forth information regarding the compensation paid to Greg Brenneman, our Chairman of the Board and Chief Executive Officer, Bradley Blum, our previous Chief Executive Officer, and the four other most highly compensated executive officers (measured by base salary and annual bonus), collectively referred to as the “named executive officers” in this prospectus, during the fiscal year ended June 30, 2005.

Summary Compensation Table

Annual Compensation

Awards

Name and Principal Position

Year

Salary

Bonus

Other Annual
Compensation

Restricted Stock
Awards ($)

Securities
Underlying
Options/
SARs (#)

All Other
Compensation

Gregory D. Brenneman

Chairman of the

Board and Chief

Executive Officer

John W. Chidsey

President and Chief

Financial Officer

Russell B. Klein

Chief Marketing

Officer.

James F. Hyatt

Chief Operations

Officer

Peter C. Smith

Chief Human

Resources Officer

Bradley Blum

former Chief

Executive Officer(1)

(1) Mr. Blum had served as our Chief Executive Officer. His employment terminated September 1, 2004.

Stock Option/SAR Grants in Last Fiscal Year

The following table sets forth information concerning grants of stock options made to the executive officers named in the Summary Compensation Table during the fiscal year ended June 30, 2005. We did not grant any stock appreciation rights, referred to as SARs, to the named executive officers during our most recent fiscal year.

Individual Grant

Number of
Securities
Underlying
Options/SARs
Granted (#)

Percent of Total
Options/SARs
Granted to
Employees in
Fiscal Year

Exercise or Base
Price ($/Sh)

Expiration
Date

Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Term

Name

5% ($)

10% ($)

Gregory D. Brenneman

John W. Chidsey

Russell B. Klein

James F. Hyatt

Peter C. Smith

Bradley Blum

Aggregated Option and SAR Exercises in Last Fiscal Year and Fiscal Year End Option Values

The following table sets forth information concerning option exercises by the executive officers named in the Summary Compensation Table during the fiscal year ended June 30, 2005.

Shares Acquired
on Exercise (#)

Value
Realized ($)

Number of Securities Underlying
Unexercised Options/SARs At
Fiscal Year End (#)

Value of Unexercised
In-the-Money Options/SARs At Fiscal
Year End ($)

Name

Exercisable

Unexercisable

Exercisable

Unexercisable

Gregory D. Brenneman

John W. Chidsey

Russell B. Klein

James F. Hyatt

Peter C. Smith

Bradley Blum

Equity Incentive Plans

Burger King Holdings, Inc. Equity Incentive Plan

The following is a description of the material terms of the Burger King Holdings, Inc. Equity Incentive Plan, which we refer to as the “Plan”. This summary is not a complete description of all provisions of the Plan and is qualified in its entirety by reference to the Plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.

Purpose. The purpose of the Plan is to motivate Plan participants to perform to the best of their abilities and to align their interests with the interests of our shareholders by giving participants an ownership interest in our common stock.

Plan Administration. The Plan is administered by the compensation committee of our board. The compensation committee has the authority, among other things, to select eligible individuals to participate in the Plan, to determine the terms and conditions of awards granted under the Plan and to make all determinations necessary for the administration of the Plan.

Authorized Shares. Subject to adjustment, the maximum number of shares of common stock that may be delivered pursuant to awards under the Plan is 519,410. Shares of common stock to be issued under the Plan may be

authorized but unissued shares of common stock or shares held in treasury. Any shares of common stock covered by an award that terminates, lapses or is otherwise cancelled will again be available for issuance under the Plan.

Eligibility. Our officers, designated employees and consultants as well as independent members of our board are eligible to participate in the Plan.

Types of Awards. The compensation committee may grant the following types of awards under the Plan: investment rights, stock options and restricted stock units. The exercise price of an option may not be less than the fair market value of a share of common stock on the date of grant and each option will have a ten-year term, unless otherwise determined by the committee.

An investment right is a one-time opportunity granted to members of our executive team, other senior executives and independent board members to purchase shares of our common stock at a price per share equal to the fair market value of our common stock on the date of grant of the investment right.

A restricted stock unit consists of a contractual right denominated in shares of our common stock which represents the right to receive a share of our common stock at a future date, subject to certain vesting and other conditions.

Vesting; Settlement. The committee has the authority to determine the vesting schedule applicable to each award. Unless otherwise set forth in an award agreement, options granted to employees vest in equal installments on each of the first five anniversaries of the grant date and options granted to members of our board at the election of a director in lieu of receiving a portion of his or her annual cash retainer vest 25% each quarter after the grant date. Restricted stock units granted in respect of our 2005 fiscal year or earlier at the election of an employee in lieu of receiving a portion of his or her annual bonus vest in two equal installments on each of the first two anniversaries of the grant date. Vested restricted stock units will be paid out upon the earlier of a termination of employment or December 31, 2007.

Termination of Employment. Unless otherwise determined by the compensation committee and provided in an applicable option agreement, upon a termination of employment or service, all unvested options will terminate. A participant will have ninety days to exercise vested options upon a termination without cause or upon his or her resignation and one year upon a termination due to his or her death, disability or retirement (or, if shorter, the remaining term of the option). If a participant’s service is terminated for cause, all options, whether or not vested, will terminate.

Unless otherwise determined by the compensation committee and provided in an applicable restricted stock unit agreement, restricted stock units granted at the election of an employee in lieu of receiving a portion of his or her annual bonus will become fully vested upon a termination without cause or due to death, disability or retirement.

Change in Control. If there is a change of control (as defined in the Plan) and, within twenty-four months following the change of control, a participant’s employment is terminated without cause, all unvested options will vest upon termination.

In the event of a change of control, the compensation committee may (1) accelerate the vesting of unvested options and restricted stock units, (2) direct that options and restricted stock units be assumed by the acquiror in the change of control transaction or converted into new awards with substantially the same terms or (3) cancel awards in exchange for a payment, which may be in cash or equity securities.

Repurchase Rights. If a participant’s employment or service with us is terminated prior to the completion of this offering, we will have the ability to repurchase any shares held by such participant.

Transferability. Awards granted under the Plan may not be sold, pledged or otherwise transferred, other than following the death of a participant by will or the laws of descent. A participant’s beneficiary or estate may exercise

vested options (but not investment rights) during the applicable exercise period following the death of the participant, subject to the same conditions that would have applied to exercise by the participant.

Lock-Ups. Except as otherwise provided in an applicable award agreement, no participant may transfer shares of our common stock during the twenty days prior to, and the 180 days following (or such other period as the underwriters may determine), the effective date of the registration statement of which this prospectus is a part.

Adjustment. The compensation committee has the authority to adjust the number of shares covered by outstanding awards, the applicable exercise or purchase price of an existing award and the number of shares of common stock issuable under the Plan as a result of any change in the number of shares resulting from a reorganization, merger, consolidation, stock split, reverse stock split or other similar transaction.

Amendment and Termination. The compensation committee may amend or terminate the plan or any award agreement entered into under the Plan, except that no amendment shall increase the number of shares available for grant under the plan without the approval of our stockholders and no amendment may adversely affect the rights of a participant without a participant’s consent.

Burger King Holdings, Inc. 2006 Omnibus Incentive Plan

Prior to the completion of this offering, our board of directors intends to adopt a long-term incentive plan to be named the Burger King Holdings, Inc. 2006 Omnibus Incentive Plan (the “2006 Plan”). The 2006 Plan will replace the terms of our current Plan, described above under “Burger King Equity Incentive Plan.” Prior to the completion of this offering, the 2006 Plan will be presented to our stockholders for their approval. The following summary describes what we anticipate to be the material terms of the 2006 Plan. However, the final terms may be different.

Types of Awards. The 2006 Plan will provide for grants of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, deferred shares and performance awards, including cash bonus awards.

Eligibility. Our employees, directors, consultants and other advisors or service providers to the company will be eligible to participate in the 2006 Plan.

Authorized Shares. Subject to adjustment, up to shares of our common stock will be available for awards to be granted under the 2006 Plan.

Administration. The compensation committee of our board of directors will administer the 2006 Plan and will have authority to select employees to whom awards are granted, determine the types of awards and number of shares covered, and determine the terms and conditions of awards. The compensation committee may delegate to one or more of our officers the authority to grant awards to participants who are not our directors or executive officers.

Performance Objectives. The 2006 Plan will provide that grants of performance awards, including cash-denominated awards, and (when determined by the committee) options, deferred shares, restricted stock or other stock-based awards, will be made based upon “performance objectives.” Performance objectives with respect to those awards that are intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code are limited to specified levels of or increases in our or one of our subsidiaries’ return on equity, diluted earnings per share, total earnings, earnings growth, return on capital, return on assets, return on equity, earnings before interest and taxes, EBITDA, EBITDA minus capital expenditures, sales or sales growth, revenue or revenue growth, gross margin return on investment, increase in the fair market value of common stock, share price (including but not limited to, growth measures and total stockholder return), operating profit, net earnings, cash flow (including, but not limited to, operating cash flow and free cash flow), cash flow return on investment (which equals net cash flow divided by total capital), inventory turns, financial return ratios, total return to stockholders, market share, earnings measures/ratios, economic value added (EVA), balance sheet measurements such as receivable turnover, internal rate of return, increase in net present value, or expense targets, customer satisfaction surveys and productivity.

Performance criteria may be measured on an absolute (e.g., plan or budget) or relative basis. Relative performance may be measured against a group of peer companies, a financial market index or other acceptable objective and quantifiable indices. Except in the case of an award intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code, if the compensation committee determines that a change in our business, operations, corporate structure or capital structure, or the manner in which we conduct our business, or other events or circumstances render the performance objectives unsuitable, the compensation committee may modify the performance objectives or the related minimum acceptable level of achievement, in whole or in part, as the compensation committee deems appropriate and equitable.

Annual Bonus Plan

Burger King Corporation Restaurant Support Incentive Plan for Executive Team

We have established the Burger King Corporation Restaurant Support Incentive Plan (the “RSIP”) for certain of our executive officers, including the named executive officers, with respect to the fiscal year ended June 30, 2006. For periods after this, performance-based cash bonus awards for our executive team will be granted under the 2006 Plan.

For the fiscal year ended June 30, 2006, the incentive payout for each executive under the RSIP will be determined by reference to several factors and expressed as a percentage of the executive’s annual base salary. The overall business performance factor measures performance against an EBITDA target set for the fiscal year. EBITDA is measured on a worldwide basis and on the basis of the division, country or region within which the executive works. Each worldwide and location-specific business performance factor has a minimum “threshold” performance level, at which a 50% payout is earned; a “target” performance level, at which a 100% payout is earned; and a “maximum” performance level, at which a 200% payout can be earned. The amount of the incentive payout calculated based on the achievement of the business performance factor is then multiplied by an individual performance factor based upon an executive’s overall performance rating. The incentive payout amount then can be reduced by up to 50%, but not increased, on the basis of two additional corporate-wide financial performance metrics: (1) minimum cash flow and (2) growth in comparable sales. Incentive payouts under the RSIP range from 0% to 250% of base salary, depending on the individual participant. Under any and all circumstances, all incentive payments under the RSIP are subject to the absolute discretion of our compensation committee.

An executive must be employed by us on the last day of the fiscal year to be entitled to incentive compensation under the RSIP. If an executive’s employment is terminated prior to such date as a result of death, approved leave of absence, or involuntary termination of employment without cause or with good reason (if applicable), all or a pro-rata amount of the bonus may be paid.

Executive Benefit Programs

We sponsor various benefit programs exclusively for certain executives, including the named executive officers, as described below.

Our Executive Retirement Program permits certain executives to voluntarily defer portions of their base salary and annual bonus until retirement or termination of employment. Amounts deferred, up to a maximum of 6% of base salary, are matched by us on a dollar-for-dollar basis. Depending on the level at which we achieve specified financial performance results, an officer’s account under the plan may also be credited with up to 6% of his or her base salary. All amounts deferred by the executive or credited to his or her account by us earn interest at a rate that reflects a reasonable long-term return for a balanced portfolio, currently an annual rate of 8.5%. All contributions by us vest on a graded basis over a three-year period.

Our Executive Life Insurance Program provides company-paid life insurance coverage to certain executives and allows such executives to purchase additional life insurance coverage at their own cost. Company-paid coverage is limited to the lesser of 2.75 times base salary or $1.3 million.

Our Executive Health Plan covers all named executive officers and certain other executives. It serves as a fully insured supplement to the medical plan provided to all our employees. Out-of-pocket costs and expenses for deductibles, coinsurance, dental care, orthodontia, vision care, prescription drugs, and preventative care are reimbursed to those executives up to an annual maximum of $100,000.

In addition, each executive officer is provided with an annual perquisite allowance to be used with respect to various personal benefits. Currently, the allowance amounts for the named executive officers are as follows: Mr. Brenneman, $ , Mr. Chidsey, $ and Messrs. Klein, Hyatt and Smith, $ .

Other Employee Compensation and Benefit Programs

We also have additional annual bonus plans which cover most of our employees, a 401(k) plan with an employer match feature, a severance program and a comprehensive health and welfare benefit program.

February 2006 Employee Option Grant

On February 14, 2006, we granted options to purchase shares of our common stock to each of approximately 5,000 of our employees worldwide who were not previously eligible to receive option grants, such as restaurant managers and support staff, at an exercise price of $ per share. These options generally vest on February 14, 2011, so long as the employee remains employed by us, and expire on February 14, 2016.

Compensatory Make-Whole Payment

On February 21, in connection with the payment of a cash dividend to holders of record of our common stock on February 9, 2006, we also paid a compensatory make-whole payment to holders of our options and restricted stock unit awards, primarily members of senior management. The aggregate amount of these payments we made to the named executive officers was approximately $ million and the aggregate amount with respect to all our executive officers as a group (including the named executive officers) was approximately $ million.

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth as of the date of this prospectus certain information regarding the beneficial ownership of our common stock as of February 15, 2006, by:

•	each of our directors and named executive officers, including our former Chief Executive Officer, individually;

•	all directors and executive officers as a group; and

•	each person who is known to us to be the beneficial owner of more than 5% of our common stock.

As of February 15, 2006, our outstanding equity securities, as determined under the rules of the SEC, consisted of 4,063,021 shares of common stock, of which 1,271,600 shares are held by the Goldman Sachs Funds, which are affiliates of Goldman, Sachs & Co., one of the representatives of the underwriters, which is selling shares in this offering. The Goldman Sachs Funds are affiliates of a broker-dealer and purchased the shares to be sold in this offering in the ordinary course of its business and at the time of such purchase had no agreements or understandings, directly or indirectly, with any person to distribute such shares. The selling stockholders in this offering may be deemed to be underwriters.

The number of shares beneficially owned by each stockholder is determined under rules promulgated by the SEC and generally includes voting or investment power over the shares. The information does not necessarily indicate beneficial ownership for any other purpose. Under the SEC rules, the number of shares of common stock deemed outstanding includes shares issuable upon conversion of other securities, as well as the exercise of options or the settlement of restricted stock units held by the respective person or group that may be exercised or settled on or within 60 days of February 15, 2006. For purposes of calculating each person’s or group’s percentage ownership, shares of common stock issuable pursuant to stock options and restricted stock units exercisable or settleable on or within 60 days of February 15, 2006 are included as outstanding and beneficially owned for that person or group but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group.

The address for each listed stockholder, unless otherwise indicated, is: c/o Burger King Holdings, Inc., 5505 Blue Lagoon Drive, Miami, Florida 33126. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.

Shares Beneficially
Owned Before This
Offering (a)

Shares
Offered
Hereby

Shares Beneficially
Owned After This
Offering Without
Exercise of Option

Shares Beneficially
Owned After This
Offering With
Exercise of Option

Name and Address of Beneficial Owner

Number

Percent

Number

Percent

Number

Percent

Named Executive Officers and

Directors:

Gregory D. Brenneman

42,468

1.04

–

John W. Chidsey

24,814

–

Russell B. Klein

7,550

–

James F. Hyatt

2,500

–

Peter C. Smith

8,896

–

Andrew B. Balson(b)

1,271,600

31.30

–

David Bonderman(c)

1,430,550

35.21

–

Richard W. Boyce

–

David M. Brandon

–

Armando Codina

1,754

–

Peter Raemin Formanek

9,369

–

Manny Garcia

3,250

–

Adrian Jones (d)

1,271,600

31.30

–

Shares Beneficially
Owned Before This
Offering (a)

Shares
Offered
Hereby

Shares Beneficially
Owned After This
Offering Without
Exercise of Option

Shares Beneficially
Owned After This
Offering With
Exercise of Option

Name and Address of Beneficial Owner

Number

Percent

Number

Percent

Number

Percent

Sanjeev K. Mehra (d)

1,271,600

31.30

–

Stephen G. Pagliuca(e)

1,271,600

31.30

–

Brian Thomas Swette

3,250

–

Kneeland C. Youngblood

4,388

–

Bradley Blum

40,751

1.00

–

All Executive Officers and Directors as

a group (26 persons)(b)(c)(d)(e)

4,135,980

99.51

–

5% Stockholders:

Investment funds affiliated with Bain

Capital Investors, LLC(e)

c/o Bain Capital Partners, LLC

111 Huntington Avenue

Boston, MA 02199

1,271,600

31.30

The Goldman Sachs Group, Inc.(d)

85 Broad Street

New York, NY 10004

1,271,600

31.30

TPG BK Holdco LLC(g)

c/o Texas Pacific Group

301 Commerce Street

Suite 3300

Fort Worth, Texas 76102

1,430,550

35.21


*	Less than one percent (1%).

(a)	Includes beneficial ownership of shares of common stock for which the following persons hold options exercisable on or within 60 days of February 15, 2006: Mr. Brenneman, 22,968 shares; Mr. Chidsey, 16,264 shares; Mr. Hyatt, 2,500 shares; Mr. Smith, 3,994 shares; Mr. Formanek, 2,869 shares; Mr. Blum, 31,001 shares; and all directors and executive officers as a group, 87,191 shares. Also includes beneficial ownership of shares of common stock underlying restricted stock units held by the following persons that have vested or will vest on or within 60 days of February 15, 2006: Mr. Chidsey, 4,000 shares, Mr. Klein, 457 shares; Mr. Smith, 1,002 shares; and all directors and executive officers as a group, 6,228 shares.

(b)	Includes 1,271,600 shares of common stock owned by investment funds affiliated with Bain Capital Investors, LLC. Mr. Balson disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest.

(c)	Includes 1,430,550 shares held by TPG BK Holdco LLC, whose managing member is TPG Partners III, LP, whose general partner is TPG GenPar III, LP, whose general partner is TPG Advisors III, Inc. Mr. Bonderman disclaims beneficial ownership of such securities.

(d)	The Goldman Sachs Group, Inc., and certain affiliates, including Goldman, Sachs & Co., may be deemed to directly or indirectly own in the aggregate 1,271,600 shares of common stock which are owned directly or indirectly by investment partnerships, which we refer to as the Goldman Sachs Funds, of which affiliates of The Goldman Sachs Group, Inc. and Goldman, Sachs & Co. are the general partner, managing limited partner or the managing partner. Goldman, Sachs & Co. is the investment manager for certain of the Goldman Sachs Funds. Goldman, Sachs & Co. is a direct and indirect, wholly owned subsidiary of The Goldman Sachs Group, Inc. The Goldman Sachs Group, Inc., Goldman, Sachs & Co. and the Goldman Sachs Funds share voting power and investment power with certain of their respective affiliates. Shares beneficially owned by the Goldman Sachs Funds consist of: (i) 664,392 shares of common stock owned by GS Capital Partners 2000, L.P.; (ii) 241,415 shares of common stock owned by GS Capital Partners 2000 Offshore, L.P.; (iii) 27,770 shares of common stock owned by GS Capital Partners 2000 GmbH & Co. Beteiligungs KG; (iv) 210,967 shares of common stock owned by GS Capital Partners 2000 Employee Fund, L.P.; (v) 9,774 shares of common stock owned by Bridge Street Special Opportunities Fund 2000, L.P.; (vi) 19,547 shares of common stock owned by Stone Street Fund 2000, L.P.; (vii) 32,578 shares of common stock owned by Goldman Sachs Direct Investment Fund 2000, L.P.; (viii) 37,776 shares of common stock owned by GS Private Equity Partners 2000, L.P.; (ix) 12,985 shares of common stock owned by GS Private Equity Partners 2000 Offshore Holdings, L.P.; and (x) 14,396 shares of common stock owned by GS Private Equity Partners 2000-Direct Investment Fund, L.P. Sanjeev Mehra and Adrian Jones are each managing directors of Goldman,

	Sachs & Co. Mr. Mehra, Mr. Jones, The Goldman Sachs Group, Inc. and Goldman, Sachs & Co. each disclaims beneficial ownership of the common shares owned directly or indirectly by the Goldman Sachs Funds, except to the extent of their pecuniary interest therein, if any.

(e)	Includes 1,271,600 shares of common stock owned by investment funds affiliated with Bain Capital Investors, LLC. Mr. Pagliuca disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest.

(f)	The shares included in the table consist of: (i) 984,773 shares of common stock owned by Bain Capital Integral Investors, LLC, whose administrative member is Bain Capital Investors, LLC; (ii) 281,455 shares of common stock owned by Bain Capital VII Coinvestment Fund, LLC, whose sole member is Bain Capital VII Coinvestment Fund, L.P., whose general partner is Bain Capital Partners VII, L.P., whose general partner is Bain Capital Investors, LLC and (iii) 5,372 shares of common stock owned by BCIP TCV, LLC, whose administrative member is Bain Capital Investors, LLC.

(g)	The shares included in the table consist of: (i) 664,392 shares of common stock owned by GS Capital Partners 2000, L.P., whose general partner is GS Advisors 2000, L.L.C.; (ii) 241,415 shares of common stock owned by GS Capital Partners 2000 Offshore, L.P., whose general partner is GS Advisors 2000, L.L.C.; (iii) 27,770 shares of common stock owned by GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, whose general partner is Goldman Sachs Management GP GmbH; (iv) 210,967 shares of common stock owned by GS Capital Partners 2000 Employee Fund, L.P., whose general partner is GS Employee Funds 2000 GP, L.L.C.; (v) 9,774 shares of common stock owned by Bridge Street Special Opportunities Fund 2000, L.P., whose general partner is Bridge Street Special Opportunities 2000, L.L.C.; (vi) 19,547 shares of common stock owned by Stone Street Fund 2000, L.P., whose general partner is Stone Street 2000, L.L.C.; (vii) 32,578 shares of common stock owned by Goldman Sachs Direct Investment Fund 2000, L.P., whose general partner is GS Employee Funds 2000 GP, L.L.C.; (viii) 37,776 shares of common stock owned by GS Private Equity Partners 2000, L.P., whose general partner is GS PEP 2000 Advisors, L.L.C., whose managing partner is GSAM Gen-Par, L.L.C.; (ix) 12,985 shares of common stock owned by GS Private Equity Partners 2000 Offshore Holdings, L.P., whose general partner is GS PEP 2000 Offshore Holdings Advisors, Inc.; and (x) 14,396 shares of common stock owned by GS Private Equity Partners 2000-Direct Investment Fund, L.P., whose general partner is GS PEP 2000 Direct Investment Advisors, L.L.C., whose managing partner is GSAM Gen-Par, L.L.C.

(h)	The shares included in the table are owned by TPG BK Holdco LLC, whose managing member is TPG Partners III, LP, whose general partner is TPG GenPar III, LP, whose general partner is TPG Advisors III, Inc.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Shareholders’ Agreement

In connection with our acquisition of BKC, we entered into a shareholders’ agreement dated June 27, 2003 with BKC and the sponsors. The shareholders’ agreement provided, among other things, that each of the sponsors would be entitled to appoint three members of our board of directors. Six of our current directors, Messrs. Balson, Bonderman, Boyce, Jones, Mehra and Pagliuca, were appointed pursuant to the shareholders’ agreement. Upon the completion of this offering, we will enter into an amendment to the shareholders’ agreement with the sponsors providing that all of the provisions of the existing shareholders’ agreement terminate, except for (i) the right of each sponsor to appoint two members to our board of directors, (ii) certain provisions relating to drag-along and tag-along rights and transfer restrictions and (iii) registration rights provisions. The provisions granting the sponsors the right to appoint directors are subject to reduction and elimination as the stock ownership percentage of the private equity funds controlled by the applicable sponsor declines. The provisions relating to drag-along and tag-along rights and transfer restrictions obligate or allow a sponsor to participate in the sale of shares by the other sponsors or limit the transfer of shares held by the sponsors to third parties. The registration rights provisions grant shelf registration rights, demand registration rights and piggyback registration rights to all shareholders or transferees that are party to the shareholders’ agreement. As of February 15, 2006, the private equity funds controlled by the sponsors collectively held 3,973,750 shares of our common stock to which these registration rights apply. The shareholders’ agreement includes customary indemnification provisions in favor of all shareholders or transferees that are party to the shareholders’ agreement, the related parties and the controlling persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) of such shareholders against liabilities under the Securities Act incurred in connection with the registration of any of our debt or equity securities. We agreed to reimburse these persons for any legal or other expenses incurred in connection with investigating or defending any such liability, action or proceeding, except that we will not be required to indemnify any of these persons or reimburse related legal or other expenses if such loss or expense arises out of or is based on any untrue statement or omission made in reliance upon and in conformity with written information provided by these persons.

Management Subscription and Shareholders’ Agreement

We have entered into a subscription agreement and shareholders’ agreement with our directors and executive officers. Upon the completion of this offering, all of the provisions of the management subscription and shareholders agreement will terminate, except for certain transfer restrictions and restrictions on the ability of parties to the agreement to sell shares for 180 days after the effective date of the registration statement of which this prospectus is a part.

Management Agreement

In connection with our acquisition of BKC, we entered into a management agreement dated December 13, 2002 with the sponsors and entities affiliated with the sponsors, pursuant to which we pay the sponsors a quarterly management fee not to exceed 0.5% of the prior quarter’s total revenues. Under the management agreement we also paid the sponsors a separate fee of approximately $22.4 million at the time of the acquisition. The management agreement includes customary indemnification provisions pursuant to which we will indemnify each of the sponsors and those members of our board of directors who hold senior positions at the sponsors or their affiliates from and against all liabilities and expenses incurred in connection with our acquisition of BKC, the management agreement or transactions related to their investment in us, except for such liability or expense arising on account of an indemnified person’s gross negligence or willful misconduct. In connection with the closing of this offering, we will pay the sponsor management termination fee of $30 million to the sponsors to terminate all provisions of the management agreement, except for the indemnification provisions which will survive.

Payment-in-Kind Notes

In order to finance, in part, our acquisition of BKC, we issued $212.5 million in payment-in-kind, or PIK, notes to the private equity funds controlled by the sponsors on December 13, 2002. These private equity funds

subsequently transferred $0.9 million in PIK notes to four of our directors. The PIK notes accreted interest at a rate of 9% per annum. As of June 30, 2004 and 2005, the amounts outstanding under the PIK Notes were $242 million and $264 million, respectively. Our interest expense on the PIK Notes totaled $11 million for the period December 13, 2002 to June 30, 2003, $21 million for the year ended June 30, 2004 and $23 million for the year ended June 30, 2005.

On July 13, 2005, we repaid the PIK notes in full, including accreted interest, as part of the July 2005 refinancing of our indebtedness. We do not expect to borrow any other amounts in the future from the sponsors or from the private equity funds controlled by the sponsors.

Expense Reimbursement to Employees of the Sponsors

We have reimbursed the sponsors for certain travel-related expenses of their employees in connection with meetings of our board of directors and other meetings related to the management and monitoring of our business by the sponsors. Since our December 13, 2002 acquisition of BKC, we have paid approximately $650,000 in total expense reimbursements to the sponsors.

In addition, we paid on behalf of the sponsors approximately $500,000 in legal fees and expenses to Cleary Gottlieb Steen & Hamilton LLP that were incurred by the sponsors in connection with their management of us and arrangements between us and the sponsors. Cleary Gottlieb Steen & Hamilton LLP is providing legal advice to the underwriters in connection with this offering.

New Global Headquarters

One of our directors, Mr. Codina, owns the company that has agreed to lease us a 224,638 square foot building currently under construction in Coral Gables, Florida that will serve as our new global headquarters beginning in 2008. The lease runs for 15 years from the date we occupy the building or 60 days from when the landlord substantially completes construction and the estimated annual rent for the 15-year initial lease term is expected to approximate the combined rent of the two facilities that currently serve as our global headquarters. The lease terms were negotiated on an arm’s length basis and we believe the terms reflect market terms. Mr. Codina currently intends to have the lease assigned to a partnership between him, or an entity related to him, and an affiliate of JPMorgan Securities Inc.

Relocation Expenses

In connection with his relocation from Texas to the Miami area, a relocation firm hired by us advanced our Chief Executive Officer, Mr. Brenneman, $1.4 million in July 2004 in connection with the sale of his home, which was ultimately sold in September 2004. In connection with his relocation from New Jersey to the Miami area, a relocation firm hired by us purchased the home of our President and Chief Financial Officer, Mr. Chidsey, in March 2005 for $2.4 million as part of the our executive relocation program.

DESCRIPTION OF CAPITAL STOCK

General Matters

The following description of our common stock and preferred stock and the relevant provisions of our certificate of incorporation and bylaws are summaries thereof and are qualified by reference to our certificate of incorporation and bylaws, copies of which have been filed with the Securities and Exchange Commission as exhibits to our registration statement, of which this prospectus forms a part, and applicable law.

Our authorized capital stock currently consists of shares of common stock, $0.01 par value, and shares of preferred stock, par value.

Common Stock

Immediately following the completion of this offering, there will be shares of common stock outstanding, assuming no exercise of the underwriters’ option to purchase additional shares.

The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders and do not have cumulative voting rights. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor. See “Dividend Policy”. In the event of liquidation, dissolution or winding up of our company, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and non-assessable, and the shares of common stock to be issued upon completion of this offering will be fully paid and non-assessable. As of , 2006, there were approximately holders of our common stock.

Preferred Stock

The board of directors has the authority to issue preferred stock in one or more classes or series and to fix the designations, powers, preferences and rights, and the qualifications, limitations or restrictions thereof including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further action by the shareholders and may adversely affect the voting and other rights of the holders of common stock. At present, we have no plans to issue any of the preferred stock.

Voting

The affirmative vote of a majority of the shares of our capital stock present, in person or by written proxy, at a meeting of stockholders and entitled to vote on the subject matter will be the act of the stockholders.

Our certificate of incorporation may be amended in any manner provided by the Delaware General Corporation Law. The board of directors has the power to adopt, amend or repeal our bylaws.

Action by Written Consent

Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if the consent to such action is in writing and signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting. Such provision will no longer apply once the sponsors cease to own a majority of our outstanding shares.

Ability to Call Special Meetings

Special meetings of our stockholders may be called by stockholders holding a majority of our shares. Such provision will no longer apply once the private equity funds controlled by the sponsors cease to own a majority of our outstanding shares.

Shareholder Removal of the Board Without Cause

Stockholders holding a majority of our shares may remove members of the board of directors without cause. Such provision will no longer apply once the private equity funds controlled by the sponsors cease to own a majority of our outstanding shares.

Limitation of Liability and Indemnification Matters

Our certificate of incorporation provides that a director of our company will not be liable to us or our shareholders for monetary damages for breach of fiduciary duty as a director, except in certain cases where liability is mandated by the Delaware General Corporation Law. Our certificate of incorporation also provides for indemnification, to the fullest extent permitted by law, by our company of any person made or threatened to be made a party to, or who is involved in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of our company, or at the request of our company, serves or served as a director or officer of any other enterprise, against all expenses, liabilities, losses and claims actually incurred or suffered by such person in connection with the action, suit or proceeding. Our certificate of incorporation also provides that, to the extent authorized from time to time by our board of directors, we may provide indemnification to any one or more employees and other agents of our company to the extent and effect determined by the board of directors to be appropriate and authorized by the Delaware General Corporation Law. Our certificate of incorporation also permits us to purchase and maintain insurance for the foregoing and we expect to maintain such insurance.

Listing

We intend to apply to list our common stock on the New York Stock Exchange under the symbol “BKC”.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock will be .

DESCRIPTION OF OUR CREDIT FACILITY

On July 13, 2005, we and BKC entered into a $1.15 billion senior secured credit facility with JPMorgan Chase Bank N.A., as Administrative Agent, Citicorp North America, Inc., as Syndication Agent, and Bank of America N.A., RBC Capital Markets and Wachovia Bank, National Association, as Documentation Agents, and various other lenders which consisted of a $150 million revolving credit facility, a $250 million term loan, which we refer to as term loan A, and a $750 million term loan, which we refer to as term loan B. We used $1 billion in proceeds from the term loans A and B, $47 million in proceeds from the revolving credit facility, and cash on hand to pay in full BKC’s existing senior secured credit facility and our payment-in-kind notes payable to Diageo plc, the private equity funds controlled by the sponsors and certain directors that we incurred in connection with our acquisition of BKC and to pay $16 million in financing costs.

On February 15, 2006, we amended and restated the senior secured credit facility, which amendment and restatement we refer to as our senior secured credit facility, to borrow an additional $350 million by replacing the $746 million outstanding under term loan B with a new term loan B, which we refer to as term loan B-1, in an amount of $1.096 billion and to permit the payment of the February 2006 dividend, the compensatory make-whole payment and the sponsor management termination fee. We used the $350 million in additional borrowings and $55 million in cash on hand to pay the $367 million February 2006 dividend and the $33 million compensatory make-whole payment on February 21, 2006 and $5 million in financing costs and expenses. We expect to pay the $30 million sponsor management termination fee from cash on hand upon the completion of this offering.

The interest rate under the senior secured credit facility for term loan A and the revolving credit facility is at our option either (a) the greater of the federal funds effective rate plus 0.50% and the prime rate, which we refer to as ABR, plus a rate not to exceed 0.75%, which varies according to our leverage ratio or (b) LIBOR plus a rate not to exceed 1.75%, which varies according to our leverage ratio. The interest rate for term loan B-1 is at our option either (a) ABR, plus a rate of 0.50% or (b) LIBOR plus 1.50%, in each case so long as our leverage ratio remains at or below certain levels (but in any event not to exceed 0.75%, in the case of ABR loans, and 1.75% in the case of LIBOR loans).

The quarterly principal payments will begin on September 30, 2006 for term loan A and March 31, 2006 for term loan B-1 and the level of required principal repayments will increase over time. The maturity dates of term loan A, term loan B-1, and amounts drawn under the revolving credit facility are June 2011, June 2012, and June 2011, respectively.

Our senior secured credit facility contains certain customary financial and other covenants. These covenants impose restrictions on additional indebtedness, liens, investments, advances, guarantees, mergers and acquisitions. These covenants also place restrictions on asset sales, sale and leaseback transactions, dividends, payments between us and our subsidiaries and certain transactions with affiliates. Additionally, our senior secured credit facility contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, events of bankruptcy and insolvency, judgment defaults, failure of any guaranty or security document to be in full force and effect and a change of control of our business.

The financial covenants include a requirement to maintain a certain interest expense coverage ratio and leverage ratio, which are calculated excluding the effect of the payments of the February 2006 dividend, the compensatory make-whole payment and the sponsor management termination fee, and limit the maximum amount of capital expenditures to an amount ranging from $180 million to $250 million per fiscal year over the term of our senior secured credit facility. Following the end of each fiscal year, we are required to prepay the term debt in an amount equal to 50% of excess cash flow (as defined in our senior secured credit facility) for such fiscal year. This prepayment requirement is not applicable if our leverage ratio is less than a predetermined amount. There are other events and transactions, such as certain asset sales, sale and leaseback transactions resulting in aggregate net proceeds over $2.5 million in any fiscal year, proceeds from casualty events and incurrence of debt that will trigger additional mandatory prepayment.

Our senior secured credit facility permits us to pay cash dividends on our common stock, in an aggregate amount, taken together with the amount of certain investments permitted under our senior secured credit facility, following the completion of this offering, equal to the greater of (x) 50% of excess cash flow of BKC for the period from July 1, 2005 through the end of the most-recently ended fiscal year of BKC and (y) the sum of (A) $50 million, (B) 50% of consolidated net income for the period from December 31, 2005 to the end of the most-recently ended fiscal quarter (or where consolidated net income is a deficit, minus 100% of the deficit) and (C) the aggregate amount of proceeds received by us from the issuance of certain equity interests.

While BKC is the only borrower under our senior secured credit facility, we and certain of our subsidiaries have jointly and severally unconditionally guaranteed the payment of the amounts due under our senior secured credit facility. We and certain of our subsidiaries, including BKC, have pledged as collateral a 100% equity interest in our and BKC’s domestic subsidiaries with some exceptions. Furthermore, BKC has pledged as collateral a 65% equity interest in certain of its foreign subsidiaries.

As of February 15, 2006, we had $107 million available for borrowing under our $150 million revolving credit facility (net of $43 million in letters of credit issued under the revolving credit facility).

See Note 15 to our unaudited consolidated financial statements and Note 20 to our audited consolidated financial statements included elsewhere in this prospectus for further information about our senior secured credit facility.

MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
FOR NON-UNITED STATES HOLDERS OF COMMON STOCK

The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of common stock by a beneficial owner that is a “non-U.S. holder” and that does not own, and is not deemed to own, more than 5% of the Company’s common stock. A “non-U.S. holder” is a person or entity that, for U.S. federal income tax purposes, is a:

•	non-resident alien individual, other than certain former citizens and residents of the United States subject to tax as expatriates,

•	foreign corporation or

•	foreign estate or trust.

A “non-U.S. holder” does not include an individual who is present in the United States for 183 days or more in the taxable year of disposition and is not otherwise a resident of the United States for U.S. federal income tax purposes. Such an individual is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the sale, exchange or other disposition of common stock.

This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein. This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to non-U.S. holders in light of their particular circumstances and does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction. Prospective holders are urged to consult their tax advisors with respect to the particular tax consequences to them of owning and disposing of common stock, including the consequences under the laws of any state, local or foreign jurisdiction.

Dividends

Dividends paid by the Company to a non-U.S. holder of common stock generally will be subject to withholding tax at a 30% rate or a reduced rate specified by an applicable income tax treaty. In order to obtain a reduced rate of withholding, a non-U.S. holder will be required to provide an Internal Revenue Service Form W-8BEN certifying its entitlement to benefits under a treaty.

The withholding tax does not apply to dividends paid to a non-U.S. holder who provides a Form W-8ECI, certifying that the dividends are effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. income tax as if the non-U.S. holder were a U.S. resident. A non-U.S. corporation receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower treaty rate).

Gain on Disposition of Common Stock

A non-U.S. holder generally will not be subject to U.S. federal income tax on gain realized on a sale or other disposition of common stock unless:

•	the gain is effectively connected with a trade or business of the non-U.S. holder in the United States, subject to an applicable treaty providing otherwise, or

•	the Company is or has been a U.S. real property holding corporation, as defined below, at any time within the five-year period preceding the disposition or the non-U.S. holder’s holding period, whichever period is shorter, and its common stock has ceased to be traded on an established securities market prior to the beginning of the calendar year in which the sale or disposition occurs.

The Company believes that it is not, and does not anticipate becoming, a U.S. real property holding corporation.

Information Reporting Requirements and Backup Withholding

Information returns will be filed with the Internal Revenue Service in connection with payments of dividends and the proceeds from a sale or other disposition of common stock. You may have to comply with certification procedures to establish that you are not a U.S. person in order to avoid information reporting and backup withholding tax requirements. The certification procedures required to claim a reduced rate of withholding under a treaty will satisfy the certification requirements necessary to avoid the backup withholding tax as well. The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is furnished to the Internal Revenue Service.

Federal Estate Tax

An individual non-U.S. holder who is treated as the owner of, or has made certain lifetime transfers of, an interest in the common stock will be required to include the value of the stock in his gross estate for U.S. federal estate tax purposes, and may be subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of common stock in the public market, or the perception that such sales may occur, could adversely affect the prevailing market price of the common stock. Upon completion of this offering, there will be shares of common stock outstanding (and shares if the underwriters’ option to purchase additional shares is exercised in full). Of these shares, shares of common stock sold in this offering will be freely transferable without restriction or further registration under the Securities Act of 1933. Of the remaining shares of common stock outstanding:

•	shares of our common stock will be available for immediate sale pursuant to Rule 144; and

•	shares of our common stock will be available for sale after the expiration of the lock-up agreements (180 days after the date of the final prospectus unless earlier waiver in the manner described under “Underwriting” pursuant to Rule 144).

Rule 144

In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including an affiliate, who beneficially owns “restricted securities” may not sell those securities until they have been beneficially owned for at least one year. Thereafter, the person would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

•	1% of the number of shares of common stock then outstanding (which will equal approximately shares immediately after this offering); or

•	the average weekly trading volume of the common stock on the New York Stock Exchange during the four calendar weeks preceding the filing with the SEC of a notice on the SEC’s Form 144 with respect to such sale.

Sales under Rule 144 are also subject to certain other requirements regarding the manner of sale, notice and availability of current public information about us.

Rule 144(k)

Under Rule 144(k), a person who is not, and has not been at any time during the 90 days preceding a sale, an affiliate of ours and who has beneficially owned the shares proposed to be sold for at least two years (including the holding period of any prior owner except an affiliate) is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

Rule 701

In general, under Rule 701 of the Securities Act as currently in effect, each of our employees, consultants or advisors who purchased shares from us in connection with a compensatory stock plan or other written agreement is eligible to resell those shares 90 days after the effective date of this offering in reliance on Rule 144 (or earlier, if such shares are registered on a Registration Statement pursuant to Form S-8), but without compliance with some of the restrictions, including the holding period, contained in Rule 144.

No precise prediction can be made as to the effect, if any, that market sales of shares or the availability of shares for sale will have on the market price of our common stock prevailing from time to time. We are unable to estimate the number of our shares that may be sold in the public market pursuant to Rule 144 or Rule 701 (or pursuant to Form S-8, if applicable) because this will depend on the market price of our common stock, the personal circumstances of the sellers and other factors. Nevertheless, sales of significant amounts of our common stock in the public market could adversely affect the market price of our common stock.

Stock Plans

We intend to file a registration statement or statements under the Securities Act covering shares of common stock both reserved for issuance under our 2006 Plan and pursuant to all option grants made prior to this offering. Subject to lock-up arrangements, these registration statements are expected to be filed as soon as practicable after the completion of this offering. As of December 31, 2005, there were 333,302 options outstanding to purchase shares of which 95,556 options were vested Shares issued upon the exercise of stock options after the effective date of the applicable Form S-8 registration statement will be eligible for resale in the public market without restriction, subject to Rule 144 limitations applicable to affiliates and the lock-up agreements described above.

Registration Rights Under Shareholders’ Agreement

Following this offering, holders of substantially all of our common stock will, under some circumstances, have the right to require us to register their shares for future sale. See “Certain Relationships and Related Transactions—Shareholders’ Agreement”.

UNDERWRITING

We and the selling stockholders are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities Inc., Citigroup Global Markets Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated are acting as joint book-running managers of the offering and as representatives of the underwriters. We and the selling stockholders have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we and the selling stockholders have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:

	Name			Number of Shares


	J.P. Morgan Securities Inc.
	Citigroup Global Markets Inc.
	Goldman, Sachs & Co.
	Morgan Stanley & Co. Incorporated

	Total

The underwriters are committed to purchase all the common shares offered by us and the selling stockholders if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.

The underwriters propose to offer the common shares directly to the pubic at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $ per share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the United States may be made by affiliates of the underwriters.

The underwriters have an option to buy up to additional shares of common stock from us and up to additional shares of common stock from the sponsors to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this over-allotment option. If any shares are purchased with this over-allotment option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us and the selling stockholders per share of common stock. The underwriting fee is $ per share. The following table shows the per share and total underwriting discounts and commissions to be paid by us and the selling stockholders to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.

Paid by the Company	Without over- allotment exercise	With full over- allotment exercise


Per Share	$	$
Total	$	$

Paid by the Selling Stockholders	Without over- allotment exercise	With full over- allotment exercise


Per Share	$	$
Total	$	$

At our request, the underwriters have reserved percent of the shares of common stock offered by this prospectus for sale, at the initial public offering price, to our directors, officers, employees, franchisees and certain other business partners as designated by us. The number of shares available for sale to other investors will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus.

We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $ .

A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

We have agreed that, subject to certain exceptions, we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of J.P. Morgan Securities Inc. for a period of 180 days after the date of this prospectus. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to our company occurs; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

All of our directors and executive officers, and holders of substantially all of our common stock, including the selling stockholders and certain of our other officers, have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with certain exceptions, for a period of 180 days after the date of this prospectus, may not, without the prior written consent of J.P. Morgan Securities Inc., (1) offer, pledge, announce the intention to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock (including, without limitation, common stock which may be deemed to be beneficially owned by such persons in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant) or (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to our company occurs; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

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We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

We will apply to have our common stock approved for listing on the New York Stock Exchange under the symbol “BKC.”

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ over allotment option referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their over allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the over allotment option. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The underwriters have advised us that, pursuant to Regulation M of the Securities Act of 1933, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

These activities, as well as other purchases by the underwriters for their own account, may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise.

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:

•	the information set forth in this prospectus and otherwise available to the representatives;

•	our prospects and the history and prospects for the industry in which we compete;

•	an assessment of our management;

•	our prospects for future earnings;

•	the general condition of the securities markets at the time of this offering;

•	the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and

•	other factors deemed relevant by the underwriters and us.

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Neither we nor the selling stockholders nor the underwriters can assure investors that an active trading market will develop for our common shares, or that the shares will trade in the public market at or above the initial public offering price.

Each underwriter has represented that (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any common stock in circumstances in which Section 21(1) of the FSMA does not apply to us and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a ‘‘Relevant Member State’’), each underwriter has represented and agreed that with effect from and including the date on which the European Union Prospectus Directive (the ‘‘EU Prospectus Directive’’) is implemented in that Relevant Member State (the ‘‘Relevant Implementation Date’’) it has not made and will not make an offer of common stock to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:

•	to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

•	to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than 443,000,000 and (3) an annual net turnover of more than 450,000,000, as shown in its last annual or consolidated accounts; or

•	in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an ‘‘offer of shares to the public’’ in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Member State by any measure implementing the EU Prospectus Directive in that Member State and the expression EU Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

The shares may not be offered or sold by means of any document other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong, and no advertisement, invitation or document relating to the shares may be issued, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made thereunder.

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the

102

conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

The securities have not been and will not be registered under the Securities and Exchange Law of Japan (the Securities and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for reoffering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Prior to this offering, the Goldman Sachs Funds, affiliates of Goldman, Sachs & Co., owns in excess of 10% of the issued and outstanding shares of our common stock. Because its affiliate will receive in excess of 10% of the net proceeds from this offering, Goldman, Sachs & Co. may be deemed to have a “conflict of interest” with us under Rule 2710(h) of the National Association of Securities Dealers, Inc.’s Conduct Rules. When a NASD member with a conflict of interest participates as an underwriter in a public offering, the rule requires that the initial public offering price can be no higher than that recommended by a “qualified independent underwriter,” as defined by the NASD. In accordance with the rule, will assume the responsibility of acting as a qualified independent underwriter. In this role, will perform a due diligence investigation and review and participate in the preparation of the registration statement of which this prospectus forms a part. The underwriters may not confirm sales to any discretionary account without the prior specific written approval of the customer.

Certain of the underwriters and their affiliates have provided in the past to us, our affiliates and the sponsors and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us, such affiliates and the sponsors in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. For example, J.P. Morgan Chase Bank N.A., an affiliate of J.P. Morgan Securities Inc., is the administrative agent for our senior secured credit facility and Citicorp North America Inc., an affiliate of Citigroup Global Markets Inc., is syndication agent for our senior secured credit facility. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future. In addition, TurnWorks, Inc., a consulting company 100% owned by our Chairman and Chief Executive Officer, has provided certain consulting and other advisory services unrelated to this offering to an affiliate of J.P. Morgan Securities Inc.

103

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed upon for us by Davis Polk & Wardwell, New York, New York, and certain legal matters will be passed upon for the underwriters by Cleary Gottlieb Steen & Hamilton LLP, New York, New York. Cleary Gottlieb Steen & Hamilton LLP has in the past provided legal services to us and the sponsors, including in connection with the acquisition of BKC in December 2002, and may in the future continue to provide legal services to us and the sponsors. In addition, Cleary Gottlieb Steen & Hamilton LLP currently provides legal services to the sponsors, including legal services regarding modifications to the arrangements between us and the sponsors in connection with this offering.

EXPERTS

The consolidated financial statements of Burger King Holdings, Inc. and subsidiaries (Successor) as of June 30, 2004 and 2005, the period from December 13, 2002 to June 30, 2003 and for each of the years in the two-year period ended June 30, 2005, and for the period from July 1, 2002 to December 12, 2002 of Burger King Corporation and subsidiaries (Predecessor), have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission or SEC, in Washington, DC, a registration statement on Form S-1 under the Securities Act with respect to the common stock offered hereby. For further information with respect to us and our common stock, reference is made to the registration statement and the exhibits and any schedules filed therewith. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if such contract or document is filed as an exhibit, reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each statement being qualified in all respects by such reference. A copy of the registration statement, including the exhibits and schedules thereto, may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site at http://www.sec.gov, from which interested persons can electronically access the registration statement, including the exhibits and any schedules thereto. The registration statement, including the exhibits and schedules thereto, are also available for reading and copying at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005.

As a result of this offering, we will become subject to the full informational requirements of the Securities Exchange Act of 1934, as amended. We will fulfill our obligations with respect to such requirements by filing periodic reports and other information with the SEC. We intend to furnish our shareholders with annual reports containing consolidated financial statements certified by an independent public accounting firm. We also maintain an Internet site at http://www.bk.com. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus or the registration statement of which it forms a part.

You may obtain a copy of any of our filings, at no cost, by writing or telephoning us at:

Burger King Holdings, Inc.

5505 Blue Lagoon Drive

Miami, Florida 33126

(305) 378-3000

Attn: Corporate Secretary

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BURGER KING HOLDINGS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Unaudited Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2005	F-2
Condensed Consolidated Statements of Operations for the six months ended December 31, 2004
and December 31, 2005	F-3
Condensed Consolidated Statement of Stockholders’ Equity for the six months ended December 31, 2005	F-4
Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2004
and December 31, 2005	F-5
Notes to Condensed Consolidated Financial Statements	F-7

Audited Financial Statements

Report of Independent Registered Public Accounting Firm	F-17
Consolidated Balance Sheets as of June 30, 2004 and 2005	F-18
Consolidated Statements of Operations for the periods July 1, 2002 to December 12, 2002 (Predecessor) and
December 13, 2002 to June 30, 2003, and for each of the years in the two-year period ended
June 30, 2005 (Successor)	F-19
Consolidated Statements of Stockholders’ Equity for the periods July 1, 2002 to December 12, 2002
(Predecessor) and December 13, 2002 to June 30, 2003, and for each of the years in the two-year period ended
June 30, 2005 (Successor)	F-20
Consolidated Statements of Cash Flows for the periods July 1, 2002 to December 12, 2002 (Predecessor) and
December 13, 2002 to June 30, 2003, and for each of the years in the two-year period ended June 30, 2005
(Successor)	F-21
Notes to Consolidated Financial Statements	F-23

F-1

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets as of

June 30, 2005 and December 31, 2005

(In millions, except share data)

		June 30, 2005			December 31, 2005

					(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	432		$	207
Trade and notes receivable, net		110			110
Prepaids and other current assets, net		35			44
Deferred income taxes, net		57			45

Total current assets		634			406

Property and equipment, net		899			876
Intangibles, net		995			987
Goodwill		17			20
Net investment in property leased to franchisees		149			149
Other assets, net		29			38

Total assets	$	2,723		$	2,476


Liabilities and Stockholders’ Equity
Current liabilities:
Accounts and drafts payable	$	83		$	66
Accrued advertising		59			67
Other accrued liabilities		248			213
Current portion of term debt and capital leases		4			24

Total current liabilities		394			370



Term debt		1,282			980
Capital leases		53			62
Other deferrals and liabilities		375			375
Deferred income taxes, net		142			159

Total liabilities		2,246			1,946


Commitments and contingencies

Stockholders’ equity:
Common stock, $0.01 par value; 4,500,000 shares authorized; 4,035,986
and 4,041,331 shares issued and outstanding at June 30, 2005 and
December 31, 2005, respectively		–			–
Restricted stock units		2			4
Additional paid-in capital		407			407
Retained earnings		76			125
Accumulated other comprehensive loss		(6	)		(4	)
Treasury stock, at cost; 15,276 shares at June 30, 2005 and
December 31, 2005		(2	)		(2	)

Total stockholders’ equity		477			530

Total liabilities and stockholders’ equity	$	2,723		$	2,476

See accompanying notes to condensed consolidated financial statements.

F-2

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations for the six months ended

December 31, 2004 and December 31, 2005

(Unaudited)

(In millions, except share and per share data)

		Six Months Ended December 31,

		2004		2005

Revenues:
Company restaurant	$	704	$	754
Franchise and property		265		266

		969		1,020

Company restaurant expenses:
Food, paper and product costs		218		237
Payroll and employee benefits		204		219
Occupancy and other operating costs		168		184

Company restaurant expenses		590		640

Selling, general and administrative expenses		236		213
Property expenses		30		28
Other operating (income) expense, net		3		(3	)

Total operating costs and expenses		859		878


Income from operations		110		142

Interest expense, net		34		34
Loss on early extinguishment of debt		–		13


Income before income taxes		76		95

Income tax expense		31		46


Net income	$	45	$	49


Earnings per share:
Basic	$	11.16	$	12.09

Diluted	$	11.12	$	11.44


Weighted average shares outstanding:
Basic		4,033,585		4,053,977

Diluted		4,046,370		4,283,651

See accompanying notes to condensed consolidated financial statements.

F-3

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES

Condensed Statement of Stockholders’ Equity for the six months ended

December 31, 2005

(Unaudited)

(In millions)

		Common Stock		Restricted stock units		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)			Treasury stock			Total

Balances at June 30, 2005	$	–	$	2	$	407	$	76	$	(6	)	$	(2	)	$	477
Issuance of restricted stock units		–		2		–		–		–			–			2
Comprehensive income:
Net income		–		–		–		49		–			–			49
Translation adjustment		–		–		–		–		3			–			3
Unrealized gain on hedging activity,
net of tax of $(3)		–		–		–		–		5			–			5
Minimum pension liability,
net of tax of $5		–		–		–		–		(6	)		–			(6	)

Comprehensive income																51

Balances at December 31, 2005	$	–	$	4	$	407	$	125	$	(4	)	$	(2	)	$	530

See accompanying notes to condensed consolidated financial statements

F-4

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows for the six months ended

December 31, 2004 and December 31, 2005

(Unaudited)

(In millions)

		Six Months Ended December 31,

		2004			2005

Cash flows from operating activities:
Net income	$	45		$	49
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization		34			42
Interest expense payable in kind		22			–
Gain on asset disposals		(3	)		(1	)
Provision for bad debt expense		2			–
Impairment of investments in franchisee debt		1			–
Pension curtailment gain		–			(6	)
Loss on early extinguishment of debt		–			13
Deferred income taxes		15			31
Changes in current assets and liabilities, net of acquisitions:
Trade and notes receivables		(18	)		1
Prepaids and other current assets, net		(7	)		(12	)
Accounts and drafts payable		(39	)		(20	)
Accrued advertising		(3	)		8
Other accrued liabilities		2			(27	)
Changes in other long-term assets and liabilities, net		11			27

Net cash provided by operating activities		62			105


Cash flows from investing activities:
Sales of securities available for sale		368			–
Purchase of securities available for sale		(251	)		–
Additions to property and equipment		(29	)		(30	)
Proceeds from dispositions of assets and business disposals		8			10
Payments for acquired franchisee operations		(20	)		(7	)
Investment in franchisee debt		(15	)		(3	)
Collections on franchisee debt		–			1

Net cash provided by (used for) investing activities		61			(29	)


Cash flows from financing activities:
Proceeds from term debt and credit facility		–			1,047
Repayments of term debt, credit facility and capital leases		(2	)		(1,332	)
Payment of deferred financing costs		–			(16	)
Proceeds from sale of common stock		3			–
Purchases of treasury stock		(1	)		–

Net cash used for financing activities		–			(301	)


Increase (decrease) in cash and cash equivalents		123			(225	)
Cash and cash equivalents at beginning of period		221			432

Cash and cash equivalents at end of period	$	344		$	207

See accompanying notes to condensed consolidated financial statements.

F-5

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows for the six months ended
December 31, 2004 and December 31, 2005
(Unaudited)
(In millions)

		Six Months Ended December 31,

		2004		2005

Supplemental cash–flow disclosures:
Interest paid	$	11	$	36
Income taxes paid		8		7
Non–cash investing and financing activities:
Acquisition of franchise operations	$	17	$	–
Acquisition of property with capital leases		–		10

See accompanying notes to condensed consolidated financial statements.

F-6

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Description of Business and Organization

Burger King Holdings, Inc. (“BKH”) is a Delaware corporation and the parent of Burger King Corporation (“BKC”), a Florida corporation, that is a worldwide franchisor and operator of fast food hamburger restaurants, principally under the Burger King brand. BKH is owned by private equity funds controlled by Texas Pacific Group, the Goldman Sachs Funds and Bain Capital Partners (collectively, the “Sponsors”). BKH and its subsidiaries, including BKC, are collectively referred to herein as the “Company”.

The Company generates revenues from three sources: (i) sales at restaurants owned by the Company; (ii) royalties and franchise fees paid by franchisees; and (iii) property income from the franchise restaurants that the Company leases or subleases to franchisees. The Company receives monthly royalties and advertising contributions from franchisees based on a percentage of restaurant sales.

Note 2. Basis of Consolidation and Presentation

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The condensed unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended June 30, 2005. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the accompanying condensed unaudited consolidated financial statements have been made. Operating results for the six months ended December 31, 2005 are not necessarily indicative of the results that may be expected for the full year.

Note 3. Acquisitions

All acquisitions of franchised restaurant operations are accounted for using the purchase method of accounting. The operating results of acquired restaurants have been included in the consolidated statements of operations since their respective dates of acquisition. These acquisitions are summarized as follows (in millions, except for number of restaurants):

		Six Months Ended December 31,

		2004			2005

Number of restaurants acquired		6			38

Property and equipment, net	$	32		$	2
Goodwill and other intangible assets		6			6
Other miscellaneous		(1	)		(1	)

Total purchase price	$	37		$	7

Included in property and equipment, net of $32 million for the six months ended December 31, 2004 was property leased to franchisees of $14 million.

The Company’s settlement losses, recorded in accordance with Emerging Issues Task Force (“EITF”) 04-1, Accounting for Preexisting Relationships between the Parties to a Business Combination, was insignificant for the six months ended December 31, 2005. During the six months ended December 31, 2004 the Company recorded settlement losses of $4 million. These settlement losses and other expenses are recorded in other operating expenses (income), net, in the accompanying condensed consolidated statements of operations.

F-7

Note 4. Related Party Transactions

The Company is charged a management fee by the Sponsors equal to 0.5% of total current year revenues, which amount is limited to 0.5% of the prior year’s total revenues. For both the six months ended December 31, 2004 and 2005, the Company incurred management fees and expenses totaling $5 million. These fees and expenses are recorded within selling, general and administrative expenses in the accompanying condensed consolidated statement of operations. At December 31, 2004 and 2005, the Company had a management fee payable of $2 million, which is reflected within other accrued liabilities in the accompanying condensed consolidated balance sheet.

As of June 30, 2005, the Company had payment-in-kind notes (“PIK Notes”) outstanding to affiliates of $528 million. There were no PIK Notes outstanding as of December 31, 2005. Interest expense on the PIK Notes for the six months ended December 31, 2004 and 2005 was $22 million and $2 million, respectively.

An independent director of the board of directors of the Company has a direct financial interest in a company with which the Company has entered into a lease agreement for the Company’s headquarters.

Note 5. Prepaid Expenses and Other Current Assets, Net

Included in prepaid expenses and other current assets, net are inventory of $15 million and $16 million as of June 30, 2005 and December 31, 2005, respectively.

Note 6. Property & Equipment, Net

Property and equipment, net consists of the following:

		June 30, 2005			December 31, 2005

Property and equipment	$	1,151		$	1,179
Accumulated depreciation		(252	)		(303	)


Property and equipment, net	$	899		$	876

Note 7. Earnings Per Share

Basic earnings per share is computed by dividing net earnings attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Basic and diluted earnings per share were calculated as follows:

		Six Months Ended December 31,

(in millions, except share and per share amounts)		2004		2005

Numerator:
Numerator for basic and diluted earnings per share-net income	$	45	$	49


Denominator:
Denominator for basic earnings per share-weighted average shares		4,033,585		4,053,977
Effect of dilutive securities:
Restricted stock units		12,785		17,677
Employee stock options		-		211,997


Denominator for diluted earnings per share- adjusted weighted average shares		4,046,370		4,283,651


Basic earnings per share	$	11.16	$	12.09

F-8

		Six Months Ended December 31,

(in millions, except share and per share amounts)		2004		2005

Diluted earnings per share	$	11.12	$	11.44

For the six months ended December 31, 2004 and 2005, 340,965 and 21,335 of the Company’s options to purchase common stock, respectively, were excluded from the calculation of diluted earnings per share as their exercise price was equal to or greater than the average fair market value for the respective periods.

Note 8. Other Accrued Liabilities

Included in other accrued liabilities as of June 30, 2005 and December 31, 2005, were accrued payroll and employee-related benefit costs totaling $93 million and $77 million, respectively.

Note 9. Long Term Debt

In July 2005, the Company entered into a $1.15 billion credit agreement, which consists of a $150 million revolving credit facility, a $250 million term loan (“Term Loan A”), and a $750 million term loan (“Term Loan B”). The interest rate for Term Loan A, Term Loan B, and the revolving credit facility, as selected by the Company, is either (a) the greater of the prime rate or the federal funds effective rate plus 0.5% plus a rate not to exceed 0.75%, which varies according to the Company’s leverage ratio or (b) LIBOR plus a rate not to exceed 1.75%, which varies according to the Company’s leverage ratio.

The quarterly principal payments for Term Loan A and Term Loan B begin on September 30, 2006 and September 30, 2005, respectively, and the amounts of required principal payments increase over time. The maturity dates of Term Loan A, Term Loan B, and amounts drawn under the revolving credit facility are June 2011, June 2012, and June 2011, respectively. The aggregate amounts of future maturities for long term debt for each of the twelve months ending December 31 are as follows (in millions):

2006	$	20
2007		34
2008		45
2009		64
2010		83
Thereafter		754

	$	1,000

The credit agreement contains certain customary financial and other covenants. These covenants impose restrictions on additional indebtedness, liens, investments, advances, guarantees, mergers and acquisitions. These covenants also place restrictions on asset sales, sale and leaseback transactions, dividends, payments among BKC, BKH and their subsidiaries, and certain transactions with affiliates. The financial covenants include a requirement to maintain a certain interest expense coverage ratio and leverage ratio and limit the maximum amount of capital expenditures in a year. Following the end of each fiscal year, the Company is required to prepay the term debt in an amount equal to 50% of excess cash flow (as defined in the credit agreement). This prepayment requirement is not applicable if the Company’s leverage ratio is less than a predetermined amount. There are other events and transactions such as certain asset sales, sale and leaseback transactions, proceeds from casualty events, and incurrence of debt that will trigger additional mandatory prepayments.

BKC is the borrower under the credit agreement and BKH and certain subsidiaries have jointly and severally unconditionally guaranteed the payment of the amounts due under the new credit agreement. BKH, BKC, and certain subsidiaries have pledged, as collateral, a 100% equity interest in the domestic subsidiaries of BKH and BKC, with some exceptions. Furthermore, BKC has pledged as collateral a 65% equity interest in certain foreign subsidiaries.

The Company utilized $1 billion in proceeds from Term Loans A and B, $47 million of the revolving credit facility, and cash on hand to repay BKC’s existing term debt and the payment-in-kind notes (“PIK Notes”) issued by

F-9

BKH. The remaining deferred financing fee balance of $13 million from the existing term debt was recorded as a loss on early extinguishment of debt in the accompanying condensed consolidated statement of operations for the six months ended December 31, 2005. The Company recorded deferred financing costs of $16 million in connection with the refinancing. During the six months ended December 31, 2005 the Company repaid all of the $47 million outstanding under the revolving credit facility.

Subsequent to December 31, 2005, the Company amended and restated its senior secured credit facility. See Note 15 for further details of these amendments.

Interest rate swaps

During the six months December 31, 2005, the Company entered into interest rate swaps with a notional value of $750 million that qualify as cash flow hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended. These interest rate swaps are used to convert the floating interest-rate component of certain debt obligations to fixed rates.

The fair value of the swap agreement was $9 million as of December 31, 2005 and is recorded within other assets, net in the accompanying condensed consolidated balance sheets. During the six months ended December 31, 2005, the Company recorded a $5 million, net of tax, unrealized gain on hedging activity in accumulated other comprehensive loss included in stockholders’ equity. Unrealized gains and losses in other comprehensive income related to these hedges are expected to be recorded to the Company’s statement of operations in the future and will offset interest expense on certain variable rate debt. The actual amounts that will be recorded to the Company’s statement of operations could vary materially from this estimated amount as a result of changes in interest rates in the future.

Note 10. Compensation

Stock-Based Compensation

Options issued by the Company generally vest over five years and have a ten-year life from the date of grant. The exercise price of these options was equal to or greater than the fair market value of the underlying common stock on the grant date; therefore, no stock-based compensation is recognized. During the six months ended December 31, 2004 and 2005, certain officers and employees of the Company were granted options to purchase 190,086 and 33,732 shares of common stock of BKH, respectively. During the six months ended December 31, 2004 and 2005, options to purchase 107,915 and 21,983 shares of common stock, respectively, were forfeited. In addition, certain former officers and directors exercised their right to purchase 4,216 shares of common stock during the six months ended December 31, 2005. During the six months ended December 31, 2004, none of the options to purchase shares of common stock had been exercised.

The Company accounts for stock-based compensation in accordance with Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The provisions of SFAS No. 123, Share-Based Payment, as amended by SFAS No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure, as they apply to stock-based employee compensation require disclosure of the effect on net income and earnings per share had the Company applied the fair value method under SFAS No. 123. The impact under the fair value method was insignificant for the six months ended December 31, 2004 and 2005.

Restricted Stock Units

Pursuant to BKH’s Equity Incentive Plan, certain officers of BKC are eligible to receive a portion of their annual incentive plan award in restricted stock units (“RSUs”). During the six months ended December 31, 2004 and December 31, 2005, the Company granted 14,808 and 10,694 RSUs, respectively, at a fair market value. The Company recognizes compensation expense on the BKH restricted stock units granted to its employees ratably over the vesting period.

F-10

Note 11. Retirement Plan and Other Postretirement Benefits

A summary of the components of net periodic benefit cost for the defined benefit plans (retirement benefits) and postretirement benefit plans (other benefits) is presented below (in millions):

		Retirement Benefits						Other Benefits

		Six Months Ended December 31,						Six Months Ended December 31,

		2004			2005			2004		2005

Service cost – benefits earned during the period	$	3		$	3		$	–	$	–
Interest costs on projected benefit obligations		5			5			1		1
Expected return on plan assets		(4	)		(4	)		–		–
Recognized net actuarial loss		–			–			–		–
Curtailment gain		–			(6	)		–		–

Net periodic benefit expense (income)	$	4		$	(2	)	$	1	$	1

The Company has noncontributory defined benefit plans for its salaried employees in the United States (the “Plans”) and noncontributory defined benefit plans for certain employees in the United Kingdom and Germany. In November 2005, the Company announced that effective December 31, 2005 all benefits accrued under the Plans would be frozen at the level attained on that date. The benefits accrued through December 31, 2005 were not reduced and market assets used to fund the Plans’ obligations will continue to be invested after that date. As a result, the Company recognized a one-time pension curtailment gain of $6 million, equal to the unamortized balances as of December 31, 2005 from prior plan amendments and allowable gains to be realized. The curtailment gain was recorded as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements of operations for the six months ended December 31, 2005.

In conjunction with the curtailment gain, the Company approved a distribution totaling $6 million on behalf of those participants who were affected by the curtailment of the Plans. The distribution was recorded as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements of operations for the six months ended December 31, 2005 and will be paid by the Company to employees in cash or contributed to the Plan in which the employee participates.

Note 12. Segment Information

The Company operates in the fast food hamburger restaurant industry. Revenues include retail sales at BKC-owned restaurants and franchise and property revenues. The business is managed as distinct geographic segments: United States and Canada, Europe, Middle East and Asia Pacific (“EMEA/APAC”), and Latin America. Unallocated includes corporate support costs in areas such as facilities, finance, human resources, information technology, legal, marketing and supply chain management.

The following tables present revenues, operating income, depreciation and amortization and long-lived assets information by geographic segment (in millions):

		Six Months Ended December 31,

		2004		2005
Revenues:
United States and Canada	$	632	$	682
EMEA/APAC		298		294
Latin America		39		44

Total revenues	$	969	$	1,020

Other than the United States and Germany, no other individual country represented 10% or more of the Company’s total revenues. Revenues in the United States totaled $565 million and $611 million for the six months ended December 31, 2004 and 2005, respectively. Revenues in Germany totaled $132 million and $135 million for the six months ended December 31, 2004 and 2005, respectively.

F-11

		Six Months Ended December 31,

		2004			2005
Operating Income:
United States and Canada	$	138		$	152
EMEA/APAC		37			42
Latin America		12			15
Unallocated		(77	)		(67	)

Total operating income	$	110		$	142



		Six Months Ended December 31,

		2004			2005
Depreciation and Amortization:
United States and Canada	$	23		$	28
EMEA/APAC		2			3
Latin America		1			2
Unallocated		8			9

Total depreciation and amortization	$	34		$	42



	June 30, 2005			December 31, 2005
Long-Lived Assets:
United States and Canada	$	892		$	873
EMEA/APAC		102			97
Latin America		31			32
Unallocated		23			23

Total long-lived assets	$	1,048		$	1,025

Long-lived assets include property and equipment, net, and net investment in property leased to franchisees. Other than the United States, no other individual country represented 10% or more of the Company’s total long-lived assets. Long-lived assets in the United States totaled $845 million and $826 million at June 30, 2005 and December 31, 2005, respectively.

Note 13. Commitments and Contingencies

Financial Restructuring Program

During 2003, the Company initiated a program in the United States and Canada designed to provide assistance to franchisees experiencing financial difficulties. Under this program, the Company worked with franchisees meeting certain operational criteria, their lenders, and other creditors to attempt to strengthen the franchisees’ financial condition. As part of this program, the Company has agreed to provide financial support to certain franchisees.

During the six months ended December 31, 2004 and 2005, the Company funded $1 million and $7 million, respectively, in loans for capital expenditures (“Capex Loans”) and grants for improvements to restaurant properties that the Company leases to franchisees. In addition, as of December 31, 2005, the Company has committed to provide future Capex Loans of $12 million and grants for improvements to properties that the Company leases to franchisees of up to $11 million.

For both the six months ended December 31, 2004 and 2005, temporary reductions in rent (“rent relief”) for certain franchisees that leased restaurant properties from the Company was $1 million. As of December 31, 2005, the Company has also committed to provide future rent relief of up to $7 million.

F-12

cash flow subsidy has been provided through December 31, 2005. The maximum contingent cash flow subsidy commitment for future periods as of December 31, 2005 is $6 million.

Guarantees

Other commitments, arising out of normal business operations, were $10 million and $9 million as of June 30, 2005 and December 31, 2005. These commitments consist primarily of guarantees covering foreign franchisees’ obligations, obligations to suppliers, and acquisition related guarantees.

The Company guarantees certain lease payments of franchisees, arising from leases assigned in connection with sales of company restaurants to franchisees, by remaining secondarily liable under the assigned leases of varying terms, for base and contingent rents. The maximum contingent rent amount payable is not determinable as the amount is based on future revenues. In the event of default by the franchisees, the Company has typically retained the right to acquire possession of the related restaurants, subject to landlord consent. The aggregate contingent obligation arising from these assigned lease guarantees was $115 million at December 31, 2005, expiring over an average period of seven years.

Letters of Credit

At December 31, 2005, there were $44 million in irrevocable standby letters of credit outstanding, of which $43 million were issued to certain insurance carriers to guarantee payment for various insurance programs such as health and commercial liability insurance. Of these, $43 million were collateralized by the Company’s $150 million revolving credit facility and $1 million was posted by Diageo plc on behalf of the Company relating to open casualty claim matters. Additionally, $1 million in letters of credit were issued relating to the Company’s headquarters. As of December 31, 2005, none of these irrevocable standby letters of credit had been drawn on.

As of December 31, 2005, the Company had posted bonds totaling $15 million, which related to certain promotional activities.

Vendor Relationships

In fiscal 2000, the Company entered into long-term, exclusive contracts with the Coca-Cola Company and with Dr Pepper/Seven Up, Inc. to supply Company and franchise restaurants with their products and obligating Burger King restaurants in the United States to purchase a specified number of gallons of soft drink syrup. These volume commitments are not subject to any time limit. As of June 30, 2005, the Company estimates that it will take approximately 17 years and 19 years to complete the Coca-Cola and Dr Pepper purchase commitments, respectively. In the event of early termination of these arrangements, the Company may be required to make termination payments that could be material to the Company’s results of operations and financial position. Additionally, in connection with these contracts, the Company has received upfront fees, which are being amortized over the term of the contracts. At June 30, 2005 and December 31, 2005, the deferred amounts of upfront fees received totaled $26 million and $25 million, respectively. These deferred amounts are amortized as a reduction to food, paper and product costs in the accompanying condensed consolidated statement of operations.

The Company also enters into commitments to purchase advertising for periods up to twelve months. At December 31, 2005 commitments to purchase advertising totaled $99 million.

New Global Headquarters

In May 2005, the Company entered into an agreement for the Company’s new global headquarters. The estimated annual rent for the 15 year initial term is approximately $5 million, to be finalized upon the completion of the building’s construction, expected in 2008. The Company will receive a tenant improvement allowance, estimated at approximately $8 million to be finalized upon the completion of the building’s construction.

Other

F-13

for healthcare claims for eligible participating employees subject to certain deductibles and limitations. The Company determines its liability for claims incurred but not reported on an actuarial basis.

The Company is a party to legal proceedings arising in the ordinary course of business, some of which are covered by insurance. In the opinion of management, disposition of these matters will not materially affect the Company’s financial condition and results of its operations.

As a matter of course, the Company is regularly audited by various tax authorities. From time to time, these audits result in proposed assessments where the ultimate resolution may result in the Company owing additional taxes. The Company believes that its tax positions comply with applicable tax law and that it has adequately provided for these matters.

Note 14. New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No.123 (revised 2004), Share-Based Payment, (“SFAS 123(R)”), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). SFAS 123(R) supersedes Accounting Principles Board Opinion No.25, Accounting for Stock Issued to Employees (“APB No. 25”). SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. Under SFAS 123(R) the effective date for a nonpublic entity that becomes a public entity after June 15, 2005 is the first interim or annual reporting period beginning after becoming a public company. Further, SFAS 123(R) states that an entity that makes a filing with a regulatory agency in preparation for the sale of any class of equity securities in a public market is considered a public entity for purposes of SFAS 123(R). The Company expects to implement SFAS 123(R) effective July 1, 2006, the beginning of the Company’s next fiscal year.

As permitted by SFAS 123, the Company currently accounts for share-based payments to employees using APB No. 25’s intrinsic value method and, as such, generally recognizes no compensation expense for employee stock options. As the Company currently applies SFAS 123 pro forma disclosure using the minimum value method of accounting, the Company is required to adopt SFAS 123(R) using the prospective transition method. Under the prospective transition method, non-public entities that previously applied SFAS 123 using the minimum value method continue to account for non-vested awards outstanding at the date of adoption of SFAS 123(R) in the same manner as they had been accounted to prior to adoption. The Company currently accounts for equity awards using the minimum value method under APB No. 25, and will continue to apply APB No. 25 in future periods to equity awards outstanding at the adoption date of SFAS 123(R). The Company will not recognize compensation expense for awards issued prior to the date of adoption, unless those awards are modified after the Company becomes a public company, as described above.

For any awards granted subsequent to the adoption of SFAS 123(R), compensation expense will be recognized generally over the vesting period of the award. As a result of the transition method described above, the Company does not expect to recognize any compensation expense under SFAS 123(R) for awards outstanding at the date of adoption.

Note 15. Subsequent Events

In February, 2006, the Company amended and restated its secured credit facility (“amended facility”) to replace the existing $746 million Term Loan B loan and borrow an additional $350 million with a new Term Loan B loan (“Term Loan B-1”) in an aggregate amount of $1.096 billion. The interest rate for the Term Loan B-1 is at the Company’s option either (a) the greater of the federal funds effective rate plus 0.50% and the prime rate (“ABR”), plus a rate not to exceed 0.75%, which varies according to the Company’s leverage ratio or (b) LIBOR plus 1.50%, in each case so long as the Company’s leverage ratio remains at or below certain levels (but in any event not to exceed 0.75%, in the case of ABR loans, and 1.75% in the case of LIBOR loans). The amended facility also allows the Company:

•	to make a one time payment of up to $400 million to holders of the Company’s common stock and certain option and restricted stock unit holders;

•	to enter into an agreement with the Sponsors to pay a fee to terminate the quarterly management fee currently charged by the Sponsors;

F-14

•	to make dividend payments after an initial public offering, subject to certain covenant restrictions.

The aggregate debt maturities including the Term Loan A, Term Loan B-1 and other debt as of February 15, 2006 is as follows:

2006	$	24
2007		37
2008		49
2009		67
2010		87
Thereafter		1,086

	$	1,350

In February 2006, the Company declared a cash dividend of $367 million, or $90.2195 per share, to holders of the outstanding shares of the Company’s common stock of record on February 9, 2006. In February 2006, the Company also authorized a compensatory make-whole payment of $33 million to certain option and restricted stock unit holders. The Company will recognize a pre-tax selling, general and administrative expense of $33 million for the compensatory make-whole payment.

In February 2006, the Company entered into an agreement with the Sponsors to pay a termination fee totaling $30 million to the Sponsors to terminate the quarterly management fee charged by the Sponsors upon an effective initial public offering. The Company will recognize a pre-tax selling, general and administrative expense of $30 million at the effective date of an initial public offering.

The following table presents the unaudited pro forma consolidated balance sheet as of December 31, 2005, as if the additional borrowing of $350 million under the Term Loan B-1 facility and related costs of $5 million, the payment of $33 million to holders of equity interests in the Company, and the cash dividend payment of $367 million, as described above, had occurred on December 31, 2005 (in millions):

	December 31, 2005 (Unaudited)			Adjustments				Pro Forma Consolidated Balance Sheet (Unaudited)

Cash and cash equivalents	$	207		$	(55	)		$	152
Other current assets, net		199			5		(b)		204
Long-term assets, net		2,070							2,070

Total assets	$	2,476		$	(50	)		$	2,426


Current liabilities	$	370		$	(13	)	(c)	$	357
Term debt		980			350		(d)		1,330
Capital leases		62							62
Other deferrals and liabilities		375							375
Deferred income taxes, net		159							159

Total liabilities		1,946			337				2,283

Common stock		—							—
Additional paid-in capital		407			(262	)	(e)		145
Restricted stock units		4							4
Retained earnings		125			(125	)	(f)		—
Accumulated other comprehensive loss		(4	)						(4	)
Treasury stock		(2	)						(2	)

Total stockholders’ equity		530			(387	)			143

Total liabilities and stockholders’ equity	$	2,476		$	(50	)		$	2,426

F-15


(a)	Amount represents net proceeds from the Term Loan B-1 of $350 million, offset by the payment of deferred financing costs of $5 million, compensatory make-whole payment of $33 million, and payment of the cash dividend of $367 million.

(b)	Amount represents capitalized deferred financing costs related to debt refinancing of $5 million.

(c)	Amount represents tax effect of $13 million related to $33 million payment to holders of equity interests in Company.

(d)	Amount represents increase in debt of $350 million from replacement of Term Loan B with Term Loan B-1.

(e)	Amount represents payment of the cash dividend in excess of retained earnings, totaling $262 million, recorded as a return of capital.

(f)	Amount represents reduction in retained earnings from the payment of the compensatory make-whole payment of $20 million, net of tax, and the payment of the cash dividend totaling $105 million. The remaining dividend of $262 million is recorded as a return of capital transaction.

F-16

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Burger King Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of Burger King Holdings, Inc. and subsidiaries (Successor) as of June 30, 2004 and 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the period from December 13, 2002 to June 30, 2003, and for each of the years in the two-year period ended June 30, 2005 (Successor period), and for the period from July 1, 2002 to December 12, 2002 (Predecessor period) of Burger King Corporation and subsidiaries (Predecessor). These consolidated financial statements are the responsibility of the Companies’ management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the aforementioned Successor consolidated financial statements present fairly, in all material respects, the financial position of Burger King Holdings, Inc. and subsidiaries as of June 30, 2004 and 2005, and the results of their operations and their cash flows for the Successor period, in conformity with U.S. generally accepted accounting principles. Further, in our opinion, the aforementioned Predecessor consolidated financial statements present fairly, in all material respects, the results of their operations and their cash flows of Burger King Corporation and subsidiaries for the Predecessor periods, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, effective December 13, 2002, Burger King Holdings, Inc., through a wholly owned subsidiary, acquired all of the outstanding stock of Burger King Corporation in a business combination accounted for as a purchase. As a result of the acquisition, the consolidated financial information for the periods after the acquisition is presented on a different cost basis than that for the periods before the acquisition and, therefore, is not comparable.

/s/ KPMG LLP

September 1, 2005
Miami, Florida
Certified Public Accountants

F-17

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets as of June 30, 2004 and 2005
(In millions, except share data)

	June 30,

		2004			2005

Assets
Current assets:
Cash and cash equivalents	$	221		$	432
Investment in auction rate notes		122			—
Trade and notes receivable, net		111			110
Prepaids and other current assets, net		39			35
Deferred income taxes, net		94			57

Total current assets		587			634

Property and equipment, net		880			899
Intangible assets, net		1,001			995
Goodwill		5			17
Net investment in property leased to franchisees		159			149
Other assets, net		33			29

Total assets	$	2,665		$	2,723


Liabilities and Stockholders’ Equity
Current liabilities:
Accounts and drafts payable	$	105		$	83
Accrued advertising		52			59
Other accrued liabilities		194			248
Current potion of long term debt and capital leases		4			4

Total current liabilities		355			394

Term debt		1,238			1,282
Capital leases		52			53
Other deferrals and liabilities		424			375
Deferred income taxes, net		172			142

Total liabilities	$	2,241		$	2,246


Commitments and contingencies

Stockholders’ equity:
Common stock, $0.01 par value; 4,500,000 shares authorized; 4,036,639 and 4,035,986
shares issued and outstanding at June 30, 2004 and June 30, 2005, respectively		—			—
Restricted stock units		—			2
Additional paid-in capital		404			407
Retained earnings		29			76
Accumulated other comprehensive loss		(9	)		(6	)
Treasury stock, at cost; 0 and 15,276 shares, respectively		—			(2	)

Total stockholders’ equity		424			477

Total liabilities and stockholders’ equity	$	2,665		$	2,723

See accompanying notes to consolidated financial statements.

F-18

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations for the periods July 1, 2002 to December 12, 2002 (Predecessor) and December 13, 2002 to June 30, 2003, and for each of the years in the two-year period ended June 30 2005 (Successor)
(In millions, except share data)

	Predecessor			Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years ended June 30,

							2004			2005

Revenues:
Company restaurant	$	526		$	648		$	1,276		$	1,407
Franchise and property		225			258			478			533

		751			906			1,754			1,940
Company restaurant expenses:
Food, paper and product costs		162			197			391			437
Payroll and employee benefits		157			192			382			415
Occupancy and other operating costs		146			168			314			343

Company restaurant expenses		465			557			1,087			1,195

Selling, general and administrative
expenses		225			253			482			496
Property expenses		27			28			58			64
Impairment of goodwill		875			-			-			-
Other operating expenses (income), net		39			(7	)		54			34

Total operating costs and expenses		1,631			831			1,681			1,789

Income (loss) from operations		(880	)		75			73			151

Interest expense		48			37			68			82
Interest income		(2	)		(2	)		(4	)		(9	)

Total interest expense, net		46			35			64			73

Income (loss) before income taxes		(926	)		40			9			78
Income tax (benefit) expense		(34	)		16			4			31


Net income (loss)	$	(892	)	$	24		$	5		$	47



Earnings per share:
Basic	$	8.43		$	6.04		$	1.24		$	11.63

Diluted	$	8.43		$	6.04		$	1.24		$	11.58


Weighted average shares outstanding:
Basic		105,754,800			3,973,750			4,025,718			4,042,342

Diluted		105,754,800			3,973,750			4,025,718			4,057,914

See accompanying notes to consolidated financial statements.

F-19

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity for the periods July 1, 2002 to December 12, 2002 (Predecessor)
and December 13, 2002 to June 30, 2003, and for each of the years in the two-year period ended June 30, 2005
(Successor)
(In millions)

	Common stock		Restricted stock units		Additional paid-in capital		(Accumulated deficit) retained earnings			Accumulated other comprehensive (loss) income			Tresury Stock			Total

Predecessor
Balances at June 30, 2002	$	1	$	-	$	1,246	$	(75	)	$	(29	)	$	-		$	1,143
Capital contribution from affiliates		-		-		1,448		-			-			-			1,448
Comprehensive loss:
Net loss		-		-		-		(892	)		-			-			(892	)
Translation adjustment		-		-		-		-			3			-			3
Minimum pension liability
adjustment, net of tax of
$6		-		-		-		-			(10	)		-			(10	)

Comprehensive loss																	(899	)

Balances at December 12, 2002	$	1	$	-	$	2,694	$	(967	)	$	(36	)	$	-		$	1,692



Successor
Balances at December 13, 2002	$	-	$	-	$	-	$	-		$	-		$	-		$	-
Initial capitalization of the
Company		-		-		398		-			-			-			398
Comprehensive income:
Net income		-		-		-		24			-			-			24
Translation adjustment		-		-		-		-			10			-			10

Comprehensive income																	34

Balances at June 30, 2003		-		-		398		24			10			-			432
Sale of common stock		-		-		6		-			-			-			6
Comprehensive income:
Net income		-		-		-		5			-			-			5
Translation adjustment		-		-		-		-			(19	)		-			(19	)

Comprehensive income																	(14	)

Balances at June 30, 2004		-		-		404		29			(9	)		-			424
Sale of common stock		-		-		3		-			-						3
Treasury stock purchases		-		-		-		-			-			(2	)		(2	)
Issuance of restricted stock units		-		2		-		-			-			-			2
Comprehensive income:
Net income		-		-		-		47			-			-			47
Translation adjustment		-		-		-		-			6			-			6
Minimum pension liability
adjustment, net of tax of $2		-		-		-		-			(3	)		-			(3	)

Comprehensive income																	50

Balances at June 30, 2005	$	-	$	2	$	407	$	76		$	(6	)	$	(2	)	$	477

See accompanying notes to consolidated financial statements.

F-20

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows for the periods July 1, 2002 to December 12, 2002 (Predecessor) and
December 13, 2002 to June 30, 2003, and for each of the years in the two-year period ended June 30, 2005
(Successor)
(In millions)

	Predecessor			Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years ended June 30,

							2004			2005

Cash flows from operating activities:
Net (loss) income	$	(892	)	$	24		$	5		$	47
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		43			43			63			74
Interest expense payable in kind		-			21			41			45
(Gain) loss on asset disposals		(5	)		2			12			(4	)
Provision for bad debt expense		23			30			11			1
Impairment of debt investments and investments
in unconsolidated companies and joint ventures		-			-			24			4
Impairment of goodwill and long-lived assets		927			-			-			4
Deferred income tax (benefit) expense		(45	)		1			(12	)		9
Changes in current assets and liabilities, net of
acquisitions:
Trade and notes receivables		(9	)		(18	)		(8	)		(2	)
Prepaids and other current assets, net		(8	)		16			(6	)		(2	)
Accounts and drafts payable		(37	)		(20	)		23			(21	)
Accrued advertising		5			4			(3	)		7
Other accrued liabilities		(1	)		(41	)		28			48
Changes in other long-term assets and liabilities,
net		-			19			21			8

Net cash provided by operating activities		1			81			199			218


Cash flows from investing activities:
Purchases of securities available for sale		-			-			(308	)		(768	)
Sales of securities available for sale		-			-			186			890
Additions to property and equipment		(95	)		(47	)		(81	)		(93	)
Proceeds from dispositions of assets and business
disposals		6			13			26			18
Payments for acquired franchisee operations		(13	)		(1	)		(6	)		(28	)
Investment in franchisee debt		-			-			(22	)		(27	)
Repayments of franchisee debt		-			-			3			3
Net (payments)/proceeds for purchase of BKC		-			(377	)		5			-
Costs incurred for purchase of BKC		-			(62	)		-			-
(Deposits to) release from restricted cash/escrow		-			(11	)		13			-

Net cash used for investing activities		(102	)		(485	)		(184	)		(5	)


Cash flows from financing activities:
Proceeds from sale of common stock		-			-			6			3
Treasury stock purchases		-			-			-			(2	)
Repayments of term debt and capital leases		(5	)		(3	)		(3	)		(3	)
Proceeds from capitalization of the Company		-			398			-			-
Proceeds from issuance of PIK Notes to stockholders		-			212			-			-
Advances from affiliates, net		90			-			-			-

F-21

	Predecessor		Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003		Years ended June 30,

					2004		2005

Capital contributions from affiliates		27		-		-		-

Net cash provided by (used for) financing activities		112		607		3		(2	)


Increase in cash and cash equivalents		11		203		18		211
Cash and cash equivalents at beginning of period		54		-		203		221

Cash and cash equivalents at end of period	$	65	$	203	$	221	$	432


Supplemental cash-flow disclosures:
Interest paid		45		12		21		26
Income taxes paid		6		14		13		14
Non-cash investing and financing activities:
Acquisition of franchisee operations		-		-		3		16
Notes issued to Diageo for purchase of Burger King		-		212		-		-
Capital contributions from affiliates		1,421		-		-		-
Non-cash settlement of term debt		37		-		-		-

See accompanying notes to consolidated financial statements.

F-22

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 1. Description of Business and Organization

Description of Business

Burger King Holdings, Inc. (“BKH”) is a Delaware corporation and the parent of Burger King Corporation (“BKC”), a Florida corporation that is a worldwide franchisor and operator of fast food hamburger restaurants, principally under the Burger King brand. BKH is owned by funds controlled by Texas Pacific Group, the Goldman Sachs Capital Funds and Bain Capital Partners (collectively, the “Sponsors”). As discussed in Note 13, certain officers of BKH and independent members of the Board of Directors also own a minority interest in BKH. BKH and its subsidiaries, including BKC, are collectively referred to herein as the “Company” or the “Successor,” for all periods subsequent to the Transaction, as defined below. All references to the “Predecessor” refer to BKC and its subsidiaries for all periods prior to the Transaction, which operated under a different ownership and capital structure.

Organization

On December 13, 2002 (the “Transaction Date”), Gramet Holding Corporation (“GHC”), a wholly-owned subsidiary of Diageo plc and the former parent of BKC, completed its sale of 100% of the outstanding common stock of BKC to Burger King Acquisition Corporation (“BKAC”) for $1,510 million, subject to adjustment (the “Transaction”). All references to the “Predecessor” are to BKC and its subsidiaries for all periods prior to the Transaction Date.

BKAC was established as an acquisition vehicle by the Sponsors for the purpose of acquiring BKC. BKAC was capitalized with an $822.5 million capital contribution from BKH. Of the aggregate contribution, $610 million was paid in cash and $212.5 million was due from the Company.

On the Transaction Date, BKAC paid GHC a total of $1,404.3 million, calculated as $1,510.0 million less a preliminary purchase price adjustment of $105.7 million. The Company and GHC ultimately settled on a further reduction to the purchase price of $5 million, and $13.3 million in restricted cash was reclassified to cash and cash equivalents in December 2003. Of the total amount, GHC received $441.8 million in cash from BKAC, $750 million in loan proceeds from BKAC’s lenders and $212.5 million in the form of a payment-in-kind note, or PIK note, issued by BKH to GHC. Additionally, BKAC paid $62.5 million in costs associated with the Transaction, comprised of $28.8 million in deferred financing fees and $33.7 in professional fees. Of the $33.7 in professional fees, $22.4 million was paid to the Sponsors.

On the Transaction Date, BKH also issued PIK notes in the aggregate amount of $212.5 million to the same funds that own the common stock of BKH, and the proceeds were contributed to BKAC. The terms of these PIK notes are identical to the PIK note issued to GHC. All of the PIK notes were payable in June 2013 with interest accreting and added to principal on June 1 and December 1 of each year.

BKAC was merged into BKC upon completion of the Transaction. The merger was accounted for as a combination of entities under common control.

The Transaction was accounted for using the purchase method of accounting, or purchase accounting, in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 141, Business Combinations. At the time of the Transaction, the Company made a preliminary allocation of the purchase price to the assets acquired and liabilities assumed at their estimated fair market value. After the transaction, the Company hired a third party valuation firm to assist in determining the fair market value of the assets. In December 2003, the Company

F-23

completed its fair market value calculations and finalized the purchase accounting adjustments to these preliminary allocations. The sum of the fair value of assets acquired and liabilities assumed exceeded the acquisition cost, resulting in negative goodwill. The negative goodwill was allocated on a pro rata basis to reduce the carrying value of long-lived assets in accordance with SFAS No. 141.

The following table represents the adjustments recorded in December 2003 to the preliminary allocations as of the Transaction Date (in millions):

	Preliminary Allocation of Initial Balance Sheet		Adjustments			Final Allocation of Initial Balance Sheet

Cash, cash equivalents and restricted cash	$	182.5	$	-		$	182.5
Trade and notes receivable, net		120.4		-			120.4
Income tax receivable		-		2.6			2.6
Other current assets, net		43.0		4.0			47.0
Deferred income taxes, net		91.2		0.8			92.0
Property and equipment, net		864.3		72.1			936.4
Intangible assets, net		924.0		127.0			1,051.0
Net investment in property leased to franchisees		177.6		(1.4	)		176.2
Other assets, net		50.6		6.2			56.8

Total assets		2,453.6		211.3			2,664.9
Accounts and drafts payable and other current liabilities		368.6		(18.1	)		350.5
Long-term obligations, including current maturities		808.1		3.4			811.5
Other deferrals and liabilities		192.3		262.2			454.5
Deferred income taxes, net		262.1		(36.2	)		225.9

Total liabilities		1,631.1		211.3			1,842.4

Net assets	$	822.5	$	-		$	822.5

In connection with the final allocation of the purchase price, the Company adjusted the valuation of our long-lived assets, primarily property and equipment, and recorded favorable and unfavorable leases as intangible assets and other liabilities, respectively. In connection with these adjustments to the preliminary allocations, the Company recognized a net benefit of $1.7 million for the period December 13, 2002 to June 30, 2003 as a change in accounting estimate. This net benefit consisted of $23.3 million in additional amortization related to the adjustment to unfavorable leases and $1.1 million in other adjustments, partially offset by $18.5 million in additional depreciation expense related to the adjustment to property and equipment and $4.2 million of additional amortization expense related to the adjustment to favorable leases.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The consolidated financial statements of the Successor include the accounts of BKH and its majority-owned subsidiaries and the consolidated financial statements of the Predecessor include the accounts of BKC and its majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. Investments in affiliates where the Company owns 50% or less are accounted for under the equity method, except as discussed below.

In December 2003, the FASB issued Interpretation No. 46R, Consolidation of Variable Interest Entities – an interpretation of ARB No. 51 (“FIN 46R”). FIN 46R replaced FIN 46 and establishes guidance to identify variable interest entities (“VIE’s”). FIN 46R requires VIE’s to be consolidated by the primary beneficiary who is exposed to the majority of the VIE’s expected losses, expected residual returns, or both. FIN 46R excludes from its scope operating businesses unless certain conditions exist.

A majority of franchise entities meet the definition of an operating business and, therefore, are exempt from the scope of FIN 46R. Additionally, there are a number of franchise entities which do not meet the definition of a

F-24

business as a result of leasing arrangements and other forms of subordinated financial support provided by the Company, including certain franchise entities that participated in the franchise financial restructuring program (see note 3). The Company is not exposed to the majority of expected losses in any of these arrangements and, therefore, is not the primary beneficiary required to consolidate any of these franchisees.

The Company has consolidated one joint venture created in fiscal 2005 that operates restaurants where the Company is a 49% partner, but is deemed to be the primary beneficiary. The results of operations of this joint venture are not material to the Company’s results of operations and financial position.

Concentrations of Risk

The Company’s operations include Company-owned and franchise restaurants located throughout the United States of America, its territories and 63 other countries. Of the 11,104 restaurants in operation as of June 30, 2005, 1,187 are Company-owned and operated and 9,917 are franchisee operated.

The Company has an operating agreement with a third party, Restaurant Services, Inc., or RSI, which acts as the exclusive purchasing agent for Company-owned and franchised Burger King restaurants in the U.S. for the purchase of food, packaging, and equipment. These restaurants place purchase orders and receive the respective products from distributors with whom, in most cases, RSI has service agreements. For the year ended June 30, 2005, the five largest U.S. distributors represented 81% of total U.S. purchases by Company-owned and franchised restaurants.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Foreign Currency Translation

Foreign currency balance sheets are translated using the end of period exchange rates, and statements of operations are translated at the average exchange rates for each period. The resulting translation adjustments are recorded in accumulated other comprehensive loss within stockholder’s equity. Local currencies have been determined to be the functional currencies of the respective countries.

Cash and Cash Equivalents

Cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less.

Investment in Auction Rate Notes

Auction rate notes represent long-term variable rate bonds tied to short-term interest rates that are reset through a “dutch auction” process, which occurs every seven to thirty-five days. Auction rate notes are considered highly liquid by market participants because of the auction process. However, because the auction rate notes have long-term maturity dates and there is no guarantee the holder will be able to liquidate its holding, they do not meet the definition of cash equivalents in FASB Statement No. 95, Statement of Cash Flows and, accordingly, are recorded as investments.

Allowance for Doubtful Accounts

The Company evaluates the collectibility of its trade and notes receivable from franchisees based on a combination of factors, including the length of time the receivables are past due and the probability of any success from litigation or default proceedings, where applicable. In such circumstances, the Company records a specific allowance for doubtful accounts in an amount required to adjust the carrying values of such balances to the amount that the Company estimates to be net realizable value. The Company writes off a specific account when (a) the Company enters into an agreement with a franchisee that releases the franchisee from outstanding obligations, (b) franchise agreements are terminated and the projected costs of collections exceed the benefits expected to be

F-25

received from pursuing the balance owed through legal action, or (c) franchisees do not have the financial wherewithal or unprotected assets from which collection is reasonably assured.

Inventories

Inventories, totaling $16 million and $15 million at June 30, 2004 and 2005, respectively, are stated at the lower of cost (first-in, first-out) or net realizable value, and consist primarily of restaurant food items and paper supplies. Inventories are included in prepaids and other current assets in the accompanying consolidated balance sheets.

Property and Equipment, net

Property and equipment, net, owned by the Company are recorded at historical cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method based on the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the remaining term of the lease or the life of the improvement.

Improvements and major repairs with a useful life greater than one year are capitalized, while minor maintenance and repairs are expensed when incurred.

Leases

The Company accounts for leases in accordance with SFAS No. 13, Accounting for Leases, and other related authoritative literature. Assets acquired under capital leases are stated at the lower of the present value of future minimum lease payments or fair market value at the date of inception of the lease. Capital lease assets are depreciated using the straight-line method over the shorter of the useful life or the underlying lease term.

The Company records rent expense for operating leases that contain scheduled rent increases on a straight-line basis over the lease term, including any option periods considered in the determination of that lease term. Contingent rentals are generally based on sales levels in excess of stipulated amounts, and thus are not considered minimum lease payments.

The Company also enters into capital leases as lessor. Capital leases meeting the criteria of direct financing leases under SFAS No. 13 are recorded on a net basis, consisting of the gross investment and residual value in the lease less the unearned income. Unearned income is recognized over the lease term yielding a constant periodic rate of return on the net investment in the lease. Direct financing leases are reviewed for impairments whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable based on the payment history under the lease.

Favorable and unfavorable lease contracts were recorded as part of the Transaction (see note 1). The Company amortizes favorable and unfavorable lease contracts on a straight-line basis over the terms of the leases. Upon early termination of a lease, the favorable or unfavorable lease contract balance associated with the lease contract is recognized as a loss or gain in the statement of operations.

Goodwill and Intangible Assets

Goodwill and the Burger King brand are assessed annually for impairment or more frequently if events or circumstances indicate that either asset may be impaired in accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”).

In accordance with the requirements of SFAS No. 142, goodwill has been assigned to reporting units for purposes of impairment testing. The reporting units are the Company’s operating segments. As of June 30, 2005, all of the goodwill recorded is included in the United States and Canada operating segment.

Long-Lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long lived assets, such as property and equipment, and acquired intangibles subject to amortization, are reviewed for

F-26

impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Some of the events or changes in circumstances that would trigger an impairment review include, but are not limited to, a significant under-performance relative to expected and/or historical results (two-years comparable restaurant sales decrease or two years negative operating cash flow), significant negative industry or economic trends, or knowledge of transactions involving the sale of similar property at amounts below our carrying value. Restaurant assets are grouped for impairment testing at a market level in the United States and Canada or at a market or country level internationally. If the carrying amount of an asset exceeds the estimated undiscounted future cash flows generated by the asset, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Other Comprehensive Loss

Other comprehensive loss refers to revenues, expenses, gains, and losses that are included in comprehensive loss but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity, net of tax. The Company’s other comprehensive loss is comprised of unrealized gains and losses on foreign currency translation adjustments and minimum pension liability adjustments, net of tax.

Derivative Financial Instruments

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, establishes accounting and reporting standards for derivative instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income and recognized in the statement of operations when the hedged item affects earnings, depending on the purpose of the derivatives and whether they qualify for hedge accounting treatment.

The Company’s policy is to designate at a derivative’s inception the specific assets, liabilities or future commitments being hedged and monitor the derivatives for effectiveness. The Company recognizes gains or losses for amounts received or paid when the underlying transaction settles. The Company does not enter into or hold derivatives for trading or speculative purposes.

Disclosures About Fair Value of Financial Instruments

Cash and cash equivalents, investment in auction rate notes, trade and notes receivable and accounts and drafts payables: The carrying value equals fair value based on the short-term nature of these accounts.

Debt, including current maturities: The fair value is estimated based on discounted future cash flow analysis using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The carrying value of long-term debt was $1,238 million at June 30, 2004, and the estimated fair value was $1,279 million at June 30, 2004. The carrying value of long-term debt was $1,282 million at June 30, 2005, which approximated fair value.

Revenue Recognition

Revenues include retail sales at Company-owned restaurants and franchise and property revenues. Franchise and property revenues include royalties, initial and renewal franchise fees, and property revenues, which include rental income from operating lease rentals and earned income on direct financing leases on property leased to franchisees. Retail sales are recognized at the point of sale.

Royalties are based on a percentage of sales by franchisees. Royalties are recorded as earned and when collectibility is reasonably assured. Initial franchise fees are recognized as income when the related restaurant begins operations. Subject to certain conditions, a franchisee may pay a renewal franchise fee and renew its franchise for an additional term. Renewal franchise fees are recognized as income upon receipt of the non-refundable fee and execution of a new franchise agreement. In accordance with SFAS No. 45, Accounting for Franchise Fee Revenue, the cost recovery accounting method is used to recognize revenues for certain franchisees for whom collectibility is not reasonably assured.

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Operating lease rentals and earned income on direct financing leases are recognized as earned and when collectibility is reasonably assured.

Advertising and Promotional Costs

The Company expenses the production costs of advertising when the advertisements are first aired or displayed. All other advertising and promotional costs are expensed in the period incurred, in accordance with Statement of Position (“SOP”) No. 93-7, Reporting on Advertising Costs.

Franchised restaurants and Company-owned restaurants contribute to advertising funds managed by the Company in the United States and certain international markets where Company-owned restaurants operate. Under the Company’s franchise agreements, contributions received from franchisees must be spent on advertising, marketing and related activities, and result in no gross profit recognized by the Company. The Company recognizes advertising expense based on the difference between the total advertising and promotional expenditures, as accounted for under SOP No. 93-7, less the amount contributed by franchisees during the year. Advertising expense, net of franchisee contributions, totaled $61 million for the period July 1, 2002 to December 12, 2002, $49 million for the period December 13, 2002 to June 30, 2003, $100 million for the year ended June 30, 2004, and $87 million for the year ended June 30, 2005.

To the extent that contributions received exceed advertising and promotional expenditures, the excess contributions are accounted for as deferred credits, in accordance with SFAS No. 45, and are recorded in accrued advertising in the accompanying consolidated balance sheets.

Franchisees in markets where no Company-owned restaurants operate contribute to advertising funds not managed by the Company. Such contributions and related fund expenditures are not reflected in the Company’s results of operations or financial position.

Income Taxes

The Company files a consolidated U.S. federal income tax return. Amounts in the financial statements related to income taxes are calculated using the principles of SFAS No. 109, Accounting for Income Taxes (“SFAS 109”). Under SFAS No. 109, deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes, as well as tax credit carryforwards and loss carryforwards. These deferred taxes are measured by applying currently enacted tax rates. The effects of changes in tax rates on deferred tax assets and liabilities are recognized in income in the year in which the law is enacted. A valuation allowance reduces deferred tax assets when it is “more likely than not” that some portion or all of the deferred tax assets will not be recognized.

Earnings per Share

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and related interpretations. Pro forma information regarding net income and earnings per share is required by SFAS No. 123 and has been determined as if the Company had accounted for its stock options under the fair value method of that Statement.

Compensation value for the fair value disclosure is estimated for each option grant using a Black-Scholes option-pricing model. The following weighted average assumptions were used for option grants: weighted average risk-free interest rate of 3.48%; expected dividend yield of 0.0%; volatility factor of the expected market price of the Company’s common stock of 0.0%; and an expected life of the options of five years.

F-28

The following table illustrates the effect on net income and earnings per share had the Company applied the fair value recognition provisions of SFAS No. 123, as amended by SFAS No. 148, Accounting for Stock-Based Compensation, to stock-based employee compensation (in millions, except per share data):

	Year Ended June 30, 2004			Year Ended June 30, 2005

Net income, as reported	$	5		$	47
plus: Stock-based compensation expense, net of related tax effects		–			–
less: Stock-based compensation expense under fair value method, net of related
tax effects		(1	)		(1	)

Net income, pro forma	$	4		$	46


Basic earnings per share, as reported	$	1.24		$	11.63

Basic earnings per share, pro forma	$	0.99		$	11.38


Diluted earnings per share, as reported	$	1.24		$	11.58

Diluted earnings per share, pro forma	$	0.99		$	11.34

New Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”), which replaces SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123R requires all companies to measure compensation costs for share-based payments to employees, including stock options, at fair value and expense such payments in the statement of operations over the service period. For non-public entities, SFAS No. 123R is effective as of the beginning of the first annual reporting period that begins after December 15, 2005. The Company is currently evaluating the impact that SFAS No. 123R will have on its statements of operations and statements of financial position.

Note 3. Acquisitions, Closures and Dispositions, and Franchise Restructuring Program

Acquisitions

	Predecessor		Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003		Years ended June 30,

					2004		2005

Number of restaurants acquired		29		2		38		101

Inventory	$	-	$	-	$	-	$	1
Property and equipment, net		10		1		4		34
Goodwill and other intangible assets		3		-		5		12
Assumed liabilities		-		-		-		(3	)
Non-capitalizable expenses		1		-		-		-

Total purchase price	$	14	$	1	$	9	$	44

The Company recorded settlement losses, in accordance with EITF 04-1, Accounting for Preexisting Relationships between the Parties to a Business Combination, and other expenses of $5 million for the year ended June 30, 2005. These settlement losses and other expenses are recorded in other operating expenses (income), net.

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Closures and Dispositions

Losses (gains) on asset and business disposals are comprised primarily of lease termination costs relating to restaurant closures and refranchising of Company-owned restaurants, and are recorded in other operating expenses (income), net in the accompanying consolidated statements of operations. The closures and refranchisings are summarized as follows (in millions, except for number of restaurants):

	Predecessor			Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003		Years ended June 30,

						2004		2005

Number of restaurant closures		5			8		20		23
Losses (gains) on restaurant closures	$	(5	)	$	2	$	12	$	6
Number of refranchisings		1			2		21		11
Loss on refranchisings	$	-		$	-	$	3	$	7

Franchisee Restructuring Program

During 2003, the Company initiated a program designed to provide assistance to franchisees experiencing financial difficulties. Under this program, the Company worked with franchisees meeting certain operational criteria, their lenders, and other creditors to attempt to strengthen the franchisees’ financial condition. As part of this program, the Company has agreed to provide financial support to certain franchisees.

During 2004 and 2005, the Company converted $18 million in past due franchisee receivables and deferred revenues to notes receivable recoverable from excess cash flow (“Clawback Notes”) and converted an additional $17 million of past due receivables into long-term notes receivable (“Franchisee Notes”). Clawback Notes are structured whereby payments are made from excess cash flows of franchise operations and do not accrue interest. Franchisee Notes bear interest and typically have a 10-year term. Prior to the conversion into these past due receivables, the Company had fully reserved the receivables. Franchisee Notes continue to remain fully reserved and the receivables and reserves related to the Clawback Notes were written-off upon conversion. Recoveries on Franchisee Notes are recorded as a reduction of bad debt expense. The Company recognizes interest income on Franchisee Notes upon receipt of interest from franchisees.

In order to assist certain franchisees in making capital improvements to restaurants in need of remodeling, the Company provided commitments to fund capital expenditure loans (“Capex Loans”) and make capital expenditures related to restaurant properties that the Company leases to franchisees. Capex Loans are typically unsecured, bear interest, and have 10-year terms. Through June 30, 2005 the Company has funded $3 million in Capex Loans and improvements to restaurant properties that the Company leases to franchisees. In addition, as of June 30, 2005, the Company has committed to provide future Capex Loans of $19 million and improvements to properties that the Company leases to franchisees of up to $13 million.

For the years ended June 30, 2004 and 2005, the Company paid approximately $17 million and $24 million, respectively, to acquire franchisee debt held by third parties. Included in these purchases for the year ended June 30, 2005 is $20 million of debt acquired to facilitate asset acquisitions, all of which was transferred to property and equipment, net, upon acquisition of the assets. The Company also recorded reserves against acquired debt of $12 million and $4 million for the years ended June 30, 2004 and June 30, 2005, respectively. Recoveries on fully reserved acquired franchisee third-party debt are recorded in other operating expenses (income), net. Unreserved franchisee third-party debt totaled $4 million and $1 million at June 30, 2004 and June 30, 2005, respectively.

Through June 30, 2005, the Company has provided $ 2 million of temporary reductions in rent (“rent relief’) for certain franchisees that leased restaurant property from the Company. As of June 30, 2005, the Company has also committed to provide future rent relief of up to $8 million.

Contingent cash flow subsidies represent commitments by the Company to provide future cash grants to certain franchisees for limited periods in the event of a failure to achieve their debt service coverage ratio. No contingent cash flow subsidy has been provided through June 30, 2005. The maximum contingent cash flow subsidy

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commitment for future periods as of June 30, 2005 is $8 million. Upon funding, in most instances, the subsidies will be added to the franchisee’s existing Clawback Note balance.

Note 4. Franchise and Property Revenues

Franchise and property revenues are comprised of the following (in millions):

	Predecessor		Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003		Years ended June 30,

					2004		2005

Franchise royalties	$	163	$	190	$	346	$	396
Property revenues		55		60		117		120
Initial franchise fees		4		5		7		9
Other		3		3		8		8

	$	225	$	258	$	478	$	533

In accordance with SFAS No. 45, the Company deferred the recognition of revenues totaling $22 million and $1 million for the years ended June 30, 2004 and June 30, 2005, respectively. The Company had no recoveries or write-offs for the periods July 1, 2002 to December 12, 2002 and December 13, 2002 to June 30, 2003 and the year ended June 30, 2004. The Company had recoveries of $4 million and write-offs of $11 million for the year ended June 30, 2005. As of June 30, 2004 and 2005, the Company had deferred revenue balances of $22 million and $8 million, respectively.

Note 5. Trade and Notes Receivable, Net

Trade and notes receivable, net, are comprised of the following (in millions):

	June 30,

	2004			2005

Trade accounts receivable	$	178		$	133
Notes receivable, current portion		12			6

		190			139

Allowance for doubtful accounts and notes receivable, current portion		(79	)		(29	)

	$	111		$	110

Substantially all of the decrease in the allowance for doubtful accounts and notes receivables during fiscal year 2005 is due to the write-off of trade accounts receivable and amounts transferred to long-term notes.

The Company recorded bad debt expense, net of recoveries, of $23 million for the period July 1, 2002 to December 12, 2002. The Company recorded bad debt expense, net of recoveries, of $30 million for the period December 13, 2002 to June 30, 2003, $11 million for the year ended June 30, 2004, and $1 million for the year ended June 30, 2005.

Note 6. Property and Equipment, Net

Property and equipment, net, along with their estimated useful lives, consist of the following (in millions):

		Years ended June 30,

		2004		2005

Land		$	371	$	384
Buildings and improvements	(up to 40 years)		409		470
Machinery and equipment	(up to 18 years)		203		234
Furniture, fixtures, and other	(up to 10 years)		27		37

F-31

	Years ended June 30,

	2004			2005

Construction in progress		30			26

	$	1,040		$	1,151

Accumulated depreciation and amortization		(160	)		(252	)

Property and equipment, net	$	880		$	899

Depreciation expense on property and equipment totaled $43 million for the period July 1, 2002 to December 12, 2002, $42 million for the period December 13, 2002 to June 30, 2003, $112 million for the year ended June 30, 2004, and $100 million for the year ended June 30, 2005.

Property and equipment, net, includes assets under capital leases, net of depreciation, of $38 million and $39 million at June 30, 2004 and 2005, respectively.

Note 7. Intangible Assets, Net and Goodwill

The Burger King brand of $909 million at June 30, 2004 and 2005 and goodwill of $5 million and $17 million at June 30, 2004 and 2005, respectively, represent the Company’s indefinite useful lived intangible assets.

Changes in the net carrying amount of goodwill for the periods July 1, 2002 to December 12, 2002 and December 13, 2002 to June 30, 2003, and for the years ended June 30, 2004 and 2005 are as follows (in millions):

Predecessor
Balance as of June 30, 2002	$	1,010
Goodwill acquired during the period		3
Impairment loss recorded during period		(875	)
Currency translation impact		2

Balance as of December 12, 2002	$	140



Successor
Balance as of December 13, 2002	$	-
Balance as of June 30, 2003		-
Goodwill acquired during the period		5

Balance as of June 30, 2004		5
Goodwill acquired during the period		12

Balance as of June 30, 2005	$	17

The table below presents intangible assets subject to amortization, along with their useful lives (in millions):

		June 30,

		2004			2005

Franchise agreements	26 years	$	65		$	65
Favorable lease contracts	Up to 20 years		36			36

		$	101		$	101
Accumulated amortization			(9	)		(15	)

Net carrying amount		$	92		$	86

Amortization expense on franchise agreements totaled $1 million for the period December 13, 2002 to June 30, 2003, $3 million for the year ended June 30, 2004, and $3 million for the year ended June 30, 2005. The company did not incur any amortization expense on franchise agreements for the period July 1, 2002 to December 12, 2002.

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The amortization of favorable lease contracts totaled $1 million for the period December 13, 2002 to June 30, 2003, $5 million for the year ended June 30, 2004, and $3 million for the year ended June 30, 2005. The company did not incur any amortization of favorable lease contracts for the period July 1, 2002 to December 12, 2002.

As of June 30, 2005, estimated future amortization expense of intangible assets subject to amortization for each of the years ended June 30 is $6 million in 2006; $5 million in each of 2007, 2008, 2009, and 2010; and $60 million thereafter.

Note 8. Earnings Per Share

Basic and diluted earnings per share were calculated as follows (in millions, except share amounts):

	Predecessor						Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003		Years ended June 30,

						2004		2005

Numerator:
Numerator for basic and diluted earnings per
share:
Net (loss) income	$	(892	)	$	24	$	5	$	47

Denominator:
Denominator for basic earnings per share:
Weighted average shares		105,754,800			3,973,750		4,025,718		4,042,342
Effective of dilutive securities:
Restricted stock units		-			-		-		15,572
Employee stock options		-			-		-		-

Denominator for diluted earnings per share-
adjusted weighted average		105,754,800			3,973,750		4,025,718		4,057,914

Basic earnings per share	$	(8.43	)	$	6.04	$	1.24	$	11.63

Diluted earnings per share	$	(8.43	)	$	6.04	$	1.24	$	11.58

Earnings per share for the Predecessor is not comparable to earnings per share for the Successor, due to the significant change in capital structure, as a result of the Transaction.

Unexercised employee stock options to purchase 3.5 million shares of the Predecessor’s Common Stock for the period July 1, 2002 to December 12, 2002 were not included in the computation of diluted earnings per share as their exercise prices were equal to or greater than the average market price of the Predecessor’s Common Stock during the respective period.

Unexercised employee stock options to purchase 258,792 and 341,953 shares of the Company’s Common Stock for the years ended June 30, 2004 and 2005, respectively, were not included in the computation of diluted earnings per share as their exercise prices were equal to or greater than the average market price of the Company’s Common Stock during those respective periods.

Note 9. Other Accrued Liabilities

Included in other accrued liabilities as of June 30, 2004 and 2005, were accrued payroll and employee-related benefit costs totaling $69 million and $93 million, respectively.

Note 10. Term Debt

The $425 million in PIK Notes issued by BKH in conjunction with the Transaction (see note 1) is due in June 2013 with interest added to the outstanding principal amount on June 1 and December 1 of each year. The Sponsors subsequently transferred $0.9 million in PIK Notes to four of our directors. Through June 30, 2005, a total of $103

F-33

million in interest has been added to the outstanding principal resulting in an outstanding principal balance of $528 million.

BKC also has a senior credit facility that includes term debt of $750 million and a revolving credit facility of $100 million. The senior credit facility is guaranteed by Diageo and certain affiliates of Diageo. The principal outstanding on the term debt is due and payable in December 2007 with interest payable quarterly at the rate of LIBOR plus an applicable margin. The weighted average interest rates related to the Company’s PIK Notes, term debt and other secured installment notes payable was 4.4% and 5.4% at June 30, 2004 and June 30, 2005, respectively.

At June 30, 2005, there were no borrowings outstanding under the revolving credit facility. At June 30, 2005, there were $20 million in irrevocable standby letters of credit outstanding, which are described further in note 16. Accordingly, the availability of the revolving credit facility was $80 million as of June 30, 2005. BKC incurs a commitment fee on the unused revolving credit facility at the rate of 40% of an applicable margin, based on Diageo’s credit rating, not to exceed 0.30% . At June 30, 2005, the applicable commitment fee rate was 0.21% .

The Company has agreements with foreign banks that provide lines of credit in the amounts of $5 million and $4 million at June 30, 2004 and June 30, 2005, respectively. At June 30, 2004 and 2005, the Company had $2 million of guarantees drawn against the lines of credit.

BKC agreed to reimburse Diageo for any and all payments Diageo is required to pay as a result of the guarantee of the senior credit agreement. BKC’s reimbursement obligation is secured by all of the personal property owned by BKC and its U.S. subsidiaries with certain limited exceptions. In addition, BKC pledged to Diageo 100% of the shares of its U.S. subsidiaries and 65% of the shares of certain foreign subsidiaries.

Subsequent to year-end, the Company entered into a $1.15 billion credit agreement. The term debt and PIK Notes were paid off in July 2005 with the proceeds from the new credit agreement and cash on hand. See note 20 for further details of the new credit agreement.

Note 11. Interest Expense

Interest expense is comprised of the following (in millions):

	Predecessor		Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003		Years ended June 30,

					2004		2005

Term debt and PIK Notes	$	1	$	33	$	61	$	74
Capital lease obligations		3		4		7		8

	$	4	$	37	$	68	$	82

As discussed in note 1, the Company incurred $28.8 million in deferred financing fees in conjunction with the Transaction. These fees are classified in other assets, net and were being amortized over five years into interest expense on term debt under the effective interest method. On July 13, 2005, the Company entered into a $1.15 billion credit agreement, and as a result, the remaining deferred financing fee balance was recorded as a loss on early extinguishment of debt. See note 20 for further details of the new credit agreement.

Note 12. Income Taxes

Income (loss) before income taxes, classified by source of income, is as follows (in millions):

	Predecessor			Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003		Years Ended June 30,

						2004			2005

Domestic	$	(731	)	$	39	$	(25	)	$	93
Foreign		(195	)		1		34			(15	)

F-34

Predecessor			Successor

July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003		Years Ended June 30,

					2004		2005

$	(926	)	$	40	$	9	$	78

Income tax expense (benefit) attributable to income from continuing operations consists of the following (in millions):

	Predecessor			Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years Ended June 30,

							2004			2005

Current:
Domestic
Federal	$	12		$	11		$	10		$	18
State, net of federal income tax benefit		2			3			5			2
Foreign		(2	)		1			1			2

		12			15			16			22

Deferred:
Domestic
Federal		(43	)		2			(22	)		13
State, net of federal income tax benefit		(4	)		-			-			(3	)
Foreign		1			(1	)		10			(1	)

		(46	)		1			(12	)		9

Total	$	(34	)	$	16		$	4		$	31


The U.S. Federal tax statutory rate reconciles to the effective tax rate as follows:

	Predecessor			Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years Ended June 30,

							2004			2005

U.S. Federal income tax (benefit) rate		(35.0	%)		35.0	%		35.0	%		35.0	%

State income taxes, net of federal income tax benefit		(0.1	)		7.0			39.0			4.3
Benefit and taxes related to foreign operations		0.1			(0.2	)		(11.6	)		(9.6	)
Foreign exchange differential on tax benefits		0.8			—			(87.2	)		4.8
Change in valuation allowance		(0.1	)		(1.9	)		80.5			10.1
Goodwill impairment		30.4			—			—			—
Other		0.3			0.1			(11.3	)		(4.9	)

Effective income tax (benefit) rate		(3.6	%)		40.0	%		44.4	%		39.7	%

For the period December 13, 2002 to June 30, 2003, the valuation allowance decreased by $1 million, as it was determined that it was more likely than not that deferred tax assets in certain foreign jurisdictions would be realized. The income tax expense includes an increase in valuation allowance related to deferred tax assets in foreign countries of $7 million and $12 million for the years ending June 30, 2004 and 2005, respectively.

For the year ended June 30, 2004, the valuation allowance increased by $1 million for certain state loss carryforwards as their realization was not considered more likely than not. The valuation allowance decreased by $4 million in certain states for the year ended June 30, 2005. This reduction was a result of determining that it was more likely than not that certain state loss carryforwards and other deferred tax assets would be realized.

The significant components of deferred income tax expense (benefit) attributable to income from continuing operations are as follows (in millions):

F-35

	Predecessor			Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years Ended June 30,

							2004			2005

Deferred income tax expense (benefit) (exclusive of the
effects of components listed below)	$	(45	)	$	2		$	(20	)	$	2
Change in valuation allowance, net of amounts allocated
as adjustments to purchase accounting		(1	)		(1	)		8			8
Change in effective state income tax rate		-			-			-			(1	)

	$	(46	)	$	1		$	(12	)	$	9

Deferred tax assets at the date of the Transaction were recorded based on management’s best estimate of the ultimate tax basis that will be accepted by the tax authorities. At the date of a change in management’s best estimate, deferred tax assets and liabilities are adjusted to reflect the revised tax basis. Pursuant to SFAS No. 109, certain adjustments to deferred taxes and reductions of valuation allowances established in purchase accounting would be applied as an adjustment to the Company’s intangible assets. During the year ended June 30, 2004, the Company recognized the effect of benefits arising from these items by recording a deferred tax asset of $41 million, which resulted in a related decrease in the value of the Burger King brand recorded in connection with the Transaction. Based on the provisions of SFAS No. 109, as described above, approximately $56 million of valuation allowance, if realized, will be applied to reduce intangible assets.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in millions):

		June 30,

		2004			2005

Deferred tax assets:
Trade and notes receivable, principally due to allowance for doubtful accounts	$	63		$	36
Accrued employee benefits		42			29
Unfavorable leases		126			106
Liabilities not currently deductible for tax		66			70
Tax loss and credit carryforwards		29			79
Property and equipment, principally due to differences in depreciation		47			49
Other		-			1

		373			370
Valuation allowance		(65	)		(78	)

		308			292

Less deferred tax liabilities:
Intangible assets		330			328
Leases		56			49

		386			377

Net deferred tax liability	$	78		$	85

After considering the level of historical taxable income, projections for future taxable income over the periods in which the deferred tax assets are deductible, and the reversal of deferred tax liabilities, management believes it is more likely than not that the benefits of certain state and foreign net operating loss carryforwards and other deferred tax assets will not be realized. The Company increased the valuation allowance by $13 million for the year ended June 30, 2005.

The Company has federal loss carryforwards in the U.S. of $38 million, expiring in 2025, and state loss carryforwards of $76 million, expiring between 2007 and 2025. In addition, the Company has foreign loss carryforwards of $49 million, expiring between 2006 and 2015, and foreign loss carryforwards of $77 million that do not expire.

F-36

Deferred taxes have not been provided on basis difference related to investments in foreign subsidiaries. These differences consist primarily of undistributed earnings, which are considered to be indefinitely reinvested in the operations of such subsidiaries.

Note 13. Related Party Transactions

The Company is charged a management fee by the Sponsors equal to 0.5% of total current year revenues, which amount is limited to 0.5% of the prior year’s total revenues. Management fees and expenses paid to the sponsors totaled $5 million for the period December 13, 2002 to June 30, 2003, $8 million for the year ended June 30, 2004, and $9 million for the year ended June 30, 2005. At June 30, 2004 and 2005, the Company had management fees payable to the Sponsors of $2 million, which are included within other current liabilities in the accompanying consolidated balance sheets. These fees and expenses were recorded within selling, general and administrative expenses in the accompanying consolidated statement of operations.

As of June 30, 2004 and 2005, BKH has PIK Notes outstanding to affiliates of $264 million. Interest expense on these PIK Notes totaled $11 million for the period December 13, 2002 to June 30, 2003, $21 million for the year ended June 30, 2004 and $23 million for the year ended June 30, 2005.

Note 14. Leases

At June 30, 2005, the Company leased 1,132 restaurant properties to franchisees. The building portions of the capital leases with franchisees are accounted for as direct financing leases and recorded as a net investment in property leased to franchisees, while the land portions are operating leases.

Property and equipment, net leased to franchisees under operating leases as follows (in millions):

		June 30,

		2004			2005

Land	$	193		$	201
Buildings and improvements		66			67
Restaurant equipment		2			2

		261			270
Accumulated depreciation		(12	)		(18	)

	$	249		$	252

Net investment in property leased to franchisees under direct financing leases is as follows (in millions):

		June 30,

		2004			2005

Future minimum rents to be received	$	378		$	373
Estimated unguaranteed residual value		4			4
Unearned income		(213	)		(218	)
Allowance on direct financing leases		-			(2	)

		169			157
Current portion included within trade receivables		(10	)		(8	)

Net investment in property leased to franchisees	$	159		$	149

In addition, land, buildings, office space, and warehousing are leased. At June 30, 2005, capital leases cover 204 restaurant buildings.

F-37

At June 30, 2005, future minimum lease receipts and commitments for each of the years ended June 30 are as follows (in millions):

		Lease Receipts			Lease Commitments

		Direct Financing Leases		Operating Leases		Capital Leases		Operating Leases

2006	$	30	$	70	$	11	$	143
2007		30		66		10		135
2008		30		62		10		131
2009		29		58		10		114
2010		29		53		9		106
Thereafter		225		348		62		730

Total	$	373	$	657	$	112	$	1,359

The total minimum obligations of the capital leases of $112 million, reduced by an amount of $56 million representing interest equals $56 million of capital leases recorded in the consolidated balance sheet, of which $3 million is classified as current capital lease obligations and the remaining $53 million is classified as long-term capital lease obligations.

Property revenues, which are classified within franchise and property revenues, are comprised primarily of rental income from operating leases and earned income on direct financing leases with franchisees as follows (in millions):

	Predecessor		Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003			Years Ended June 30,

						2004			2005

Rental income:
Minimum	$	32	$	39		$	78		$	78
Contingent		6		5			10			13

		38		44			88			91
Earned income on direct financing leases		17		16			29			29

	$	55	$	60		$	117		$	120


Rent expense associated with the lease commitments is as follows (in millions):

	Predecessor		Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003			Years Ended June 30,

						2004			2005

Rental expense:
Minimum	$	58	$	67		$	137		$	145
Contingent		4		2			5			6
Amortization of favorable and unfavorable lease
contracts, net		-		(2	)		(52	)		(29	)

	$	62	$	67		$	90		$	122

Unfavorable Leases

Unfavorable lease contracts are amortized over a period of up to 20 years as a reduction to occupancy and other operating costs and property expenses. Amortization of unfavorable lease contracts totaled $3 million for the period December 13, 2002 to June 30, 2003, $57 million for the year ended June 30, 2004, and $32 million for the year ended June 30, 2005.

F-38

Unfavorable leases, net of accumulated amortization totaled $301 million and $261 million at June 30, 2004 and June 30, 2005, respectively. Unfavorable leases, net of amortization are classified within other deferrals and liabilities.

As of June 30, 2005, estimated future amortization expense of unfavorable lease contracts subject to amortization for each of the years ended June 30 is $29 million in 2006, $26 million in 2007, $24 million in 2008, $22 million in 2009, $21 million in 2010, and $139 million thereafter.

Note 15. Stockholders’ equity

Capital Stock

The Company was initially capitalized on December 13, 2002 with $398 million in cash, as a limited liability company. On June 27, 2003, the Company was converted to a corporation and issued an aggregate 3,973,750 common shares, $0.01 par value, to the Sponsors.

Dividends

No dividends were declared during the periods July 1, 2002 to December 12, 2002 and December 13, 2002 to June 30, 2003, or the years ended June 30, 2004 and 2005.

Stock-Based Compensation

Burger King Holdings, Inc. Equity Incentive Plan

For the year ended June 30, 2002, the Company established the Burger King Corporation 2001 Omnibus Incentive Compensation Plan (the “OIC Plan”), which provided for the grant of options to purchase shares of the Company (“OIC Options”). The Company had employment agreements with certain key executives, which called for a cash payment in exchange for their OIC Options, as well as specified severance arrangements, in the event of a change in control. As a result of the sale of the Company (see note 1), these key executives exchanged all outstanding OIC Options for approximately $7.0 million in cash. The $7.0 million cash settlement was expensed and reflected in operating expenses (income), net for the period July 1, 2002 to December 12, 2002.

Burger King Holdings, Inc. Equity Incentive Plan

In July 2003, the Company implemented the Burger King Holdings, Inc. Equity Incentive Plan (the “Incentive Plan”). The Incentive Plan provides for the possible issuance of up to 519,409 shares of BKH common stock through the sale of common stock to certain officers of the Company and independent members of the Board of Directors; grants of stock options to certain officers, employees, and independent board members of the Company; and grants of restricted stock units to certain officers of the Company.

Through June 30, 2005, officers of the Company and independent members of the Board of Directors have purchased 77,512 shares of BKH common stock, net of redemptions, at fair market value.

Through June 30, 2005, certain officers, employees, and an independent member of the Board of Directors of the Company have been granted options to purchase an aggregate 341,953 shares of BKH common stock at fair market value. These options generally vest over five years and have a 10-year life from the date of grant.

The following table summarizes the status and activity of options granted under the Incentive Plan:

	Number of Options		Weighted Average Exercise Price

Outstanding at June 30, 2003	–		$	–
Options granted	333,536			128.15
Forfeited	(74,744	)		136.07
Outstanding at June 30, 2004	258,792			125.86
Options granted	195,199			112.80

F-39

	Number of Options		Weighted Average Exercise Price

Exercised	(814	)		100.00
Forfeited	(111,224	)		121.81

Outstanding at June 30, 2005	341,953		$	119.78

The following table summarizes information about stock options outstanding at June 30, 2005:

Exercise Price	Number of Options	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price

$ 100.00	295,636	8.79	$ 100.00
200.00	24,982	9.08	200.00
300.00	21,335	8.54	300.00

	341,953	8.80	$ 119.78

Restricted Stock Units

Pursuant to the Incentive Plan, through June 30, 2005, the Company granted 18,303 restricted stock units at fair market value to certain officers of the Company. The unearned compensation associated with these restricted stock units is being amortized over a period of up to four years. The Company is recognizing compensation expense on the BKH restricted stock units granted to its employees.

Note 16. Retirement Plan and Other Postretirement Benefits

BKC has noncontributory defined benefit plans for its salaried employees in the United States and certain employees in the United Kingdom and Germany. These plans are collectively referred to as the “Pension Plans.” In addition, BKC has the Burger King Savings Plan (the “Savings Plan”), a defined contribution plan that is provided to all employees who meet the eligibility requirements. Eligible employees may contribute up to 50% of pay on a pre-tax basis, subject to IRS limitations.

Effective August 1, 2003, BKC implemented the Executive Retirement Plan (“ERP”) for all officers and senior management. Officers and senior management may elect to defer up to 50% of base pay and up to 100% of incentive pay on a before-tax basis under the ERP. BKC provides a dollar-for-dollar match on up to the first 6% of base pay.

Expenses incurred for the Savings Plan and ERP totaled $2.9 million for the period July 1, 2002 to December 31, 2002. Expenses incurred for the Savings Plan and ERP totaled $2 million for the period December 13, 2002 to June 30, 2003, $5 million for the year ended June 30, 2004, and $5 million for the year ended June 30, 2005.

BKC accrues postretirement benefits in accordance with SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, for its retiree benefit plans (“Postretirement Plans”). Under SFAS No. 106, the estimated cost of retiree benefit payments, principally health and life insurance benefits, is accrued during the employees’ active service periods.

BKC uses a measurement date of March 31 for substantially all Pension and Postretirement Plans.

Obligations and Funded Status

The following table sets forth the change in benefit obligations, fair value of plan assets and amounts recognized in the balance sheets for the Pension Plans and Postretirement Plans (in millions):

	Retirement Benefits				Other Benefits

		June 30,			June 30,

		2004		2005		2004		2005

Change in benefit obligation
Benefit obligation at beginning of year	$	146	$	167	$	20	$	21

F-40

	Retirement Benefits						Other Benefits

		June 30,					June 30,

		2004			2005			2004			2005

Service cost		6			6			1			1
Interest cost		9			10			1			1
Actuarial losses (gains)		9			3			(1	)		(1	)
Benefits paid		(3	)		(5	)		–			–

Benefit obligation at end of year		167			181			21			22

Change in fair value of plan assets
Fair value of plan assets at beginning of year		73			86			–			–
Actual return on plan assets		14			4			–			–
Company contributions		2			8			–			–
Benefits paid		(3	)		(5	)		–			–

Fair value of plan assets at end of year		86			93			–			–

Accrued benefit cost
Funded status of plan		(81	)		(88	)		(21	)		(22	)
Unrecognized net actuarial loss (gain)		18			23			–			(1	)
Minimum pension liability adjustment		–			(5	)		–			–
Other		1			10			–			–

Net accrued benefit cost		(62	)		(60	)		(21	)		(23	)

Recognized in Statement of Financial Position
Accrued benefit liability		(62	)		(55	)		(21	)		(23	)
Accumulated other comprehensive loss		–			(5	)		–			–

Net accrued benefit cost	$	(62	)	$	(60	)	$	(21	)	$	(23	)

The accumulated benefit obligation for the Pension Plans was $153 million and $134 million at June 30, 2005 and 2004, respectively.

Additional year-end information for Pension Plans with accumulated benefit obligations in excess of plan assets

The following sets forth the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the Pension Plans with accumulated benefit obligations in excess of plan assets (in millions):

	June 30,

		2004		2005

Projected benefit obligation	$	167	$	181
Accumulated benefit obligation		134		153
Fair value of plan assets		86		93

Components of Net Periodic Benefit Cost

A summary of the components of net periodic benefit cost for the Pension Plans (retirement benefits) and Postretirement Plans (other benefits) is presented below (in millions):

	Retirement Benefits								Other Benefits

	Predecessor			Successor					Predecessor			Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003		Years ended June 30,				July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003		Years ended June 30,

					2004		2005						2004		2005

Service cost-benefits earned during
the period	$	2	$	3	$	6	$	6	$	–	$	–	$	1	$	1
Interest costs on projected benefit
obligations		3		4		9		10		1		1		1		1

F-41

	Retirement Benefits												Other Benefits

	Predecessor				Successor								Predecessor			Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years ended June 30,						July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003		Years ended June 30,

							2004			2005							2004		2005

Expected return on plan assets		(4	)		(3	)		(6	)		(7	)		–		–		–		–
Recognized net actuarial loss		–			–			–			1			–		–		–		–
Net periodic benefit cost and total
annual pension cost	$	1		$	4		$	9		$	10		$	1	$	1	$	2	$	2

Assumptions

The weighted-average assumptions used in computing the benefit obligations of the Pension Plans (retirement benefits) and Postretirement Plans (other benefits) are as follows:

	Retirement Benefits												Other Benefits

	Predecessor				Successor								Predecessor				Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years ended June 30,						July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years ended June 30,

							2004			2005									2004			2005

Discount rate as of year-end		6.75	%		6.25	%		6.00	%		5.86	%		6.75	%		6.25	%		6.00	%		5.86%
Range of compensation rate increase		4.75			4.75			4.75			4.75			–			–				–		–

The weighted-average assumptions used in computing the net periodic benefit cost of the Pension Plans (retirement benefits) and Postretirement Plans (other benefits) are as follows:

	Retirement Benefits												Other Benefits

	Predecessor				Successor								Predecessor				Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years ended June 30,						July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years ended June 30,

							2004			2005									2004			2005

Discount rate as of year-end		7.50	%		6.75	%		6.25	%		6.00	%		7.50	%		6.75	%		6.25	%		6.00%
Range of compensation rate increase		5.50			4.75			4.75			4.75			–			–				–		–
Expected long-term rate of return on
plan assets		9.50			8.75			8.75			8.75			–			–			–

The expected long-term rate of return on plan assets is determined by expected future returns on the asset categories in target investment allocation. These expected returns are based on historical returns for each assets category adjusted for an assessment of current market conditions.

The assumed healthcare cost trend rates are as follows:

	Predecessor			Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003		Years ended June 30,

						2004	2005

Healthcare cost trend rate assumed for next year		10.0%		10.0%		9.5%	9.0%
Rate to which the cost trend rate is assumed to decline
(the ultimate trend rate)		5		5		5	5
Year that the rate reaches the ultimate trend rate		2013		2013		2013	2013

Assumed healthcare cost trend rates do not have a significant effect on the amounts reported for the postretirement healthcare plans, since a one-percentage point change in the assumed healthcare cost trend rate would have very minimal effects on service and interest cost and the postretirement obligation.

F-42

Plan Assets

The fair value of plan assets for BKC’s U.S. pension benefit plans as of March 31, 2004 and 2005 was $78 million and $82 million, respectively. The fair value of plan assets for BKC’s pension benefit plans outside the U.S. was $8 million and $11 million at April 30, 2004 and 2005, respectively.

The following table sets forth the asset allocation for BKC’s U.S. pension plans’ assets:

	Retirement Benefits

	2004		2005

Equity securities	71	%	71	%
Debt securities	28		28
Short-term investments	1		1

	100	%	100	%

The investment objective for the U.S. pension plans is to secure the benefit obligations to participants while minimizing costs to the Company. The goal is to optimize the long-term return on plan assets at an average level of risk. The target investment allocation is 65% equity and 35% fixed income securities. The portfolio of equity securities includes primarily large-capitalization U.S. companies with a mix of some small-capitalization U.S. companies and international entities.

Estimated Future Cash Flows

Total contributions to the Pension Plans and Postretirement Plans were $1 million and $17 million, respectively, and $1 million and $3 million, respectively, for the years ended June 30, 2004 and 2005, respectively. Of the 2005 contributions, $10 million was contributed during the quarter ended June 30, 2005.

The Pension Plans’ expected contributions to be paid in the next fiscal year, the projected benefit payments for each of the next five fiscal years, and the total aggregate amount for the subsequent four fiscal years are as follows:

		Retirement Benefits

			Qualified		Excess		Total		Other Benefits

Estimated net employer
contributions during fiscal 2006		$	1	$	0.4	$	1.4	$	0.7
Estimated future fiscal year benefit
payments during fiscal:	2006	$	4	$	0.4	$	4.4	$	0.7
	2007		4		0.5		4.5		0.8
	2008		4		0.5		4.5		0.9
	2009		5		0.6		5.6		1.0
	2010		5		0.7		5.7		1.1
	2011-2014		38		4.8		42.8		7.6

Note 17. Other Operating Expenses (Income), Net

Other operating expenses (income), net, consist of the following (in millions):

	Predecessor				Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years ended June 30,

								2004		2005

Losses (gains) on asset disposals	$	(5	)	$	2		$	15	$	13
Impairment of long-lived assets		52			–			–		4
Litigation settlements and reserves		(5	)		–			4		2
Impairment of debt investments		–			–			19		4
Impairment of investments in unconsolidated		–			–			4		–
companies and joint ventures
Other, net		4			(9	)		12		11

F-43

	Predecessor			Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003			Years ended June 30,

							2004		2005

Other operating expenses (income), net	$	46	$	(7	)	$	54	$	34

Losses on Asset and Business Disposals

Losses on asset and business disposals are primarily related to restaurant closures and refranchising of Company-owned restaurants. See note 3 for further details.

Impairment of Long-Lived Assets

Due to a decrease in the sales price of the Company (see Note 1), the Company recorded an impairment charge related to the Burger King brand of $35 million for the period July 1, 2002 to December 12, 2002.

For the period July 1, 2002 to December 12, 2002, the Company recorded impairment charges of $17 million on long-lived assets in Europe due to deterioration in economic performance.

Litigation Settlements and Reserves

For the year ended June 30, 2004, the Company recognized a charge of $3 million for settlement of a claim in Australia by BKC’s joint venture partner. Under the terms of a settlement agreement, BKC paid $3 million to terminate certain development rights granted to the joint venture in June 2002. BKC’s joint venture partner also has the option to buy BKC’s interest in the joint venture for a period of two years for approximately $6 million. In addition, BKC agreed to forgive the note receivable from the joint venture plus accrued interest and accordingly, the Company recognized an impairment loss of $7 million for the year ended June 30, 2004.

Impairment of Debt Investments

For the year ended June 30, 2004, the Company assessed the collectibility of certain acquired franchisee third-party debt, and recorded an impairment charge of $12 million. As noted above, for the year ended June 30, 2004, the Company agreed to forgive the note receivable from the Australia joint venture partner plus accrued interest and thus the Company recognized an impairment loss of $7 million.

Other, net

Items included within Other, net primarily represent income and losses from joint ventures, realized gains and losses from foreign exchange forward contracts and transactions denominated in foreign currencies, franchise restructuring program costs, refranchising costs, lease termination costs, gain or loss on write-offs of favorable and unfavorable leases, non-capitalizable expenses related to acquisitions of franchisee operations, and other miscellaneous items. For the period December 13, 2002 to June 30, 2003, the Company recorded $13 million of gains from foreign exchange forward contracts and transactions denominated in foreign currencies.

Note 18. Commitments and Contingencies

Guarantees

Other commitments, arising out of normal business operations, were $4 million as of June 30, 2005 and 2004. These commitments consist primarily of guarantees covering foreign franchisees’ obligations to third-party suppliers.

F-44

The Company guarantees certain lease payments of franchisees arising from leases assigned in connection with sales of company restaurants to franchisees, by remaining secondarily liable under the assigned leases of varying terms, for base and contingent rents. The maximum contingent rent amount is not determinable as the amount is based on future revenues. In the event of default by the franchisees, the Company has typically retained the right to acquire possession of the related restaurants, subject to landlord consent. The aggregate contingent obligation arising from these assigned lease guarantees was $126 million at June 30, 2005, expiring over an average period of 10 years.

Letters of Credit

At June 30, 2005, there were $20 million in irrevocable standby letters of credit outstanding, which were issued to certain insurance carriers to guarantee payment for various insurance programs such as health and commercial liability insurance. These standby letters of credit were against the Company’s $100 million revolving credit facility. As of June 30, 2005, none of these irrevocable standby letters of credit had been drawn on.

At June 30, 2005, Diageo had posted $19 million in standby letters of credit on behalf of BKC relating to open casualty claim matters. As part of the July 2005 refinancing, these letters of credit were replaced by standby letters of credit issued by the Company totaling $18 million. See Note 20.

As of June 30, 2005, the Company had posted bonds totaling $13 million, which related to certain promotional activities.

Vendor Relationships

In fiscal 2000, the Company entered into long-term, exclusive contracts with the Coca-Cola Company and with Dr Pepper/Seven Up, Inc. to supply Company and franchise restaurants with their products and obligating Burger King restaurants in the United States to purchase a specified number of gallons of soft drink syrup. These volume commitments are not subject to any time limit. As of June 30, 2005, the Company estimates that it will take approximately 17 years and 19 years to complete the Coca-Cola and Dr Pepper/Seven Up, Inc. purchase commitments, respectively. In the event of early termination of these arrangements, the Company may be required to make termination payments that could be material to the Company’s results of operations and financial position. Additionally, in connection with these contracts, the Company has received upfront fees, which are being amortized over the term of the contracts. At June 30, 2004 and 2005, the deferred amounts totaled $28 million and $26 million, respectively. These deferred amounts are amortized as a reduction to food, paper and product costs in the accompanying consolidated statements of operations.

The Company also enters into commitments to purchase advertising for periods up to twelve months. At June 30, 2005, commitments to purchase advertising totaled $60 million.

New Headquarters

In May 2005, the Company entered into an agreement to lease a building, to serve as the Company’s global headquarters. The estimated annual rent for the 15-year initial term is approximately $5 million, to be finalized upon the completion of the building’s construction, expected in 2008. The Company will receive a tenant improvement allowance, estimated at approximately $8 million to be finalized upon the completion of the building’s construction.

Other

The Company is self-insured for most domestic workers’ compensation, general liability, and automotive liability losses subject to per occurrence and aggregate annual liability limitations. The Company is also self-insured for healthcare claims for eligible participating employees subject to certain deductibles and limitations. The Company determines its liability for claims incurred but not reported on an actuarial basis.

Note 19. Segment Reporting

The Company operates in the fast food hamburger restaurant industry. Revenues include retail sales at Company-owned restaurants and franchise revenues. The business is managed as distinct geographic segments:

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United States and Canada, Europe, Middle East and Africa and Asia Pacific (“EMEA/APAC”), and Latin America. Unallocated includes corporate support costs in areas such as facilities, finance, human resources, information technology, legal, marketing, and supply chain management.

The following tables present revenues, operating (loss) income, depreciation and amortization, total assets, long-lived assets and capital expenditures information by geographic segment (in millions):

	Predecessor			Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003		Years ended June 30,

Revenues:					2004		2005

United States and Canada	$	512	$	601	$	1,117	$	1,275
EMEA/APAC		210		267		566		586
Latin America		29		38		71		79

Total revenues	$	751	$	906	$	1,754	$	1,940

Other than the United States and Germany, no other individual country represented 10% or more of the Company’s total revenues. For the period July 1, 2002 to December 12, 2002, revenues in the United States totaled $462 million and revenues in Germany totaled $80 million. Revenues in the United States totaled $541 million for the period December 13, 2002 to June 30, 2003, $997 million for the year ended June 30, 2004, and $1,146 million for the year ended June 30, 2005. Revenues in Germany totaled $106 million for the period December 13, 2002 to June 30, 2003, $236 million for the year ended June 30, 2004, and $262 million for the year ended June 30, 2005.

	Predecessor				Successor

	July 1, 2002 to December 12, 2002			December 13, 2002 to June 30, 2003			Years ended June 30,

Operating (Loss) Income:							2004			2005

United States and Canada	$	(643	)	$	92		$	115		$	255
EMEA/APAC		(167	)		24			95			36
Latin America		9			13			26			25
Unallocated		(79	)		(54	)		(163	)		(165	)

Total operating (loss) income	$	(880	)	$	75		$	73		$	151

	Predecessor			Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003		Years ended June 30,

Depreciation and Amortization:					2004			2005

United States and Canada	$	28	$	29	$	56		$	52
EMEA/APAC		9		6		(13	)		4
Latin America		1		1		(1	)		2
Unallocated		5		7		21			16

Total depreciation and amortization	$	43	$	43	$	63		$	74

Depreciation and amortization expense for the year ended June 30, 2004 reflects the initial period of amortization of unfavorable leases recorded as part of the Transaction.

	Years Ended June 30,

Assets:	2004		2005

United States and Canada	$	2,382	$	2,433
EMEA/APAC		208		220

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	Years Ended June 30,

Assets:	2004			2005

Latin America		39		47
Unallocated		36		23

Total assets	$	2,665	$	2,723



	Years Ended June 30,

Long-Lived Assets:	2004		2005

United States and Canada	$	888	$	892
EMEA/APAC		91		102
Latin America		24		31
Unallocated		36		23

Total long-lived assets	$	1,039	$	1,048

Long-lived assets include property and equipment, net, and net investment in property leased to franchisees. Other than the United States, no other individual country represented 10% or more of the Company’s total long-lived assets. Long-lived assets in the United States totaled $845 million and $852 million at June 30, 2005 and 2004, respectively.

	Predecessor			Successor

	July 1, 2002 to December 12, 2002		December 13, 2002 to June 30, 2003		Years ended June 30,

Capital Expenditures:					2004		2005

United States and Canada	$	81	$	33	$	36	$	40
EMEA/APAC		11		11		28		27
Latin America		3		3		6		8
Unallocated		–		–		11		18

Total capital expenditures	$	95	$	47	$	81	$	93

Note 20. Subsequent Event

On July 13, 2005, BKC and BKH entered into a $1.15 billion credit agreement, which consists of a $150 million revolving credit facility, a $250 million term loan (“Term Loan A”), and a $750 million term loan (“Term Loan B”). The interest rate for Term Loan A, Term Loan B, and the revolving credit facility, as selected by the Company, is either (a) the greater of the prime rate or the federal funds effective rate plus 0.5% plus a rate not to exceed 0.75%, which varies according to the Company’s leverage ratio or (b) LIBOR plus a rate not to exceed 1.75%, which varies according to the Company’s leverage ratio.

The quarterly principal payments for Term Loan A and Term Loan B begin on September 30, 2006 and September 30, 2005, respectively, and the amounts of required principal payments increase over time. The maturity dates of Term Loan A, Term Loan B, and amounts drawn under the revolving credit facility are June 2011, June 2012, and June 2011, respectively. The aggregate amounts of future maturities for the new term debt for each of the years ending June 30 are as follows (in millions):

2006	$	8
2007		32
2008		33
2009		57
2010		70
Thereafter		847

	$	1,047

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The new credit agreement contains certain customary financial and other covenants. These covenants impose restrictions on additional indebtedness, liens, investments, advances, guarantees, and acquisitions. These covenants also place restrictions on asset sales, sale and leaseback transactions, dividends, payments between BKC and BKH, and certain transactions with affiliates. The financial covenants include a requirement to maintain a certain interest expense coverage ratio and leverage ratio and limit the maximum amount of capital expenditures in a year. Following the end of each fiscal year, the Company is required to prepay the term debt in an amount equal to 50% of excess cash flow (as defined in the credit agreement). This prepayment requirement is not applicable if the Company’s leverage ratio is less than a predetermined amount. There are other events and transactions such as sale and leaseback transactions, proceeds from casualty events, and incurrence of debt that may trigger additional mandatory prepayments.

BKC is the borrower under the credit agreement and BKH and certain subsidiaries have jointly and severally unconditionally guaranteed the payment of the amounts due under the new credit agreement. BKH, BKC, and certain subsidiaries have pledged, as collateral, a 100% equity interest in the domestic subsidiaries of BKH and BKC with some exceptions. Furthermore, BKC has pledged as collateral a 65% equity interest in certain foreign subsidiaries.

The Company utilized $1 billion in proceeds from Term Loans A and B, $47 million of the revolving credit facility, and cash on hand to repay BKC’s existing term debt and the PIK Notes held by BKH (see note 10). The remaining deferred financing fee balance of $13 million from the existing term debt was expensed and the Company recorded the deferred financing costs of $16 million in connection with the refinancing.

The following table presents the unaudited consolidated balance sheet as of June 30, 2005, as if the debt refinancing described above had occurred on June 30, 2005 (in millions):

	June 30, 2005 (as reported)			Adjustments		Pro Forma Consolidated Balance Sheet

Cash and cash equivalents	$	432	$	(254)	(1)	$	178
Other current assets, net		202		–			202
Long-term assets, net		2,089		3	(2)		2,092

Total assets		2,723		(251	)		2,472

Current liabilities		394		(11)	(3)		383
Term debt		1,282		(232)	(4)		1,050
Capital leases		53		–			53
Other deferrals and liabilities		375		–			375
Deferred income taxes, net		142		–			142

Total liabilities		2,246		(243	)		2,003

Total stockholders’ equity		477		(8)	(5)		469

Total liabilities and stockholders’ equity	$	2,723	$	(251	)	$	2,472


(1)	Amount represents proceeds from the debt refinancing of approximately $1.05 billion offset by repayment of BKC’s existing term debt of $750 million, repayment of BKH’s PIK Notes and accrued interest of $534 million, and deferred financing costs of $16 million.

(2)	Deferred financing costs associated with the debt refinancing of approximately $16 million offset by reduction of $13 million of deferred financing costs associated with the repayment of term debt.

(3)	Tax benefit of approximately $6 million associated with the deferred financing cost charge of $13 million and reversal of accrued interest on PIK Notes of $5 million.

(4)	Debt refinancing obligation of approximately $1.05 billion offset by repayment of BKC’s existing term debt of $750 million and repayment of BKH’s PIK Notes of $528 million.

(5)	$8 million, net of tax, charge associated with deferred financing cost.

F-48

Common Stock

PROSPECTUS

, 2006


JPMorgan
	Citigroup
		Goldman, Sachs & Co.
			Morgan Stanley

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock.

No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.

Through and including , 2006 (the 25^th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the expenses (other than compensation to the underwriters) expected to be incurred in connection with this offering. All such amounts (except the SEC registration fee, the NASD filing fee and the New York Stock Exchange listing fee) are estimated.

SEC registration fee	$	42,800
NASD filing fee		40,500
New York Stock Exchange listing fee		*
Printing and engraving expenses		*
Legal fees and expenses		*
Accounting fees and expenses		*
Blue Sky fees and expenses		*
Transfer Agent and Registrar fees		*
Miscellaneous		*

Total	$	*

* To be provided by subsequent amendment.

Item 14. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to the Registrant. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Article Ninth of the Registrant’s Certificate of Incorporation provides for indemnification by the Registrant of its directors, officers and employees to the fullest extent permitted by the Delaware General Corporation Law.

Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal benefit. The Registrant’s Certificate of Incorporation provides for such limitation of liability to the fullest extent permitted by the Delaware General Corporation Law.

The Registrant maintains standard policies of insurance under which coverage is provided (a) to its directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act, while acting in their capacity as directors and officers of the Registrant, and (b) to the Registrant with respect to payments which may be made by the Registrant to such officers and directors pursuant to any indemnification provision contained in the Registrant’s Certificate of Incorporation or otherwise as a matter of law.

The proposed form of underwriting agreement to be filed as Exhibit 1.1 to this Registration Statement provides for indemnification of directors and certain officers of the Registrant by the underwriters against certain liabilities.

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Item 15. Recent Sales of Unregistered Securities.

During the three years preceding the filing of this registration statement, Burger King Holdings, Inc. issued the following securities which were not registered under the Securities Act of 1933, as amended:

Between August 2003 and January 2006, Burger King Holdings, Inc. issued an aggregate of 101,534 shares of its common stock to directors and employees for an aggregate of $10,977,780 in consideration of services rendered or in private placements and (ii) an aggregate of 10,163 shares of its common stock to employees pursuant to the exercise of outstanding options for an aggregate of $1,016,300 in consideration of services rendered.

The issuances listed above were deemed exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) of the Securities Act or Rule 701 thereunder. In accordance with Rule 701, the shares were issued pursuant to a written compensatory benefit plan and the issuances did not, during any consecutive 12-month period, exceed 15% of the outstanding shares of Burger King Holdings, Inc.’s common stock, calculated in accordance with the provisions of Rule 701.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits

Exhibit Number		Description

1.1	*	Form of Underwriting Agreement
3.1	*	Certificate of Incorporation
3.2	*	By-Laws
4.1	*	Form of Common Stock Certificate
5.1	*	Opinion of Davis Polk & Wardwell
10.1	*	Amended and Restated Credit Agreement, dated February 15, 2006, among Burger King Corporation, Burger King Holdings, Inc., the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citicorp North America, Inc., as syndication agent, and Bank of America, N.A., RBC Capital Markets and Wachovia Bank, National Association, as documentation agents
10.2	*	Burger King Holdings, Inc. Equity Incentive Plan
21.1	*	List of Subsidiaries of the Registrant
23.1		Consent of Independent Registered Public Accounting Firm
23.2	*	Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
24.1		Power of Attorney (included on signature page of this filing)

* To be filed by subsequent amendment.

Item 17. Undertakings.

(a) The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referenced in Item 14 of this Registration Statement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such

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indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and this offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, State of Florida, on the 16^th day of February, 2006.

BURGER KING HOLDINGS, INC.


By:	/s/ GREGORY D. BRENNEMAN

	Name:	Gregory D. Brenneman
	Title:	Chairman and Chief Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Gregory D. Brenneman and John W. Chidsey his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to the registration statement (including any post-effective amendments and any registration statements under Rule 462(b)), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date



/s/ GREGORY D. BRENNEMAN	Chairman and Chief Executive Officer	February 16, 2006
	(principal executive officer)
Gregory D. Brenneman


/s/ JOHN W. CHIDSEY	President and Chief Financial Officer	February 16, 2006
	(principal financial and accounting officer)
John W. Chidsey


/s/ ANDREW B. BALSON	Director	February 16, 2006

Andrew B. Balson


/s/ DAVID BONDERMAN	Director	February 16, 2006

David Bonderman


/s/ RICHARD W. BOYCE	Director	February 16, 2006

Richard W. Boyce


/s/ DAVID A. BRANDON	Director	February 16, 2006

David A. Brandon

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Signature	Title	Date



/s/ ARMANDO CODINA	Director	February 16, 2006

Armando Codina


/s/ PETER RAEMIN FORMANEK	Director	February 16, 2006

Peter Raemin Formanek


/s/ MANNY GARCIA	Director	February 16, 2006

Manny Garcia


/s/ ADRIAN JONES	Director	February 16, 2006

Adrian Jones


/S/ SANJEEV K. MEHRA	Director	February 16, 2006

Sanjeev K. Mehra


/s/ STEPHEN G. PAGLIUCA	Director	February 16, 2006

Stephen G. Pagliuca


/s/ BRIAN THOMAS SWETTE	Director	February 16, 2006

Brian Thomas Swette


/s/ KNEELAND C. YOUNGBLOOD	Director	February 16, 2006

Kneeland C. Youngblood

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Exhibit Index

Exhibit Number		Description

1.1	*	Form of Underwriting Agreement
3.1	*	Certificate of Incorporation
3.2	*	By-Laws
4.1	*	Form of Common Stock Certificate
5.1	*	Opinion of Davis Polk & Wardwell
10.1	*	Amended and Restated Credit Agreement, dated February 15, 2006, among Burger King Corporation, Burger King Holdings, Inc., the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citicorp North America, Inc., as syndication agent, and Bank of America, N.A., RBC Capital Markets and Wachovia Bank, National Association, as documentation agents
10.2	*	Burger King Holdings, Inc. Equity Incentive Plan
21.1	*	List of Subsidiaries of the Registrant
23.1		Consent of Independent Registered Public Accounting Firm
23.2	*	Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
24.1		Power of Attorney (included on signature page of this filing)

* To be filed by subsequent amendment.

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