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Business and Operations
9 Months Ended
Sep. 30, 2012
Financial Statement Presentation/Business and Operations [Abstract]  
BUSINESS AND OPERATIONS

NOTE 2 - BUSINESS AND OPERATIONS

The Company was incorporated in the state of Delaware on September 16, 1992.

In December 2006, the Company established a holding company in Brazil called BFFC do Brasil Participações Ltda. (“BFFC do Brasil”, formerly 22N Participações) to consolidate all its business in the country and allow the Company to pursue its multi-brand program, as discussed below:

BOB’S TRADEMARK

In 1996, the Company acquired 100.0% of the capital of Venbo Comercio de Alimentos Ltda. (“Venbo”), a Brazilian limited liability company which conducts business under the “Bob’s” trade name and owns and operates, both directly and through franchisees, a chain of hamburger fast food restaurants in Brazil.

In 2011, three of Venbo’s own-operated restaurants were transferred to two newly affiliated companies, LM Comércio de Alimentos Ltda. and PCN Comércio de Alimentos Ltda., both subsidiaries of BFFC do Brasil, in order to enhance these stores’ results through the inclusion of a minor partner directly responsible for their operation.

KFC TRADEMARK

During the first quarter of 2007, the Company reached an agreement with Yum! Brands, owner of the KFC brand. By this agreement, BFFC do Brasil, through its subsidiary CFK Comércio de Alimentos Ltda. (“CFK”, formerly Clematis Indústria e Comércio de Alimentos e Participações Ltda.), started to conduct the operations of four directly owned and operated KFC restaurants in the city of Rio de Janeiro as a Yum! Brands franchisee, and took over the management, development and expansion of the KFC chain in Brazil. CFK started its activities on April 1, 2007.

During 2011, some of CFK’s own-operated restaurants in Sao Paulo were transferred to two newly affiliated companies, CFK São Paulo Comércio de Alimentos Ltda. (“CFK SP”) and MPSC Comércio de Alimentos Ltda. (“MPSC”). Both CFK SP and MPSC are newly affiliated companies and subsidiaries of BFFC do Brasil, created in order to enhance these four stores’ results through the inclusion of two minor partners (one for each new affiliate) which are directly responsible for the stores’ operations.

 

Suprilog Logística Ltda. (“Suprilog”), which used to warehouse equipment and spare parts and provide maintenance services for the Company’s own-operated restaurants, changed its business purpose. FCK Comércio de Alimentos Ltda. (“FCK”, formerly Suprilog) became responsible for developing and expanding the KFC chain in Brazil, but, currently, is a non-operating company.

On May 3, 2012, Brazil Fast Food and Yum! Restaurants International (YRI), a subsidiary of Yum! Brands, announced the satisfactory completion of the first phase of their efforts to expand the KFC and Pizza Hut brands in Brazil, pursuant to which the Company is engaged to provide franchise support services for KFC and Pizza Hut franchisees and to develop these brands, upon their reentry to Brazil.

Accordingly, as of May 2012, YRI started to directly manage its franchise business in Brazil, supporting the KFC business in Brazil.

YRI and BFFC will remain close partners as BFFC continues to contribute to the development of the KFC brand as a KFC franchisee focused on Rio de Janeiro and São Paulo.

PIZZA HUT TRADEMARK

In 2008, the Company reached an agreement with Restaurants Connection International Inc. (“RCI”) to acquire, through the Company’s wholly-owned holding subsidiary, BFFC do Brasil, 60% of Internacional Restaurantes do Brasil (“IRB”), which operates Pizza Hut restaurants in the city of São Paulo as a Yum! Brands franchisee. The remaining 40% of IRB is held by another Brazilian company of which IRB’s current CEO is the main stockholder.

In connection with this acquisition, the Company recorded R$799 as Goodwill, which represents the excess of cost over IRB’s net tangible assets and identifiable intangible assets.

IRB also operates a coffee concept brand called “In Bocca al Lupo Café”, which has four stores in São Paulo city.

In May 2012, YRI started to directly manage its franchise business in Brazil, supporting Pizza Hut businesses in Brazil from its Restaurant Support Center in São Paulo. However, BFFC will still continue to contribute to the development of the Pizza Hut brand as a Pizza Hut franchisee, with operations in the São Paulo metropolitan area.

DOGGIS TRADEMARK

In October 2008, the Company reached an agreement with Gastronomía & Negocios Sociedad Anonima (“G&N”, formerly Grupo de Empresas Doggis Sociedad Anonima), one of the fast food leaders and the owner of the Doggis hot-dog chain in Chile, where it has 150 stores.

By this agreement, BFFC do Brasil would establish a Master Franchise to manage, develop and expand the Doggis hot-dog chain in Brazil through own-operated restaurants and franchisees, and G&N would establish a Master Franchise to manage, develop and expand the Bob’s hamburger chain in Chile through own-operated restaurants and franchisees.

The Master Franchise established in Brazil was named DGS Comercio de Alimento S.A. (“DGS”) and the Master Franchise established in Chile was named BBS S.A. (“BBS”). According to this agreement, BFFC do Brasil would own 20% of BBS and G&N would own 20% of DGS.

 

During the third quarter ended September 30, 2012, the original agreement was reviewed, subsequent to which BFFC acquired the remaining 20% of DGS’s capital shares from G&N in exchange for 20% of BBS’s capital shares, which were accordingly transferred to G&N.

Currently, the Company owns 100% of DGS and continues to develop the Doggis trade mark in Brazil. G&N owns 100% of BBS’s capital shares and will continue to develop the Bob’s trade mark in Chile.

To reflect this exchange of interest, the Company recorded a gain of R$470,000 in the Consolidated Statements of Operations for the nine-month period ended September 30, 2012 and recorded R$1,089,000 as retained losses related to the accumulated losses from DGS that were previously recognized as non-controlling interests.

YOGGI TRADEMARK

In May 2012, the Company acquired Yoggi do Brasil Ltda (“Yoggi”), which has operated a franchise network of frozen yogurt stores in Brazil since 2008, with 48 franchised point of sales.

The Company acquired 100% of Yoggi’s equity for R$2 million, paying approximately R$0.5 million at the acquisition closing and the balance in seven equal monthly installments with interest set at the Brazilian interbank lending rate (CDI) (currently 8.25% p.y.).

In connection with the acquisition of Yoggi, the Company has recorded approximately R$1.9 million as excess of purchase price over net assets acquired. This reflects a preliminary allocation of the purchase price and is subject to a final valuation and allocation of all of Yoggi’s assets and liabilities against an increase in its equity.